Trang Do

Published: June 23, 2022

Topic: Stories

Since 2020, there has been a sharp increase in the number of industry players, both domestic and global, to invest in the segmentation of LNG thermal power in Vietnam

At COP26, Vietnam made a strong commitment on the roadmap to phase out coal-fired power and replace it with renewable and clean energy sources. Among the solutions, the development of liquefied natural gas (LNG) thermal power is expected to help the power industry reduce the dependence on coal-fired power, which accounts for a relatively high proportion of the current power system.

Effort to reduce coal dependence 

In February 2020, the Politburo, Vietnam’s highest-level policy-making body, issued the Resolution No. 55-NQ/TW “On Orientations of the Viet Nam’s National Energy Development Strategy to 2030 and outlook to 2045”. The Resolution set a specific objective of “ensure the capacity to import 8 billion m3 of liquefied natural gas (LNG) by 2030 and 15 billion m3 by 2045”. 

Since 2020, there has been a sharp increase in the number of industry players, both domestic and global, to invest in the segmentation of LNG thermal power in Vietnam. Vietnam is quickly becoming one of the most promising LNG importing markets in Asia, according to a report published by the Institute of Energy Economics and Financial Analysis (IEEFA) in January 2021.

“Transition to LNG gas thermal power is an inevitable and irreversible trend while Vietnam has limited primary energy sources and already made strong commitment at COP26”, commented Hoang Tien Dung, director of Electricity and Renewable Energy Authority (EREA) – Ministry of Industry and Trade, in a recent interview with Vietnam Law Newspaper in May.

According to EREA’s assessment, LNG thermal power produces lower carbon emissions (CO2) and nitrogen oxides (NOx) compared to coal and oil thermal power plants.

EREA estimates that using LNG thermal power will reduce the amount of CO2 emitted into the atmosphere by 40% and NOx by 90%, making LNG thermal power plants a good replacement for coal-fired power plants in the future.

PetroVietnam GAS (PV GAS), which operates the first LNG terminal in Vietnam, shared this expectation and indicated that “LNG is the cleanest fossil fuel” and that “compared to thermal coal, LNG is ‘greener’ because it emits less emissions and still generates more electricity. 

Notably, by the fourth quarter of 2022, PV GAS LNG, a branch of PV GAS, will have begun the trial run of Thi Vai LNG Terminal (Ba Ria – Vung Tau),  which is expected to be the first operational LNG terminal in Vietnam.

According to PV GAS, Thi Vai LNG Terminal will be an important link in supply of gas to consumers, including Nhon Trach 3 & 4 power plants, contributing to ensure the demand for gas, as well as electricity, for industrial areas in the key economic region of the Southeast of Vietnam.

Reports are showing a shift to LNG to reduce dependence on coal power. The latest report of the Center for Energy, Ecology and Development (CEED – based in the Philippines), has shown that in terms of LNG Import Terminals expansion, Vietnam will only come second to Thailand which now has the highest LNG import capacity in the region. 

Besides, Vietnam is one of two countries which are building the biggest gas-fired power plants in Southeast Asia. The biggest developers include Millennium Petroleum Group, Vietnam Oil and Gas Group, Vietnam Power Group and Truong Thanh Group Vietnam Joint Stock Company (TTVN Group) with respectively 9.6 GW, 6.17 GW, 4.05 GV, 4.50 GW proposed capacity. Meanwhile, Vietnam Oil and Gas Group is also proposing five new gas-fired power plants in Vietnam.

The question is, will the current LNG expansion become a booming trend in Vietnam like that of renewable energy?

Thi Vai LNG Thermal Project currently in construction with the proposed capacity of  1MMTPA. Photo credit: Courtesy of PV GAS

Many hurdles stand on the LNG “booming” path 

According to the draft National Power Development Plan for the 2021 – 2030 period, with a vision towards 2045 (PDP VIII), LNG thermal power accounts for nearly 17% of the total electricity produced nationwide in 2030, equivalent to 23.900 MW. Despite many advantages, EREA still assessed “the boom of LNG power projects will be unlikely to occur compared to solar and wind power projects” for many reasons. 

In the long run, renewable energy has more advantages to the environment, such as solar, wind and hydropower being domestic energy sources which do not emit CO2, meanwhile LNG thermal power still produces greenhouse gas into the environment. 

Answering Vietnam Law Newspaper, Gerry Arances – CEED Executive Director, worried that, by switching from coal to LNG, Vietnam is facing another “problematic energy source”. He explained: “While gas does emit less carbon dioxide emissions than coal, it leaks methane all throughout its life cycle – another greenhouse gas that has a heat trapping capacity over 80 times more than that of carbon dioxide”. 

Moreover, one of the biggest difficulties is that Vietnam completely imports LNG from abroad. The LNG imported prices and the domestic market can be easily affected by the unpredictable changes of world geopolitics. Another recent report from IEEFA has shown that the high price of imported LNG during the past two years because of the COVID-19 pandemic and the Russian-Ukranian conflict has led to an increase in the estimated selling price of electricity generated from LNG power plants. 

According to PV GAS’ assessment, Vietnam has entered the 50-year-old LNG market with a position of a “very new player”. 

The import of LNG in Vietnam currently must comply with the LNG international commerce. On the other hand, the legal framework for the development of the LNG domestic market in Vietnam is still incomplete. 

PV GAS pointed out: Vietnam currently does not have technical standards related to the design, construction and operation of LNG import facilities; the modification of LNG-generated electricity price  still lacks many specific regulations. 

Compared to the USA, the National Fire Protection Association issued the Standard for the Production, Storage, and Handling of Liquefied Natural Gas (NFPA 59A) which  provides minimum fire protection, safety, and related requirements for the location, design, construction, security, operation, and maintenance of LNG plants. Currently, the development of LNG projects in Vietnam still has to comply with normal investment processes according to the Investment Law, the Construction Law and other relevant legal regulations, without a separate mechanism.

“The lack of LNG and fossil gas related policy framework in place in Vietnam today is precisely another reason why an ambitious expansion is dangerous. There are no sufficient measures to protect consumers from hiking prices, to regulate pollution levels, or monitor other impacts and hold players accountable”, Gerry added.

Commenting on the policy issue, EREA provided that Vietnam is in the process of completing the mechanisms and policies for the development of LNG. After the PDP VIII was approved by the Appraisal Council in April, the government requested the Ministry of Industry and Trade to review and explain more issues related to the development of solar power and LNG power before final approval. This will be an important document for the central and local authorities to promulgate policies and mechanisms to meet the electricity orientation in the coming decade.

It is important to stress that these challenges cannot be solved overnight. With ambitious COP26 commitments, Vietnam needs to speed up the process of reducing coal dependence. It can be explained that although LNG thermal power is unlikely to “boom” like renewable energy, the government expects LNG to be an additional solution to accelerate the transition to clean energy in order to build a low-carbon economy.

This story was published through the support of a joint ASEAN LNG Journalism Fellowship between Climate Tracker and the Center for Energy, Ecology, and Development