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Dec 31, 2020 / 10:34

Vietnam LNG market: Lack of regulatory framework

The existing legal framework has not been strong enough to support the sector that is in its fledgling state.

Vietnamese Government is expected to improve Liquefied Natural Gas (LNG) legal and regulatory framework if it wants to promote investment in this area, insiders have said.

 Complete legal framework is needed for Vietnam's LNG sector

LNG becomes practical supply in Vietnam’s energy transition in the country whose annual power growth is around 9% by 2030.

Yet, hurdles remain for many foreign investors who intent on investing in Vietnam’s LNG and LNG-to-power sector due to lack of legal and regulatory framework.

The sector is in its fledgling state, while existing legal and regulatory framework hasn’t been developed much.

It is reported that there are as many as 22 LNG-to-power project proposals of varying sizes and locales that have received approval and will be included in the country’s National Power Development Plan VIII (Power Plan 8) for 2021-2030 and vision to 2045, scheduled for release at the start of 2021.

In January 2021, Law on Investment with a focus on Public Private Partnership (PPP) is expected to attract more private and foreign investment in its LNG and LNG-to-power sector. However, it will not add to the existing legal framework, but help clarify it. The new PPP is also likely to provide a general framework that adheres more to international standards and norms.

Some current laws set out basic principles in the country’s oil and gas sector, while LNG itself is addressed only in imprecise pieces of legislation and governmental policy and decree, Tim Daiss said in an article on Rigzone.

This has the potential to result in varying interpretations by the judiciary, the prime minister’s office and other governmental agencies – both on the national and even provincial levels.

Vietnam has an existing framework of laws to encourage private investment and has also developed a risk allocation structure that the market is generally familiar with. Nonetheless, prime ministerial intervention remains a critical step in order to put together and clarify existing laws.

Due to the increase in approved LNG-to-power project proposals in the country, the need for a more developed legal and regulatory framework is gaining momentum. Interested parties include the World Bank, and foreign investors that have already had their projects approved and included in Vietnam’s most recent Power Development Plan (PDP).

To pursue the power mix strategy, Vietnam has opened its doors to much needed foreign direct investment (FDI) in its energy sector. Until the start of the year, international energy companies of all sizes were seemingly beating a path to the Southeast Asian country of nearly 100 million people to take part. Now that pace is increasing again as the investors are seeking for a safe destination amid the global health crisis.