Recent upbeat developments, coupled by strong interest from foreign investors, have sustained an increasing role of liquefied natural gas in the national power mix.
VOV.VN - Recent upbeat developments, coupled by strong interest from foreign investors, have sustained an increasing role of liquefied natural gas in the national power mix.
Many foreign firms eager to provide LNG imports for power plants in Vietnam.
(Illustrative photo: lngworldnews.com)
Interest among foreign investors in Vietnam’s natural gas and liquefied natural gas (LNG) sectors continued to be high in the first four months of this year.
Four US-backed energy developers, including Cheniere Energy, ExxonMobil, AES, and Energy Capital Vietnam have paid much attention to the Vietnamese power market, especially the LNG sector, as reported by the Government Portal.
They expressed their interest in the Vietnamese market during a round-table talks last week with Mai Tien Dung, Minister-Chairman of the Vietnamese Government Office during his working visit to the US.
A Cheniere Energy representative said the US firm is eager to update information on the use of clean, renewable energy sources in Vietnam, adding that Cheniere has three key advantages in executing LNG projects in the country, including competitive prices, stable provision, and flexible supply schemes.
Meanwhile, David Lewis, CEO of the Energy Capital Vietnam, asserted his firm is willing to finance energy projects in the Southeast Asian country.
Minister Dung in turn stressed that the Government has created many favorable conditions for US firms operating in Vietnam. He reiterated that the AES Corporation has received approval from the Prime Minister to make investments in the Son My LNG complex of regasification terminal and power plants in the central province of Binh Thuan.
The Vietnamese official also showed his pleasure to the strong interest from the US energy developers. He affirmed that Vietnam attaches special importance to its energy development while seeking for many solutions to the issue.
In a related move, PetroVietnam Power Corporation (PV Power), a subsidiary of the State-run Vietnam Oil and Gas Group (PVN), told VOV Online that PV Power has made a proposal to the parent company on becoming the investor of the Son My 2 power complex, including three LNG-fired power plants, but it gave no detailed information on the PVN’s response.
PV Power is quickening the finalization of relevant procedures in order to kick-start construction on Nhon Trach 3 and 4 LNG-fired power plants in the second quarter of 2020, following a pre-feasibility study of these stations had been approved.
The two projects, designed a combined capacity of about 1,500 MW, are the first of Vietnam’s LNG-fired power industry.
During the first quarter of this year, PV Power hosted dozens of meetings with foreign energy developers, banks, and investment funds in desire for joining the firms’ upcoming projects, especially the Nhon Trach 3 and 4 power plants.
Nguyen Manh Tuong, deputy general director of PV Power (R) and Scott Kicker,
CEO of Gen X Energy at a March 21 meeting. (Photo: pvpower.vn)
PV Power reported on its website that VinaCapital Fund (VINACAP) and the US-based firm Gen X Energy, at meetings with PV Power representatives in March, expressed their wish to provide LNG imports for the Vietnamese firm’s power plants and future projects.
Big banks such as German Development Bank (KfW), Société Générale, and HSBC showed their desire to update information on PV Power’ projects and nurture cooperation in arranging capital for its upcoming projects.
Previously, PV Power and PV Gas - another subsidiary of the PVN - inked a deal on the supply and consumption of LNG for the Nhon Trach 3 and 4 power plants in January. Accordingly, PV Gas is in charge of providing imported LNG for these stations.
In early March, Thailand’s Gulf Energy Development Public Company Limited (Gulf), at a meeting with provincial officials, reportedly made a proposal on executing an LNG power complex totally worth US$7.8 billion in Ca Na coastal area of the central province of Ninh Thuan.
The complex includes four LNG-fired power plants designed with a combined capacity of 6,000 MW. A re-gasification terminal is another key item of the project.
Regarding a LNG-fired power project in the southern province of Bac Lieu, Prime Minister Nguyen Xuan Phuc made his direction on the project at a January meeting with provincial officials.
PM Phuc underlined the significance of the LNG project and its addition to the national power development plan. He asked the Ministry of Industry and Trade (MoIT) to preside over a meeting with relevant agencies in order to review and make a final conclusion.
Bac Lieu is waiting the addition of the LNG project and some renewable ones to the revised Power Development Plan VII (PDP VII). Earlier, the province had called for investment in building the LNG-fired power plant with a capacity of 3,200 MW and total investment of US$4.3 billion.
Key element in power mix
According to Fitch Solutions Macro Research - a unit of the leading financial information service provider Fitch Group, natural gas consumption in Vietnam is expected to grow at a robust average annual rate of 10 per cent over the 2017-28 period.
This would be driven by government efforts to gradually diversify away from coal in favour of cleaner alternatives, and start of several LNG import projects to compliment declining domestic production.
The PDP VII puts emphasis on expanding coal, which at the time was embraced by policymakers and power producers alike, largely for its availability, affordability and familiarity.
However, the Government’s stance towards its available energy options is gradually shifting, amid growing public environmental awareness and international pressure on the Government to reduce greenhouse gas emissions and introduce clean-energy generation targets.
Specific power mix targets are yet to be announced, although the country has on multiple occasions reiterated its intention to pursue a ‘greener’ energy plan, as it undertakes review of the PDP VII, Fitch Solutions said.
The Government has primarily centred on renewable sources such as solar and wind, though their intermittent nature continues to raise questions about reliability. Meanwhile, hydropower, currently a prominent part of the national power mix, is increasingly being scrutinised for its certain effects 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, and a more reliable baseload power source compared with most renewables.
Indeed, the PDP VII does provide for the construction of 8 GW of new gas-fired capacity across Kien Giang, Dong Nai, Quang Nam, and Binh Thuan provinces over the 2021-27 period, which are likely to be retained in the forthcoming power plan.
Falling domestic production will not be sufficient to meet rising demand for gas, rendering LNG imports inevitable. Two LNG infrastructure projects have been announced to date. The PV Gas is leading the development of Thi Vai LNG terminal in the southern province of Ba Ria-Vung Tau, while first phase construction on Son My LNG terminal in Binh Thuan is headed by a consortium of foreign firms led by France's EDF.
The two terminals will provide a combined LNG import capacity of 5.5 million tons per annum (mpta) or 7.5 billion cubic meters (bcm) by 2023, most of which would need to be committed to supplying feedstock to the majority of the power projects listed above, given declining domestic production from aging fields.
Fitch Solutions predicts that the need for LNG imports will partly be reduced in the latter half of the next decade due to injection of fresh output from two giant offshore developments, Block B and Ca Voi Xanh fields, which are scheduled to come on stream in 2021 and 2023, respectively.
Vietnam’s current crop of gas-to-power projects could have a good chance of coming online as planned, due to a combination of supportive factors, including availability of funding, rising foreign capital inflows into the domestic power, natural gas and LNG sectors, alongside the Government’s increased advocacy for reducing emissions and promoting greater gas use.
However, Fitch Solutions noted the risks to forecasts lie to the downside, given that delays or cancellations of the aforementioned projects could significantly derail government plans to boost both gas imports and its utilisation across industries.
The relatively higher cost of importing LNG, especially when compared with domestically available coal and hydropower, could also prove a headwind, if not accompanied by favourable policies and regulatory framework incentivising the switch to gas and LNG.
In the light of the PDP VII, Vietnam expects to lift the total combined power capacity to some 129,500 megawatts (MW) by 2030. Of which, 19,000 MW is set to come from gas-fired power plants, including LNG.
According to Dang Hoang An, Deputy Minister of Industry and Trade, the country’s demand for energy, especially electricity is projected to double in the next two decades. Given this, the ministry is hastening efforts to finalize the forthcoming power plan.
