The largest petrochemical complex in Vietnam Long Son Petrochemicals, which is owned by SCG Chemicals, has halted its commercial operations amid low global demand for chemical products while its parent corporation, Thai conglomerate Siam Cement Group (SCG), has stated that it will invest US$700 million to upgrade the US$5 billion facility and diversify its raw materials amid the suspension.

The Vietnamese complex, better known as LSP, which is located in Vung Tau City, just more than two hours by road from Ho Chi Minh City, started trial operations early this year and only officially kicked off commercial operations on September 30, a little more than one month ago.

LSP will start using ethane imported from the US as a raw material, SCG says, because ethane is cheaper than naphtha, a product of fossil fuels. The complex has used naphtha as a key raw material to make polyethylene, polypropylene and basic chemicals. But naphtha, a liquid hydrocarbon mixture from crude oil or natural gas, is expensive.

The new investment will focus on the handling and storage of ethane feedstock. The production suspension is scheduled to last at least six months; and when once operating again, LSP plans to use ethane for as much as two-thirds of the total feedstock, in addition to propane and naphtha.

However, even with the new feedstock mix, a resumption of profitable operations at LSP will also depend on the global demand for chemical products prompting the company to pin its profitability hopes on more favourable future market conditions. SCG lost 4,814 million Thai baht (some US$141.58 million) from its LSP operations, according to its statistics, in the first half of this year.

SGC Chemicals finished testing at the complex early this January and trial production followed. At the time of test completion, the company said the annual output of LSP, which is not an oil refinery, would include 1.4 million tonnes of polyethylene and polypropylene, not to mention basic chemicals. The facility’s products, SGC Chemical also noted, would be sold in Vietnam and regional markets like Thailand and Indonesia.

Vietnam has only two operational oil refineries, both of which are located in the central region and provide gasoline and oil products, not chemicals like LSP. The first, Dung Quat Refinery has among its investors the state-run oil and gas group Petrovietnam, while, the second, Binh Son Refinery has as its investors Petrovietnam, Kuwait Petroleum International, Idemitsu Kosan Company, and Mitsui Chemicals of Japan.