High LNG import prices to affect power generation: Vietnam state utility EVN

The price of imported liquefied natural gas (LNG) is currently 1.5 times higher than domestic gas, making electricity production costs from this fuel source higher than retail prices, according to state utility Vietnam Electricity (EVN).

In a recent report to the Ministry of Industry and Trade (MoIT), EVN stated it will face difficulties when domestic gas-fired power plants start to use imported LNG as additional fuel.

This is due to the fact that gas supplies for the southeastern region provided PV Gas, a subsidiary of state-run Petrovietnam, for power generation are lower than before as gas fields have entered a period of output decline.

Supplies for the region fell about 30% from 6 billion cubic meters in 2020 to 4.3 billion cubic meters in 2023. The figure for the southwestern region was about 1.3-1.4 billion cubic meters a year.

EVN said that once the Phu My 2.2 and Phu My 3 power plant projects are handed over in 2024-2025 as their build-operate-transfer (BOT) contracts end, they will have to use imported LNG because domestic gas has been allocated to other plants under long-term contracts. Similarly, the Nhon Trach 3 and 4 power plants will also have to use imported LNG, it added.

The addition of LNG for power generation, according to EVN, will cause price difficulties. Currently, the price of imported LNG is about 1.5 times higher than domestic gas, hiking power generation costs and EVN’s electricity purchasing costs amid its existing financial difficulties, the state utility said.

It cited that in the newly-approved Power Development Plan VIII (PDP III), the average imported LNG price is forecast by the MoIT at about $11.8 per million BTU in the 2021-2045 period. With this price, the corresponding price of electricity produced will be about 9.2 U.S. cents per kWh, about 1. U.S. cents higher than the current average retail price of about 8 U.S cents per kWh.

In its July report, Petrovietnam estimated that the domestic gas supply in the southeastern region will reach 3.06 billion cubic meters in 2024 and then decrease to 2.61 billion cubic meters a year later. This level only will meet 33% of the gas demand of power plants, so imports of LNG for power generation are inevitable.

Currently, PV Gas has completed the first phase of Thi Vai LNG Terminal in the southern province of Ba Ria-Vung Tau, with a capacity of 1 million tons a year with one LNG tank of 180,000 cubic meters (corresponding to an additional gas volume of 1.4 billion cubic meters per year). The first LNG carrier docked at the terminal on July 10, 2023.

According to the PDP VIII, LNG-fired power is expected to have a total capacity of 23,900 megawatts and account for around 15% of Vietnam’s total electricity supply by 2030.

Under the plan, realizing the goal of developing gas-fired power, including LNG projects, is essential to promoting the development of the LNG market in Vietnam in an efficient, competitive, and sustainable manner. The smooth development of the LNG industry will contribute to the country's energy security and sustainable development.