Vietnam faces domestic natural gas shortfall for power generation in 2025

Vietnam is expected to continue experiencing a shortfall of domestic natural gas for power generation next year due to declining production at its upstream gas fields, according to a presentation from state utility EVN, seen by S&P Global Commodity Insights on Sept. 23.

Meanwhile, delays and constraints in its LNG terminal projects mean it may not be able to fully rely on LNG imports to meet the shortfall.

Gas power plants in Vietnam are located in the southern region. These include 5,705 MW of capacity in the southeast, which requires 20 million-22 million cu m/d of gas, and 1,500 MW in the southwest, with a demand of 4 million-4.6 million cu m/d.

Since 2020, supply for these power plants has been on the decline due to ageing gas fields.

Currently, average gas supply for the plants in the southeast stands at just 9.5 million cu m/d, less than half of demand, according to EVN. From 2025 onwards, gas supply is expected to continue this downward trend, with only 5.3 million-6.8 million cu m/d forecast for 2025, a significant drop from 2024 levels.

Vietnam currently has only one operational LNG terminal, located at Thi Vai, with a capacity of 1 million metric tons per year.

Due to the shortfall in natural gas supply, EVN purchased LNG from the Thi Vai terminal during the dry season from April to July, to supply three of its power plants in the southeast. These plants include the 715-MW Phu My 3, the 477-MW Phu My 2.1 and the 477-MW Phu My 4, all located in Ba Ria Vung Tau province.

However, state-controlled PV Gas was able to supply LNG from Thi Vai to the three power plants because its main downstream offtakers, Nhon Trach 3 & 4, have not started operations. When the Nhon Trach 3 & 4 power plants, each with a capacity of 750 MW, are operational in 2025, they will absorb all the LNG supply from Thi Vai.

In July, PV Gas said the Thi Vai terminal had received a total of four LNG shipments, primarily for power generation, after a commissioning cargo was imported in July 2023.

LNG hurdles

A second LNG terminal that has finished construction is Hai Linh Co. Ltd.'s Cai Mep LNG terminal, which is also located in the southeast province of Ba Ria-Vung Tau. Atlantic Gulf & Pacific bought a 49% stake in Hai Linh and expects the terminal to start operations in September, but so far it has yet to import its first LNG cargo.

The Hai Linh LNG terminal, with a capacity of 3 million t/y, is expected to supply LNG to the downstream joint venture Vietfirst Gas, which has secured a 1 MMt/y LNG offtake agreement with the Hiep Phuoc power plant in Ho Chi Minh City, and another agreement with a demand aggregator in Vietnam, according to AG&P.

In August, the government granted Hai Linh a license to import and export LNG that would allow it to issue a tender for spot LNG cargoes, although it has not closed any tender so far, according to market participants. Some market participants said Hai Linh has issued at least one tender but did not award it due to high prices, and may look at issuing another one.

Hai Linh is likely to be able to use the remaining 2 MMt/y LNG of import capacity to supply southern Vietnamese gas-fired power plants such as Phu My, most likely through spot sales to EVN.

But since the additional gas is only needed for the dry season that starts in April, and cheaper sources like hydro, renewables and coal are currently available, it does not need to start commercial operations immediately, according to market participants.

Another key hurdle in Vietnam in the progress of the Nhon Trach 3 & 4 power plants and the Hai Linh LNG project is that the government has still not given EVN approval to sign power purchase agreements for LNG-based electricity generation. The lack of PPAs is the biggest obstacle in opening up the LNG-fired power sector for now.