Vietnam’s PetroVietnam Gas (PV Gas) will opt for LNG imports to offset falling domestic gas output, despite unfavourable market conditions for buyers and regulatory obstacles.
According to Poten and Partners’ ’LNG in World Markets’, two of its state-backed terminals have advanced LNG import plans.
PV Gas and the AES Corp joint venture sought term LNG supply for its proposed Son My LNG-to-power project via a limited participation tender in November, although tight global supply, credit and operational risks, lack of downstream power customers and a request for interim floating facilities, could hinder negotiations.
The company said last month that Vietnam will start importing LNG in the third quarter of next year, through the Thi Vai regasification terminal that is now around 90% complete. The state-run firm said it will take the lead in developing the necessary infrastructure, commercial arrangements, and downstream markets.
The joint venture is looking for around 1.5 mill tonnes per year of LNG for its Son My project in southeastern Binh Thuan province, with the first cargo to be delivered in 2026. It is flexible about duration and pricing, which suppliers should propose in their offer submissions, Poten said.
It is also looking to operate an FSRU or an FRU and an FSU hybrid, although tender participants have the option to submit LNG supply offers only. The unit must be moored at the Son My site for around 12-18 months.
This temporary option is being pursued as the plant is expected to be ready for start-up ahead of the planned 3.6 mill tonnes per year onshore regasification terminal.
PV Gas/AES limited participation tender closed for submission in the first half of November, with offers valid for 180 days. A small number of firms and producers were invited to participate, including QatarEnergies and Petronas.
However, interest is expected to be luke warm, as the project has yet to secure power purchase agreements (PPAs) with the state-run utility Vietnam Electricity (EVN).
FSRU uncertainty
In addition, the floating unit’s short term requirement is also a deterrent and there is also regulatory uncertainty over the use of FSRUs in Vietnam, as it is unclear if they will be classified as a port or a vessel, which would affect licensing and approval processes, Poten warned.
The long six-month bid validity period is also unpopular among suppliers, amid current bullish LNG markets and price volatility.
Meanwhile, the 1 mill tonnes per year Thi Vai import terminal in southern Vietnam’s Ba Ria-Vung Tau province is on track to start next year, operator PV Gas said last month. Terminal capacity could rise to 3 mill tonnes per year in subsequent phases.
PV Gas is thought to be seeking a commissioning LNG cargo for Thi Vai in 3Q22.
The company will focus on developing short- and medium-term LNG import sources for Vietnam and has established six master sale and purchase agreement (MSPA) frameworks thus far.
For foreign investors, there is uncertainty on the regulatory front. Legislative changes on build, operate and transfer (BOT) projects and public-private partnerships (PPPs) that took effect in January, 2021 will affect LNG projects, although how they play out is unclear.
Nearly a dozen LNG import projects have been proposed in Vietnam – excluding Thi Vai and Son My – nearly all of which involve foreign interests from countries like the US and Japan, Poten said.
Meanwhile, during an official visit of Vietnamese President, Nguyen Xuan Phuc to Russia, NOVATEK and PetroVietnam Power signed a co-operation agreement for LNG and power projects.
The agreement includes co-operation on LNG infrastructure projects to meet Vietnam’s growing demand for electricity. NOVATEK has also opened a representative office in the country.
