By Emily Chow and Khanh Vu
SINGAPORE/HANOI- Electricity-hungry Vietnam wants liquefied natural gas to fire 15 percent of power capacity by 2030 but is unlikely to meet that target as power producers and foreign investors balk at the country’s strategy for making the super-chilled fuel affordable.
To promote LNG use and shield consumers from high prices, Hanoi in May set a price cap on generators’ sales of electricity fueled by imported LNG.
However, power producers are concerned that a price cap fails to reflect the volatility in the LNG market and will make gas-fired plants uneconomic if prices spike as they did in the past three years.
“It’s risky for both suppliers and buyers as LNG supplies and prices depend on geopolitical conditions, which are currently not stable,” said Nguyen Thanh Son, a Hanoi-based energy expert, adding the price cap was not appropriate.
The stakes are high for Vietnam as it struggles to wean itself off heavy reliance on coal to cut carbon emissions, and for global LNG producers, who see the fast-growing economy as a ripe opportunity.
In a national power development plan last year, the government set a target to have 13 LNG-fired power plants with a combined capacity of 22.4 gigawatts (GW) by 2030, accounting for 15 percent of the country’s total power generation mix.
If built, those 13 LNG-fueled power plants would require imports of 14 million metric tons of LNG per year, according to state-owned PetroVietnam Gas, which on current levels would make the country the sixth-largest market in Asia.
The Ministry of Industry and Trade has now set a price cap of 2,590.85 dong ($0.10) per kilowatt-hour (KWh) for electricity sourced from LNG sold by power producers to state grid operator EVN in 2024.
EVN told Reuters the price cap is reasonable for both suppliers and end-users, as it “will be reviewed and adjusted annually by the ministry when input data changes, thus offering long-term stability to investors.”
The 2024 price cap is based on LNG at $12.9792 per million British thermal units (mmBtu) excluding tax and storage, gasification and distribution costs, and a currency conversion rate of 24,520 dong per $1.
That is slightly higher than current Asia spot LNG prices, and roughly in line with the current value of LNG in long-term contracts linked to oil prices.
But average Asian spot LNG prices have trended higher since 2021, between $14 and $34/mmBtu on an annual basis, as COVID-19 and the Russia-Ukraine war drove them to record highs, making plant developers nervous about the price cap. – Reuters
