Large-scale Mekong Delta power project not out of the woods

Can Tho city’s prolonged multi-billion-dollar O Mon power center project still wrestles with complex price negotiations to buy gas from Petrovietnam’s Block B project offshore of Vietnam.

The development of the major project, which includes four gas-fired power plants called O Mon I, II, III and IV, has not been carried out smoothly as national oil and gas giant Petrovietnam has not concluded any gas supply contract with the developers of the plants.

The four plants’ total planned capacity is about 3,810 megawatts, and they are all expected to consume gas from the Block B project, located in the Malay-Tho Chu basin, southwest Vietnam. The Block B development will include the construction of a gas field and pipeline.

State utility Vietnam Electricity (EVN) is the developer of O Mon I, III, and IV. Meanwhile, a consortium between Japan’s Marubeni and Vietnam’s Vietracimex is the developer of O Mon II.

EVN completed O Mon I (660 MW) in 2015, and received the green light to invest in O Mon IV (1,050 MW) in 2019. This September, Can Tho city’s administration agreed in principle that the group will build O Mon III (also 1,050 MW).

Following the September decision, EVN expects it is able to reach a gas purchase deal with Petrovietnam for O Mon III, paving the way for Petrovietnam to be able to commence the construction of the gas field and pipeline.

According to a Petrovietnam source who does not want to be named, Vietnamese authorities have not had instructions on calculating the gas consumption volume for the three power plants of EVN. Therefore, a final investment decision, often known as FID, cannot be made to start work on the Block B project.

As for O Mon II, a development by the Marubeni-Vietracimex consortium, the Ministry of Industry and Trade is appraising its feasibility study, which was submitted this June. As planned, the heads of agreement for a gas supply contract (GSA) between the consortium and Petrovietnam is in process so that both sides could reach this GSA later.

The consortium has proposed the ministry allocate gas for the plants in the O Mon power complex based on electricity generation capacity. It has also asked Petrovietnam to supply enough gas during their GSA duration of 23 years, and to confirm that Petrovietnam would assure another gas supply plan for the full term of the power purchase agreement (25 years) secured for O Mon II, which means two years longer than the GSA.