Thi Vai Terminal, an LNG storage facility in the southern province of Ba Ria-Vung Tau. (Photo: VNA)

Hanoi (VNS/VNA) - Infrastructure, planning and amarket mechanism were among key issues that must be addressed in order todevelop a market for liquefied natural gas (LNG) in Vietnam, heardparticipants at a conference on LNG on November 22 in Hanoi. 

Deputyhead of the Electricity and Renewable Energy Department under the Ministry ofIndustry and Trade (MoIT) Bui Quoc Hung said the importation of LNG must followinternational trade standards and regulations while Vietnam is still lacking inmany key areas including design, construction, and operation of infrastructurefor LNG imports. 

As of now, the country has not yet developed a fully functional legal frameworkfor its LNG power projects. This is especially concerning as LNG prices haveseen significant fluctuations in recent years, which will likely hurtprice-sensitive markets such as Vietnam.

In addition, LNG power projects often require long-term commitments and aresubject to market changes and international geopolitical events. They alsooften demand an advanced level of technology and large capital investmentsby experienced and financially capable investors. 

Hung said the biggest challenge for LNG power projects, from an investor'sperspective, lies in negotiating Power Purchase Agreements (PPA), which must beconducted in accordance with the regulations of the MoIT. 

Industry experts said such projects will likely face fierce competition fromother power-generating plants, traditional and renewable, as the VietnameseGovernment does not offer guarantees for LNG. 

Deputy Director-General of PetroVietnam Gas (PV Gas) Huỳnh Quang Hai said oneof the most difficult challenges to overcome was a lack of centralised LNGstorage facility.

"The idea is to have multiple storages for LNG to supply multiple LNGpower plants but many localities still have no plans for warehouses andpipelines. It will be extremely challenging to meet the plants' demand withjust one warehouse," he said. 

Hai proposed having dedicated warehouses for each LNG power plant to bring downtransport costs and the construction of warehouse hubs and ports. He said theGovernment must quickly establish policies related to LNG projects, includingtransitioning prices, LNG purchase contracts and power purchase contracts. 

Economist Ngo Tri Long said pricing remains a key problem, holding back thedevelopment of an LNG market in Vietnam. 

He advised the Government to employ a market-oriented approach while trying tobalance the rights and interests of both investors and consumers. This isespecially important to LNG power projects as LNG import costs typically amountto 70-80% of its total costs.

He said Vietnam could consider setting up several specialised import hubs tosupply LNG power projects, which are under the management of the State, toensure transparency and compliance. 

He said the Government must select capable investors, offer additionalfinancial incentives, standardise technical and legal requirements to give themarket a boost. 

"It is unlikely LNG projects can proceed according to schedule and operateefficiently without a form of guarantee and successfully negotiated PPAs,"Long said. 

Economist Dinh Trong Thinh from the Vietnam Academy of Finance said LNG poweris to play a key part in meeting Vietnam’s energy target, which has beenprojected at 150.000-160.000MW in 2030 or double the country's current output.

In addition, as Vietnam remains committed to lowering its carbon emissions thecountry's power sector must maintain growth while going under a majorrestructuring process.

Under the National Power Plan VIII, LNG power was expected to increase from 7GW(10.2% of the total output) in 2020 to 32GW (21.8% of total output) in 2030. Hesaid LNG remains a viable option to make up for shortfalls from outputgenerated from renewable sources and a key component in ensuring Việt Nam'senergy security.

Nguyen HungDung, deputy chairman and secretary-general of the Vietnam PetroleumAssociation, said under the National Power Plan VIII there is only one1-million tonnes storage planned while many localities across the country havevoiced their interest in developing LNG.

ℱ "The sector's key issues remain profitability and the sustainabledevelopment of a strong and fair LNG market," he said./.