US ties expand on back of power plans
US ties expand on back of power plans
Vietnam is diversifying its sources of power in the direction of reducing coal-fired power and raising the share of renewable energy and liquefied natural gas-based power, creating a new race for investors as well as helping to balance bilateral trade and deepen economic interests between the United States and Vietnam.
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The newly-granted $4 billion liquefied natural gas (LNG) Bac Lieu facility, developed by Singapore’s Delta Offshore Energy in the Mekong Delta province of Bac Lieu, has a total capacity of up to 3,200MW, with 100 hectares of sea surface area and 40ha of land, as well as a floating station to receive and store between 150,000 and 175,000 cubic metres of LNG in the form of a gas recycling station.
“Delta Offshore Energy’s Bac Lieu project addresses Vietnam’s need for an LNG import terminal to provide access to growing the LNG industry as a feedstock for electricity generation,” said Bobby Quintos, engineering managing director for Delta Offshore. “This move will allow the Vietnamese government to have a stronger relationship with the US market and the long-term stability of the Henry Hub Index, which fits perfectly with the Vietnamese National Power Development Plan VII (PDP7).”
Under PDP7, for Vietnam’s industry development up to 2025 with a vision toward 2035 approved by the prime minister in 2017, the country will likely buy from one to four billion cubic metres of LNG per year in the 2021-2025 period. The purchase will increase as the government builds up an eighth power master plan in order to adapt to new situations and energy demands.
John Rockhold, chairman of the Vietnam Business Forum’s Power and Energy Working Group, told VIR that the shift from coal to gas in energy planning is important in terms of Vietnam’s energy security, reliability of the electricity system, and greenhouse gas emissions reductions. A second objective with imports of LNG from today’s largest producer, the US, would be to use these sales to work towards the balance trade between Vietnam and the States, which is growing ever higher.
Besides this project, more investors are showing ambitions to pour billions of dollars into LNG-to-power projects in Vietnam, including AES, Gen X Energy, and state-run PetroVietnam.
Late last year, the American AES Corporation jointly signed an MoU on the implementation of the Son My 2 combined cycle gas turbine (CCGT) power plant with total capacity of 2.2GW, and will be located in the central province of Binh Thuan. The $1.7 billion plant will have a 20-year contract with the Vietnamese government.
“The Son My 2 CCGT and Son My LNG terminal are excellent examples of the continued partnership between the US and Vietnam,” explained AES CEO David Stone. “We strongly believe that the implementation of these two projects will substantially contribute to the bilateral trade and investment relationship between the two countries, while at the same time creating jobs and supporting Vietnam to move toward a cleaner energy future.”
Globalinx Group, specialising in assisting and supporting companies in their international business development plans for Asia, said that more and more enterprises, particularly from the US, are showing interest in selling and distributing LNG to Vietnam. This is due to the great demand as well as the trend from coal-fired to LNG power and renewables, feeding about 10 per cent demand per-year for the power sector.
The need for energy as part of Vietnam’s sustainable growth is expected to increase significantly in the coming years, as LNG imports are needed to fill the gas supply-demand gap being created by the decline in domestic gas production.
However, Rockhold said that some LNG-based initiatives will not start importing until 2025 and beyond. He stressed that the expansion of LNG as a fuel source for power stations will be dependent on the creation of a network of regasification terminals.
A recently-completed report for the International Finance Corporation demonstrates that the Vietnamese coastline has many suitable locations for use of floating storage and regasification units (FSRU) and the installation of LNG import terminals, both onshore and offshore.
“Whether and how Vietnam uses such FSRUs will be determined based on financial feasibility studies matched to geography, expected size, and throughput capacity,” Rockhold explained. “None have so far been planned. Their value is in their capacity for rapid deployment, especially to existing gas power plants.”.
In the same viewpoint, Delta Offshore Energy noted the required transmission interconnection of the project will establish a necessary energy backbone to the socio-economic development and sustainability of Bac Lieu and the surrounding Mekong Delta.
