LNG as a desirable transition fuel?

The Vietnamese Government views LNG as a desirable transition fuel changing. However, it is not due to high prices and market turmoil of recent months but to comply with zero emission objective in 2050 and development of cleaner power sources as Vietnam committed in COP26.

In particular, the draft Power Development Plan (PDP8) sets out a plan of imported LNG being 23,900 MW, equivalent to 16.4% of the total power sources in 2030. This leads to a higher demand of imported LNG than that set out in Resolution No. 55 of the Politburo (import of 8 billion m3 in 2030 and 15 billion m3 in 2045 vs. 14-18 m3 in 2030 and 13-16 billion m3 in 2045). However, the MOIT explained that due to technical determination for adoption of Resolution No. 55, coal-fired power sources still reach 55GW while LNG reaches 22GW. In the draft PDP8, the MOIT has taken into account external expenses to determine the capacity of these sources. Thus, in 2030, the total capacity of coal-fired sources is only 37GW. The 18GW difference has been replaced by 14GW LNG and the rest by renewable energy sources.

Please note that 17,900MW out of 23,900MW of LNG in the draft PDP8 is from approved projects in the amended PDP7. There is 6,000 MW LNG to develop further in the Northern region to ensure the power foundation of the Northern power system.

How to track any shift in Government sentiment in terms of LNG as a transition fuel?

We could check this through all PDP8 drafts and any communication among the Government and the relevant ministries on these draft. Notable documents are Official Letter No. 182/LDCP, and the response from the MOIT (Official Letter No. 3787/BCT-DL).

These letters, especially Official Letter No. 3787 in response to Letter No. 182, explain that the plan for imported LNG complies with Resolution 55. In the short and midterm, Vietnam could import LNG from Australia, US, Russia and Qatar as these are countries with the most LNG exporting volume and also have a plan to increase their export volume. In the long term, it is necessary to consider importing LNG from Mozambique, Turkmenistan and Iran. With such variety in supply, it is possible to import LNG for power plants with a total capacity of 23,900MW in 2030.

Regarding the risk of LNG price increase in world market, it should still be acceptable in terms of the average power production price.

Has the amount of LNG-to-power plants in PDP8 drafts been changing?

In the latest MOIT’s response, the LNG-to-power plants in the draft PDP8 are still unchanged.

Have any planned LNG-to-power plants been cancelled? Or have any plans for LNG re gas/terminal infrastructure been cancelled or delayed?

No, there has been no LNG-to-power plants having been cancelled. There are some delays in certain projects, mainly due to difficulties in financing arrangement in addition to change in investment priority target by the investors.
FYI, there are two LNG Projects (total 750 MWx2 – Kien Giang 1 and Kien Giang 2 of PVN expected to operate during 2021-2022) approved in the amended PDP7 but not yet provided in PDP8 draft. The MOIT has explained in Official Letter No. 4967 that these two projects have not found suitable sources (LNG or domestic gas in O Mon) and thus not being considered to be included in the PDP8 draft.

Outlook on the PDP8

On 6 September 2022, the Government Office releases a Notification that described what happened in the Government’s meeting on 20 August 2022. That was a meeting chaired by the Prime Minister Pham Minh Chinh and joined by several cabinet members such as Ministers of Ministry of Planning and Investment, Ministry of Industry and Trade, Ministry of Justice, Ministry of Finance, Ministry of Agriculture and Rural Development, Ministry of Construction, Ministry of Natural Resources and Environment. The Prime Minister has not yet satisfied with PDP8 draft and required MOIT to carefully review and revise the PDP 8 with the fundament principle to ensure the national interest and security.

The latest PDP8 draft is attached with the Official Letter No. 4967/TTr-BCT dated 18 August 2022. So far, it is not clear when PDP8 will be adopted/finalized. Hopefully, it could be adopted within this year.

Please do not hesitate to contact Dr. Oliver Massmann under if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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