LNG features prominently in Vietnam's energy transition: White & Case

Vietnam is a rapidly industrialising country in Southeast Asia, and the government plans to incorporate domestic gas and imported LNG to constitute just under 25% of the country's energy mix by 2030. Achieving this target will require a significant increase in capacity, with plans to reach around 37 GW of LNG-based power generation by 2030.

Tim Fourteau, partner in the project development and finance group of global law firm White & Case, tells NGW that LNG is expected to play a prominent role in Vietnam's energy transition in the coming years and the potential opportunities for investors are attractive.

“LNG is set to feature prominently in Vietnam's energy transition with plans calling for domestic gas and imported LNG to form just under 25% of the country's energy mix by 2030. This will require a fourfold increase in capacity to around 37 GW by 2030,” he said. “The potential opportunities for investors are attractive.”

However, there are challenges for private sector investment, including issues with offtakers (the entities buying the energy) and an underdeveloped regulatory framework, he said. Currently, most investment in the LNG sector has been driven by state-owned parties within Vietnam.

LNG to power infrastructure development progresses, but slowly

Vietnam has been working on developing infrastructure to support the LNG-to-power sector, such as import terminals and storage facilities. These include the LNG terminal at Thi Vai which received its first shipment of LNG in July this year, and the Son My LNG terminal under development to serve the south of the country. Despite progress, the pace of development is deemed slow in comparison to the ambitious targets set by the country.

“Given the country's ambitious target for the LNG to power sector, the pace of development is arguably insufficient, but PDP8 [Power Development Plan 8] signals a willingness to address certain impediments, for example by calling for the doubling of grid capacity by 2030,” Fourteau said.

For instance, the PDP8 aims to develop 13 LNG-to-power projects by 2030 and an additional two projects by 2035, representing a total capacity of almost 26 GW. Investors include domestic players such as state-owned PetroVietnam Gas, PetroVietnam Power and Vietnam Electricity as well as international players from Singapore, Europe, Japan and the US, including utilities and trading houses.

The investments required to achieve these targets are substantial, amounting to over $130bn by 2030. “Vietnam will need to attract foreign capital to achieve this goal, including by pursuing the much-needed legal reforms envisaged under PDP8,” Fourteau added.

Renewable energy sources will remain intermittent

In addition to LNG, Vietnam also aims to source nearly 50% of its power needs from renewable sources by 2030. However, renewable energy sources are intermittent, and the country will continue to require growing sources of baseload power. Therefore, it is expected that LNG will complement and not be replaced by renewable energy technologies in Vietnam's energy mix.

“I therefore do not see the current renewable technology displacing LNG to power in the country,” Fourteau said. “That said, as Vietnam would largely be reliant on LNG imports, these projects pose material supply and energy security risks for the country, which have contributed to a progressive moderation of its LNG to power ambitions.”