Son My 1 LNG Gas Power Plant

>> Gas-fired power to rebound from its low base

According to the most recent PDP8 draft, after stopping development in the post-2035F period, the 2022–35F period will be a strong development phase for gas-fired electricity. With a projected CAGR of 15.2%, the total gas-fired capacity will increase from 7,300 MW in 2022 to 46,330 MW in 2035.

Mr. Nguyen Duc Tung, an analyst at VNDirect, said with significant contributions from the O Mon cluster (3,810 MW), Dung Quat (2,250 MW), and Mien Trung clusters, domestic gas-fired electricity would more than treble to 14,930 MW in 2030F (1,500 MW). However, domestic gas-fired power must gradually migrate to LNG and hydrogen input after 10 years of operation due to a quick clean energy transition. The capacity of LNG power also increases significantly, starting at 3,500 MW in 2025F and then skyrocketing to 27,900 MW in 2035F.

Additionally, the new LNG facilities, like domestic gas-fired power plants, transition to partially using hydrogen after 10 years of operation before progressively switching to fully hydrogen combustion after 20 years. POW, with Nhon Trach 3 and 4—the first LNG gas-fired power in Vietnam—will be the leading domestic corporation to capitalize on this trend during the gas-fired power industry's blossoming phase. Additionally, a number of large-scale projects involving domestic businesses are now being executed, including LNG Quang Ninh (POW), LNG Hai Lang (T&T Group), and LNG Long Son (PGV, TV2).

Due to the gradual depletion of gas and the more challenging development of the new gas fields, the mobilization of output in the gas-fired power sector showed a downward trend from 2016 to 2021. This resulted in higher gas input prices.

>> Vietnam power snapshot: Leverage for gas-fired power

However, Mr. Nguyen Duc Tung sees the breaking point in 2022, after gas-fired output hit its low point in 2021 as a result of the low level of demand for electricity during COVID-19. As a result, despite lower-than-expected power consumption growth and a persistently high gas price, gas-fired power output has still slightly increased year over year to 23.9 billion kWh, with a distinct segregation between power plants, despite the fact that it has not recovered as sharply as anticipated. Nhon Trach 2 saw a significant mobilization of output in 9M22 as a result of the plant's high efficiency. Nhon Trach 1 showed a substantial production comeback from a very low level in 2021, although it continued to experience low output mobilization. However, Ca Mau 1 and 2 output was significantly reduced due to a lengthy refurbishment schedule and a gas shortage.

The Singapore Platts Fuel Oil price hit a low of US$380 per tonne in September, down 54% from its high and the lowest level since 2022. As a result, the domestic gas price in Vietnam, which is based on the Singapore Platts Fuel Oil (46% FO), has decreased commensurately. The price of NT2 and Phu My gas, for instance, fell 14% and 16% from their peaks in May to 9.08 US dollars per mmbtu and 8.35 US dollars per mmbtu, respectively. Additionally, the international gas price has fallen from its mid-February peak as a result of the EU's effort to stockpile gas and lower demand due to a warmer-than-expected winter. This follows a bullish run that began in 2020, following several supply disruption events such as COVID-19 and the recent Ukraine-Russia conflict.

Following the gas price downtrend, Mr. Nguyen Duc Tung sees this as a positive for the gas-fired power segment in terms of output mobilization as well as upcoming project implementation. Generally, the domestic gas price is anchored on the FO and moves closely with the Brent oil price. Therefore, he sees lower Brent forecasts of US$90 per barrel and US$80 per barrel as releasing pressure on the price competitiveness of gas-fired power. Although the domestic gas price is still at a high level compared to the 2-year average level, the price drop will narrow the price gap between gas-fired power and coal-fired power, especially in the context of the international coal price hike.

"We expect higher demand for gas-fired power in 2023–24F, underpinned by strong power consumption growth of 8.2% and lower hydropower output after coming out of its favorable weather condition. Besides, we believe that lower international gas price will be the opportunity for smoother price negotiation of the upcoming project, which has struggled in the past period", said Mr. Nguyen Duc Tung.