Vietnam's industry ministry proposes 75% offtake for LNG power projects

The Vietnamese Ministry of Industry and Trade (MoIT) has proposed an offtake of no less than 75% of the average annual electricity output for LNG-to-power projects.

This guaranteed offtake will apply during the period of debt principal and interest repayment but shall not exceed 10 years from the project's commercial operation date, according a parliament resolution being drafted by the ministry.

This policy applies to imported LNG-to-power projects that receive approval from relevant state agencies upon project completion and begin commercial operation using imported LNG from the effective date of Law 61/2024/QH15 until before January 1, 2031.

According to the draft, power purchase agreements (PPAs) for gas-fired and LNG-fueled thermal power plants will have a 20-year term from the date of commercial operation.

For BOT (build-operate-transfer) projects, government guarantees will be provided for the full term of the project contract. In contrast, government guarantees for PPAs of LNG power projects are set at 15 years.ư

VinEnergo, a subsidiary of private conglomerate Vingroup, has submitted feedback on the draft. While agreeing with the 75% minimum offtake rate, the firm proposes extending the term to up to 25 years (compared to the current draft's 10 years) for projects entering commercial operation between January 1, 2030 and December 31, 2031.

For projects that begin operations earlier, from January 1, 2026 to December 31, 2029, VinEnergo suggests a minimum offtake rate of no less than 90%, also applied over a debt repayment period of up to 25 years, significantly higher than the 75% and 10-year limits proposed in the draft.

In response, the MoIT noted that there is no sufficient basis to assess the feasibility of a 25-year term and that it may not balance the interests between power sellers and buyers.

Regarding offtake levels, the ministry emphasized that the resolution only sets a minimum threshold, and that actual figures could be higher depending on project structure and mutual agreements between parties to ensure a balance of interests.

On September 26, Vingroup broke ground on the infrastructure development project for the Tan Trao Industrial Park (Phase 1), along with the 4,800 MW Hai Phong LNG-to-power plant project, set to become the largest in Vietnam and among the world's leading LNG power plants.

The Hai Phong LNG power plant, located within the Tan Trao Industrial Park, is developed by a joint venture between Vingroup and the group's subsidiary VinEnergo JSC. The nearly 100-hectare plant has a total investment of over VND178 trillion ($6.74 billion).

The facility will be constructed over five years and is scheduled to begin operations by late 2030. It will supply about 9.6 billion kWh per year in Phase 1 and 19.2 billion kWh per year in Phase 2, serving both the Tan Trao Industrial Park and the national grid, thereby enhancing energy security and reducing reliance on traditional fossil fuels.

With a designed capacity of 4,800 MW (1,600 MW in Phase 1 and 3,200 MW in Phase 2), this will be Vietnam’s largest thermal power plant, as outlined in the National Power Development Plan VIII, and one of the world’s leading LNG-fired power facilities.

Under the Adjusted National Power Development Plan VIII (PDP VIII), for LNG with carbon capture and storage technology (LNG with CCS), by 2050, its total capacity will be increased to the range of 1,887-2,269 MW.

Vietnam currently has only one operational LNG-fired power project - the Nhon Trach 3 and Nhon Trach 4 in the southern province of Dong Nai.

The Vietnamese government has asked relevant agencies to speed up the progress of LNG-fired power projects towards completion and operation in 2028, earlier than the deadline specified in PDP VIII.

They include those already having investors such as LNG Quang Ninh, LNG Thai Binh, LNG Quang Trach II, phase 1 of LNG Hai Lang, LNG Son My I and LNG Son My II, and LNG O Mon II III IV; and projects without investors like LNG Quynh Lap, LNG Nghi Son, and LNG Ca Na.