Workers perform maintenance of Hai Thach gas field, situated in Nam Con Son basin offshore of southern Vietnam. (Photo: VNA)

Hanoi (VNS/VNA) - Early this week, oil specialistsand economists convened at a seminar to deliberate on the importance ofmaintaining fuel security for electricity generation in Vietnam, given thediminishing yields from national gas fields.

During the event, organised by Petrovietnam and PV Gas in Ba Ria-VungTau province, Huynh Quang Hai, Deputy General Director of PV GAS, underscoredthe annual decline of approximately 10% in domestic gas production, attributingit to the prolonged exploitation of gas fields.

This downward trend is anticipated to lead to a domestic gasdeficit for future electricity production.

The seminar revealed that the annual requirement for domestic gasin electricity generation hovers between 5 and 6 billion cubic metres.Presently, only about 3 billion cubic metres are being supplied to powerstations. This shortfall necessitates the temporary cessation of gas supply toother consumers when the power generation system demands higher gas capacities.

The shortage of gas for electricity production in Vietnam isexacerbated by the delay in the operation of projects like the Nhon Trach 3 &4 power plant, which has a gas demand of about one million tonnes per year(equivalent to 1.2 billion cubic metres of gas per year). Meanwhile, the LongAn 1 and 2 gas power project has also only recently received the Ministry ofIndustry and Trade's appraisal of its basic design.

He mentioned that importing liquefied natural gas (LNG) tocompensate for the shortage of domestic gas was considered an inevitablealternative.

In addition, the absence of an LNG price policy mechanism and thelack of a defined authority to approve LNG gas purchase contracts are keyobstacles in developing imported LNG projects. Additionally, the transportationand storage costs associated with LNG imports also pose further challenges.

In the past, domestic gas development in Vietnam, such as the NamCon Son gas field, benefited from clear regulations on gas prices and offtakecontracts. This provided a solid foundation for the development of domestic gasfields. However, the situation is different for imported LNG. The pricingmechanism for imported LNG is not yet established, making it difficult todetermine the economic viability of LNG-based power projects.

Moreover, importing LNG involves additional costs, includingtransportation expenses to bring LNG from abroad to Vietnam and theinfrastructure required to store LNG at extremely low temperatures.

Taking an example, the Nhon Trach 3&4 gas power project hasencountered challenges in negotiating a power purchase agreement (PPA) betweenPV Power and Vietnam Electricity Group (EVN). One of the key issues is relatedto the commitment of annual power purchase contracts from EVN.

EVN has also reported to the Ministry of Industry and Trade thatthe price of LNG is currently 1.5 times higher than the price of domestic gas.This significant price difference makes the cost of generating electricity fromimported LNG too high. As a result, it becomes difficult for the Nhon Trach 3& 4 project to operate in the electricity market. Moreover, the high costof imported LNG also affects EVN's overall electricity purchase plans, creatingchallenges for financial balance.

According to Huynh Quang Hai, PV GAS has taken steps to meet thedemand for LNG for clean electricity production in Vietnam. They have alreadyput phase 1 of the Thi Vai LNG warehouse into operation in Ba Ria-Vung Tau,with a capacity of 1 million tonnes.

PV GAS is now preparing to implement phase 2 of the project, whichaims to increase the capacity of the Thi Vai LNG warehouse to 3 million tonnes.This expansion is intended to align with the demand for LNG gas required forclean electricity production as specified in the approved Power DevelopmentPlan VIII.

Also at the seminar, Dr. Ngo Tri Long, former Director of theMinistry of Finance's Price and Market Research Institute, highlighted the needfor the Government to address several issues related to domestic LNG gas powerprojects. Completing policies and incentive mechanisms was the main solution.These measures should include tax incentive policies, loan support mechanisms,and clear regulations on the approval and construction process of LNG projects.

Investors of the Nhon Trach 3 & 4 power plant project statedthat this project was the first LNG power project in the country and there wasno precedent for an output offtake contract for this type of project. Theybelieved that certain measures should be taken to promote investment in LNGpower projects in Vietnam, such as the early issuance of a power generationprice framework specifically for LNG projects.

ꦉ Many experts suggested that the involvement of State managementagencies was crucial. These agencies can play a significant role by providingclear policy mechanisms to promote LNG consumption in Vietnam./.