Vietnam to be key link in global LNG chain on rising demand: experts

Vietnam is emerging as a potential LNG importer and expected to become a key link in the global LNG chain, says Nguyen Duc Tung from the Vietnam Institute of Strategy and Policy for Industry and Trade.

At a forum on global LNG distribution chain and Vietnam's position held on Wednesday, Tung stated that the global liquefaction capacity currently stands at approximately 482.5 million metric tons (MT), with an average operating rate of 88.7% in 2023.

Among the world's top liquefaction producers, the U.S. has the largest capacity at around 91.4 million MT per annum (MTPA), followed by Australia (87.6 million) and Qatar (77.1 million).

He said in 2023, Vietnam officially entered the global LNG map as a new importer. With its strategic geographic location near major international shipping routes, modern port infrastructure, and proximity to major LNG centers in Southeast Asia, Vietnam is seen as a promising LNG importer. The country is poised to play a crucial role in the LNG supply chain globally and especially in Southeast Asia.

Tung noted that although Vietnam's LNG consumption is currently low, it is expected to increase rapidly due to the country's energy transition goals and commitment to achieving net-zero emissions by 2050.

In 2023, Vietnam's LNG import volume was around 0.1 million MT, accounting for just 0.2% of global LNG imports. However, its LNG demand is forecast to grow significantly, reaching 15-20 million MTPA by 2030 and 20-25 million MTPA by 2035.

Therefore, attracting investment and developing LNG infrastructure will be essential for boosting the country’s position in the global LNG chain.

Regarding this matter, Dang Thi Thuy from the Ministry of Industry and Trade’s Vietnam Industry and Trade Information Center, highlighted that Vietnam has 13 LNG power projects approved by the Prime Minister as part of the country's priority energy projects.

By 2030, the country is set to have 22,400 MW of LNG-fired electricity capacity, which will account for 14.9% of the national power generation capacity, producing 83 billion kWh. This is expected to play a key role in ensuring the stability and security of the national electricity grid.

In Vietnam, LNG is primarily used as fuel for power plants and industrial consumers. LNG power plants and port terminals are driving the local LNG market, helping to reduce environmental pollution caused by coal-fired power plants and ensuring a stable energy supply as resources like coal and hydroelectricity are being depleted due to over-exploitation and climate change impacts.

Vietnam is also working on expanding its LNG import infrastructure, Thuy said, adding that the government is currently enhancing legal frameworks and standards to create a more favorable environment for widespread LNG use in the future.

Opportunities for LNG market

Thuy pointed out that there are many opportunities for the LNG market in Vietnam. Globally, there is a clear trend toward transitioning to LNG, which opens up avenues for Vietnam to access stable LNG supplies at competitive prices.

Additionally, the relocation of manufacturing plants to Vietnam and the increase in domestic gas-fired power plants will contribute to the growth of the LNG market in the coming years. The Vietnamese government has also laid out a clear strategy for LNG market development, making it easier for local businesses to switch to this energy.

However, Vietnam's LNG market also faces several challenges, she noted. As a latecomer to the international LNG market, the country must comply with established global norms and practices for LNG imports.

The infrastructure and legal frameworks for LNG imports are still under development and yet to meet current demand. Furthermore, global geopolitical tensions, particularly the Russia-Ukraine conflict, are causing significant fluctuations in LNG supply and prices.

La Hong Ky from the Office of the National Steering Committee for Energy Projects noted that there are several other issues that need to be addressed for the successful development of gas-fired electricity.

For instance, he noted, several provinces such as Thanh Hoa, Nghe An, and Ninh Thuan have yet to select investors for their projects due to delays in in-principle investment approval and bidding processes. Additionally, some power transmission lines needed to connect to large power plants are yet to have investors, hindering their progress.

Other challenges include securing financing for LNG power projects. Currently, most LNG power projects, except for the Nhon Trach 3 & 4 plants, rely on Power Purchase Agreements (PPAs) to secure financing.

However, there are still unresolved issues related to the stability of long-term gas supply commitments and the transition from gas contracts to power contracts, which could delay project financing.

To ensure the timely implementation of LNG power projects, Ky emphasized the need for the government to focus on building appropriate mechanisms and policies to remove these challenges.