Vietnam bets big on LNG, South China Sea gas fields amid risks
HANOI — Vietnam’s plan to quadruple by 2030 its gas processing capacity, turning it into its first source of energy, marks a big bet on imported liquefied natural gas (LNG) and its reserves in the South China Sea, despite supply and geopolitical risks.
The plan, which was approved by the government late on Monday, would turn the Southeast Asian nation from a very small player in the gas market into one of the largest users in the region.
LNG imports are projected to jump from zero now to volumes that would cover nearly 15% of the country’s booming energy needs by the end of the decade, according to the government’s adopted targets published on Tuesday.
Locally produced gas would be given priority over LNG, the government said, with output expected to jump by about 65% to 15 gigawatts (GW) by 2030 — but its share in the country’s power mix is set to drop to 10% from 13% in 2020.
Both targets face major hurdles, as LNG imports may be expensive amid high global demand, experts warned, whereas Vietnam’s gas production is often exposed to pressure from China which opposes extraction in large parts of the South China Sea which it claims.
To process the additional energy input Vietnam would build 15 LNG power plants by 2035, at least two LNG terminals and nearly a dozen new plants fired with domestic gas, which would switch to green hydrogen over the next decades.
The plan does not indicate the estimated cost of LNG imports. Prices rose quickly last year as European Union countries sought to replace Russian gas, a trend that is expected to continue, warned the Institute for Energy Economics and Financial Analysis (IEEFA).
“Vietnam could be entirely exposed to the spot market and price shocks because they do not have long-term LNG sale and purchase agreements,” said San Naing, senior gas analyst at BMI, a research firm.
“If they did not contract LNG sufficiently, then it’s natural for them to shift back to coal to mitigate paying such high prices for LNG,” said Alex Siow from ICIS, a consultancy, noting however that LNG prices were expected to fall after 2025.
State-owned PetroVietnam Gas did not reply to requests for comments about possible long-term contracts.
SOUTH CHINA SEA
Betting on local natural gas is also risky. Vietnam currently produces it in blocks in the South China Sea, some of which are close to where Chinese coast guard ships and research vessels frequently sail causing confrontations.
The additional output would come from blocks that are closer to Vietnam’s coast, including the Blue Whale field operated by U.S. giant ExxonMobil and a smaller deposit managed by Russia’s Gazprom with more gas possibly from fields operated by Italy’s ENI, the plan said.
None of the companies replied to requests for comments.
The plan did not mention imports from Indonesia’s Tuna block in the South China Sea, which Jakarta has said would export gas to Vietnam from 2026, although the government projects that imports of unspecified energy to cover 3.3% of the country’s needs by 2030. — Reuters