A 3.2-gigawatt LNG-to-power project in Bac Lieu province, initially aimed to start construction in the second quarter of this year, has become entangled in procedure bottlenecks.
Delta Offshore Energy (DOE), the $4-billion project investor, is still negotiating a power purchase agreement, or PPA, with state utility Vietnam Electricity (EVN). Without a signed PPA, the investor cannot negotiate with financial institutions for capital arrangements, according to the Singaporean company.
Under Vietnamese law, feasibility studies for a project must be approved before a PPA is signed. In order for a feasibility report to be approved, plans for transmission lines and connection to the national grid, as well as for a terminal and storage of imported liquefied natural gas (LNG) must be okayed.
However, the Ministry of Industry and Trade is still considering the plans, according to Bac Lieu province’s Department of Planning and Investment.
Bac Lieu authorities added 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.
A DOE representative said the company has sent its feasibility study to the Electricity Power Trading Company (EPTC) under EVN three times and entered negotiations with the firm seven times, but results have failed to meet expectations.
DOE had earlier planned to start construction of the project in the second quarter of this year and expected to put the first turbine into operation in 2024.
Regarding the expected PPA, an EVN representative said the state utility and DOE had started talks in August 2020. EVN has so far repeatedly asked DOE to show its official price quotation, but such a document has not been made available.
To assist DOE, the Ministry of Planning and Investment has proposed the government set up an ad hoc team to solve all obstacles the investor is facing.
The Bac Lieu People’s Committee granted an investment certificate to DOE in January 2020, making it the largest foreign-invested project in Mekong Delta at the time.
DOE plans to have four turbines of 750 megawatt each and one of 200 MW. The entire project is slated for completion by the end of 2027. The complex of an LNG terminal and storage warehouses would be located in a coastal area about 35 kilometers from the power plant.
Up to now, no LNG-to-power plants operate in Vietnam.
Prime Minister Pham Minh Chinh in mid-June ordered the industry ministry to recalculate the ratio of LNG power in the country’s energy mix under the draft power development plan VIII as the soaring price of imported LNG might make LNG-to-power plant projects until 2030 unbankable.
The latest draft plan (PDP VIII) put LNG-fueled power generation of new projects until 2030 at 23,900 MW, accounting for 16.4% of the country’s total. Another 14,930 MW would come from plants converted into LNG-fueled due to a lack of domestically sourced natural gas.
“Due to the Russia-Ukraine war, the price of imported LNG has soared to 15-20 U.S cents/kWh, while the current electricity selling price is 6-7 U.S. cents/kWh,” the PM wrote in a document sent to the ministry.