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Aug 01, 2019 / 17:04

Vietnam LNG sector: Unlocking potential for foreign investors

Liquefied natural gas (LNG) has a greater role in feeding Vietnam`s growing demand for electricity amid its efforts to reduce coal power.

Strong demand for liquefied natural gas (LNG) from gas-fired power projects in Vietnam leaves this sector potential for foreign investors as some entered the market with big deals and bright prospects ahead. 
A liquefied natural gas (LNG) project in Vietnam
A liquefied natural gas (LNG) project in Vietnam
Vietnam plans to import one million metric tons (mt) per year of LNG by 2021, around four million mt/year by 2025, and between six million mt/year and 10 million mt/year from 2026 to 2035, according to the government’s gas market development master plan.

The country’s first LNG import facility, the 1 million mt/year Thi Vai terminal in the southern province of Ba Ria Vung Tau, is under construction and due to commence operation in 2020.

PetroVietnam Gas Corp (PV Gas), the largest gas supplier in the country, in 2014 signed two LNG sale and purchase agreements with Russia’s Gazprom Marketing & Trading and Anglo-Dutch Shell for deliveries into Thi Vai.

PetroVietnam, through its gas arm PV Gas, supplies natural gas to meet 35% of the country's electricity demand and 70% of its fertilizer requirements.

LNG consumption in Vietnam is expected to grow at an annual rate of 10% in the next decade, driven by the government’s efforts to gradually move away from coal-fired power in favor of cleaner alternatives. 

Despite efforts to raise the ratio of renewable sources such as solar and wind, challenges in regulatory framework, long-term planning, and grid capacity are weighing on the government’s efforts. 

Meanwhile, hydropower potential is nearly exhausted and increasingly being scrutinized due to impacts on the environment.

This opens up room for gas-fired power generation to assume a larger role in the national power mix, as a cleaner, less- environmentally hazardous alternative to coal and hydropower with a more reliable baseload power source compared with most renewables, according to Vietnam News Agency.

In the country’s current power plan (the Power Plan VII) revised in 2016, the room for construction of 8,000 MW of newly-built gas-fired projects is available between 2021 and 2027 in the southern provinces of Kien Giang and Dong Nai, and the central provinces of Quang Nam and Binh Thuan.

In addition, gas-to-power projects become more feasible thanks to a combination of supportive factors including the availability of funding, rising foreign capital inflows into the domestic power, and government’s support for greater gas use, accordingly to analysts from Fitch Solutions.

Foreign presence 

Korea Gas Corporation (Kogas) has become the latest player when it inked last week a memorandum of understanding with Energy Capital Vietnam (ECV) to serve the development of a privately-funded LNG regasification terminal, storage, gas supply system and a 3,200MW gas-fired power project near the Ke Ga cape in Binh Thuan.

David Lewis, CEO of Energy Capital Vietnam, said the partnership between Kogas and ECV allows both companies to leverage each other’s strengths to bring low-cost LNG to Vietnam and help address critical energy security needs.

In early July, Japan JXTG Nippon Oil & Energy (JXTG) tied up with Vietnam National Petroleum Group (Petrolimex) to build liquefied natural gas (LNG) receiving stations and joint procurement. 

In an MoU signed in Tokyo, Hanoi-based Petrolimex expects to invest roughly US$4 billion in LNG receiving facilities and power plants in Vietnam while JXTG – which has LNG receiving facilities in Japan – will offer operational expertise, according to Nikkei. 

The partnership marks a new Vietnamese foray for JXTG – Japan’s largest direct seller of crude oil – which had planned to conduct an oil refinery project in Vietnam. In 2016, JXTG’s unit named JXTG Holdings took an 8% stake in Petrolimex for JPY20 billion (US$185 million at current exchange rate).

Meanwhile, Vietnam News Agency reported that the deal aims to serve Petrolimex’s upcoming LNG import port in Vietnam’s central province of Khanh Hoa where Petrolimex will provide LNG to gas-fueled power plants in the locality run by Vietnam Electricity (EVN). 

On this occasion, Petrolimex also inked an MoU with Japan Cooperation Centre Petroleum (JCCP) in which JCCP will focus on human resources, technical training in downstream oil and gas industry.

The deals have caught public attention as Vietnam is shifting to other power sources to feed its growing economy. 

During the participation of Vietnamese Prime Minister Nguyen Xuan Phuc at G20 Summit in Japan late in June, he and US President Donald Trump discussed and expected the soon signing of the memorandum of understanding on long-term cooperation between Vietnam’s Ministry of Industry and Trade and the US Department of Energy for large scale import of LNG.