Out-Law / Your Daily Need-To-Know

Vietnam energy transition: LNG imports to start in 2022

28 Sep 2021, 1:54 am

Vietnam will begin importing liquified natural gas (LNG) in 2022 as part of plans to lower carbon emissions from its electricity consumption.

The country’s import demand for LNG will increase to 5 million metric tonnes (mt) by 2025, 10 million mt by 2030 and 15 million mt by 2035, according to Vietnam’s Minister of Industry and Trade Nguyen Hong Dien.

LNG is considered as "one of the most important solutions" to ensure its energy security in the context of declining domestic natural gas resource production and strong economic growth, Dien said at a recent conference, according to S&P Global.

Vietnam is speeding up the development of LNG import terminals and related infrastructure. Its draft national power development plan VIII (PDPVIII), published earlier this year, contained plans for up to 41 LNG-to-power plants, and targeted growth from 7 gigawatts (GW) generating capacity in 2020 to 13.5GW in 2025 and 28GW-33GW in 2030, according to Project Finance International (registration required).

The country is also seeking foreign investment to build its LNG sector. Most of the LNG-to-power plants listed in PDPVIII feature American investment, according to Project Finance International.

The country’s government is also building up a legal framework to reduce greenhouse gas emissions in line with its commitments under the Paris Agreement on climate change. Planned measures include a requirement for companies and plants that emit over 3,000 mt of CO2 of greenhouse gases annually to submit their emissions records, according to S&P Global.

John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “With the commitments to net zero, decarbonising the electricity sector is unavoidable and Vietnam for the past few years has moved away from its previous prioritising of new coal fired power plants. Gas as the transition fuel makes sense for economies such as Vietnam that have to balance climate change commitments and enabling continued rapid economic growth.”

“However, issues around gas procurement and pricing, as well as project delivery risks, mean LNG to power projects will require sophisticated contracting and financing solutions,” he said.