Vietnam's LNG-to-power sector attracts increased investor interest [Global Gas Perspectives]
The level of investor interest in Vietnam's LNG-to-power sector has surged since the announcement of the national power development master plan last year, according to Tim Fourteau, a partner in the project development and finance group of the global law firm White & Case.
The Master Power Development Plan 8 (PDP8), approved by the government in April 2023, aims to achieve a total installed capacity of 22,400 megawatts (MW) for LNG-to-power in Vietnam by 2030. It includes 15 LNG-to-power projects slated for development between 2021 and 2030. Currently, even investors in coal-fired thermal power projects have the option to convert their projects into LNG-to-power projects.
Investors include a combination of domestic and foreign entities. Domestic investors include PetroVietnam Gas (PV Gas) and PetroVietnam Power. Foreign investors have primarily come from Japan, South Korea, the US, and Europe, including utilities and trading houses. They often collaborate with PV Gas through joint ventures and strategic alliances.
“PDP8 is an ambitious shift for Vietnam's energy transition and the country's priorities moving forward as it aims to reach net zero by 2050,” Fourteau told NGW.
Infrastructure development
Vietnam is actively developing infrastructure to support the LNG-to-power sector, including import terminals and storage facilities. Examples include the LNG terminal at Thi Vai, which received its first shipment of LNG last year.
The Thi Vai LNG import terminal, commissioned by PV Gas, a unit of state-backed PetroVietnam, last year, has an initial handling capacity of 1mn tonnes/year. The terminal boasts a 180,000 m³ storage LNG tank, a jetty, and a regasification area. In the second phase, the terminal's capacity will be expanded to 3mn tonnes/year.
The Thi Vai LNG import terminal is poised to play a pivotal role in addressing Vietnam's gas shortage by augmenting the gas supply to consumers, including the Nhon Trach 3 and 4 power plants, as well as industrial customers.
Vietnam has also started the commissioning phase of its second LNG terminal and is on track to begin commercial operations in September. The Cai Mep LNG terminal, located in Vietnam's southern Ba Ria Vung Tau province, has the capacity to import 3mn tonnes/year of LNG. It is operated by Cai Mep LNG, a joint venture between Singapore-based Atlantic, Gulf and Pacific LNG (AG&P LNG) and Vietnamese petroleum trader Hai Linh Company.
PV Gas is also developing an LNG import terminal with US-based AES Corp. The Son My LNG terminal project is part of a chain of LNG power projects in Binh Thuan province, with an estimated total investment of $1.31bn. The terminal will have a capacity of 3.6mn tonnes/year in the first phase, increasing to 9mn tonnes/year in subsequent phases.
The Son My terminal will receive, process, and supply regasified LNG as fuel for two power plants, Son My 1 and Son My 2, which are expected to be operational by the end of 2025.
“Given the country's ambitious target for the LNG-to-power sector, the pace of development is arguably insufficient, but PDP8 signals a willingness to address certain impediments, for example by calling for the doubling of grid capacity by 2030,” Fourteau says.
Fast-growing energy demand
Vietnam's total energy demand has been growing steadily at 7.4%/year over the past decade, driven by robust economic growth and demographic expansion. With booming demand for energy, LNG imports can help Vietnam facilitate a less carbon-intensive fuel than coal for power generation and industrial uses.
“With the strong growth in LNG demand, it is predicted that an additional 100mn tonnes of LNG production capacity will be needed to meet demand by the mid-2030s, a 25% increase from the current supply,” Fourteau says.
Although Vietnam’s LNG-to-power sector offers promising opportunities, challenges remain. Persistent barriers to private sector investment include offtaker credit issues, unbankable risk allocations under the statutory form PPA, and an underdeveloped regulatory framework.
“Most investment to date has been driven by domestic state-owned parties,” Fourteau adds.