Vietnam’s central province okays S Korea’s SK E&S to process LNG-to-power project

The central coastal province of Quang Tri, SK E&S under South Korean chaebol SK, and Vietnamese conglomerate T&T Group have agreed to cooperate in investment, trade, energy transition, and green growth.

The three sides signed a memorandum of understanding for the move on Wednesday as part of Quang Tri Chairman Vo Van Hung’s South Korea visit to promote investment.

The signing followed provincial authorities giving an in-principle nod to SK E&S and T&T Group to study the feasibility of a coal-to-LNG conversion for a thermal power plant project in the province.

The signing is an important step for the sides to cooperate and urge higher authorities to approve the conversion and add the project to the national Power Development Plan VIII (PDP VIII).

In addition to coal-to-LNG conversion, the three sides will develop low carbon emission projects, green hydrogen production, carbon credits, central LNG terminals, and investment promotions in sustainable activities.

The predecessor of the LNG-fired thermal plant is the $2.3 billion, 1,320-MW Quang Tri I coal-fired power plant. It was to be built and operated by EGAT International (EGATi), a wholly-owned subsidiary of the Electricity Generating Authority of Thailand.

Construction of the project began in November 2019, but little progress has been made. In September-October 2023, EGATi signed documents with Vietnam’s Ministry of Industry and Trade and Quang Tri authorities to terminate the project.

Draft policies for LNG can open up market reform

Vietnam’s trade ministry is drafting a decree on developing LNG-fired and natural gas-fired power plants. Analyzing the draft rules, S&P Global Commodity Insights, under market analyzer S&P Global, said, “the government plans to allow the cost of natural gas and LNG to be passed through to consumers in electricity prices in power purchase agreements.”

“The policy will allow electricity purchase costs from gas and LNG-fired power plants to be included as inputs in the calculation for adjusting electricity retail prices,” SP Global Commodity Insights clarified.

This conversion in power prices is “a long-awaited regulation that is expected to pave the way for state firms like PV Gas to sign long-term LNG contracts,” SP Global Commodity Insights added.

Another key draft term is between now and 2030, when “long-term power purchase contracts must guarantee that a minimum contract quantity of 70% of the total output of LNG power plants is purchased during the project's debt repayment period. This will guarantee enough electricity offtake to make the projects commercially feasible and bankable,” SP Global Commodity Insights quoted developers as saying.