Marubeni deal gives Vietnam’s second largest gas project a lift

Vietnam’s second largest natural gas project that needs around $10 billion to facilitate fuel energy transition has received a stimulus from a deal signed on Wednesday by Japanese heavyweight Marubeni and Petrovietnam.

State-run Petrovietnam signed the heads of agreement with Marubeni Corporation in Hanoi to provide the latter with gas to run the Marubeni-invested O Mon II thermal power project in the Mekong Delta city of Can Tho.

A heads of agreement, sometimes called a letter of intent, marks the first step on the path to a fully legally binding agreement or contract.

For Marubeni and Petrovietnam, their latest deal aims at finalizing the principles and main provisions of a gas sales agreement (GSA) and help the Japanese firm speed up its investment in the power plant.

It also serves as a basis for Petrovietnam to accelerate its work on the development of the entire Block B gas-power project chain. Block B, located in the Malay-Tho Chu basin, southwest Vietnam and about 400 kilometers from Can Tho, is Vietnam’s second-biggest gas project after Ca Voi Xanh, or Blue Whale, offshore the central region.

Nobuta Tetsuhiro, a counselor from the Japanese Embassy in Hanoi, said that the joint venture between Marubeni and Vietnamese construction firm Vietracimex would serve as a key transitional energy project helping Vietnam in the country’s efforts towards its 2050 net-zero target, and further tightening ties between Japan and Vietnam.

“The Japanese Embassy will continue its support to speed up the progress of the project so that it can hopefully start commercial operations in 2026 or 2027 as expected,” he stressed.

Petrovietnam plans for natural gas from Block B to flow through a pipeline system to Can Tho’s multi-billion-dollar O Mon Power Center to feed thermal power plants O Mon I, II, III, and IV. The four power projects have a combined capacity of about 3,810 megawatts. The $1.3 billion O Mon II project, with a designed capacity of 1,050 MW, is still under construction. O Mon III and IV will follow later. State utility Vietnam Electricity (EVN) is the developer of O Mon I, III, and IV.

The first one is already operational but natural gas for it is not from Block B because the second largest gas project is still on paper.

Petrovietnam CEO Le Manh Hung said Block B is expected to provide gas to power plants with some 5.06 billion cubic meters per year.

“The development of the major project will contribute significantly to Vietnam’s budget and socio-economic development, and meet the country’s electricity demand,” he said.

Gas power plants are part of the country’s clean energy transition, which is expected to help Vietnam reach carbon neutrality by 2050.

Vietnam and the International Partners Group, including the EU, the UK, France, Germany, the US, Italy, Canada, Japan, Norway, and Denmark agreed in December on a bold Just Energy Transition Partnership to support Vietnam’s net-zero 2050 goal. The JETP will mobilize an initial $15.5 billion of public and private finance over the next three to five years to support the country’s green transition.

Marubeni has been involved in the construction and operation of a total of 11 thermal projects in Vietnam since the 1970s.

The Japanese heavyweight and EVN signed a memorandum of understanding in November 2022 to embark on their collaboration supporting Vietnam’s clean energy transition. The Japanese corporation said the two sides would jointly study a wide range of decarbonization projects, including the decarbonization or carbon emission reduction of existing thermal power plants in Vietnam and the development of renewable energy and sustainable green energy such as biomass, ammonia, and hydrogen.

Marubeni was the first company to sign an MoU with EVN focusing on decarbonization in Vietnam.

Also last November, Marubeni, along with Tokyo Gas Co., Petrovietnam Power Corp., and Vietnamese firm COLAVI, set up their joint venture Quang Ninh LNG Power JSC to begin a feasibility study for their Quang Ninh LNG-to-power project in this northern province.

A total of $2 billion has been earmarked for the 1,500 MW project, which will be the largest of its kind in Vietnam. It will also include an LNG terminal, storage system, and regasification facilities.

To date, there are no operational LNG power plants in Vietnam. In all, nine LNG projects have received investment certificates or in-principle agreements as independent power producers. Of these, five have found investors and are in a position to enter the phase of negotiating a power purchase agreement with EVN.