Bac Lieu LNG-to-power project aims to reach purchase deal with EVN in Q4

Delta Offshore Energy (DOE) aims to reach a power purchase agreement (PPA) with state utility Vietnam Electricity (EVN) for its 3,200MW Bac Lieu LNG-to-power plant project in southern Vietnam in the fourth quarter of this year.

“We appreciate the government of Vietnam for the approval of PDP8, as it provides a clear path to the completion of the grid interconnection which is critical for DOE and EVN to reach agreement on tariffs and schedule of the PPA,” Ian Nguyen, managing director of the U.S company, said in a release on Wednesday.

He added the company targets to secure the PPA in Q4/2023 in order to break ground in 2024. Negotiations started at the end of 2020.

DOE made the statement a few days after the Vietnamese government approved the national Power Development Plan VIII (PDP VIII), which features its integrated Bac Lieu LNG-to-power plant.

Delta Offshore Energy Pte Ltd, the Singapore affiliate of DOE, is the exclusive owner of the $4 billion project in the Mekong Delta province of Bac Lieu.

DOE was issued the investment registration certificate in 2020 and set up a Vietnamese enterprise for project implementation in Q2/2021. The project secured environmental impact assessment approval in Q3/2021 and feasibility study appraisal in Q4/2021, according to the release.

Roberto Mayo Quintos, managing director of DOE, said: "DOE undertook a long-term LNG supply tender in late 2020-2021, achieving tremendous success having received nearly 30 bids from leading suppliers. This transparent procurement process provides a strong model to ensure “best pricing” to EVN and Vietnam."

"Long-term LNG contracts mitigate volatility in fuel pricing while ensuing security of supply to maintain reliable power generation to address Vietnam’s fast growing power demand," he added.

The PDP VIII for the 2021-2030 period with a vision until 2050 also includes the approval of a grid interconnection plan for the LNG-to-power project to connect with the national 500 kV grid.

This would allow the project to supply power to the Mekong Delta region and support the efficient use of wind and solar renewable energy projects in Bac Lieu province and the delta, DOE said.

The 500 kV Bac Lieu-Thot Not transmission line, with a length of 130 kilometers, is approved in PDP VIII. DOE obtained funding from the Trade & Development Agency (USTDA) under the U.S. Department of Commerce (DOC) to process an international feasibility study of the transmission line.

The international feasibility study is being finalized and has been prepared by Black & Veatch to comply with international financing standards and supported by the Vietnamese Institute of Energy to comply with local requirements.

Once the feasibility study is complete, the transmission line can proceed to financing and construction, according to DOE.

The project, initially aimed to start construction in the second quarter of 2022, has become entangled in procedure bottlenecks. Without a signed PPA, the investor cannot negotiate with financial institutions for capital arrangements, according to the company.

Previously, Bac Lieu authorities had said that foreign currency conversion, government guarantee for EVN payment obligations and issues of compensation in case the PPA is terminated are further hiccups in the giant project.

After three years of drafting and preparation, on May 15, 2023, Prime Minister Pham Minh Chinh issued Decision No. 500/QD-TTg, approving the much-awaited national Power Development Plan for 2021-2030 with a vision to 2050 (PDP VIII).

PDP VIII prioritizes maximizing the use of domestic gas for power generation. In case domestic gas production decreases, natural gas or LNG will be imported. Gas-fired power projects will be gradually converted to use hydro as fuel when the technology is commercialized and the generation cost is reasonable.

PDP VIII limits the development of power sources using LNG if there is an alternative to reduce the dependence on imported fuels. By 2050, plants using LNG will gradually switch to hydrogen.

The list of LNG projects of importance and priority for development until 2035 are prescribed under Table 1 of Appendix II, including Quang Ninh (1,500 MW); Thai Binh (1,500 MW); Nghi Son (1,500 MW); Quang Trach II (1,500 MW); Quynh Lap/Nghi Son (1,500 MW); Hai Lang Phase 1 (1,500 MW); Ca Na (1,500 MW); Long Son (1,500 MW); Hiep Phuoc Phase 1 (1,200 MW); Long An I (1,500 MW); Long An II (1,500 MW); and Bac Lieu (3,200 MW).

Under the plan, among power generation sources, coal will account for 20.5% by 2030, down from almost 29% in 2020. Gas will make up 21.8% by 2030, up from 10.2% in 2020. Renewable sources (including hydroelectricity, solar and wind power, and biomass) will account for 50.3% by 2030, but contributions from hydroelectricity alone will drop to 20% from 30% in 2020.