Trade partners: Putin (left) and Vietnam’s President To Lam at an event in Hanoi last month. Vietnam is expected to require up to 10 billion cubic metres of LNG a year by 2026. — AP
Hanoi: During his trip to Vietnam last month, Russian President Vladimir Putin highlighted Russia’s capability to both produce liquefied natural gas (LNG) in Vietnam and supply it to the country.
“There are different options here: we can take part in the construction of the appropriate liquefaction capacities, or we can supply our liquefied gas from the territory of the Russian Federation. Either way, it’s possible, there are prospects here, there are corresponding blocks where we can operate and produce liquefied natural gas,” he told the media.
In his article in the Nhan Dan (The People) newspaper on June 19 titled “Russia and Vietnam: A Friendship Tested over Time”, Putin announced plans for the Novatek group, Russia’s leading LNG producer and exporter, to implement LNG projects in Vietnam.
“The energy sector remains a strategically important area of bilateral cooperation. The Vietsovpetro joint venture, which has been exploring deposits on Vietnam’s continental shelf for more than four decades, has proved highly efficient,” Putin wrote.
“The volume of oil it has produced over the years has exceeded 250 million tonnes. Rusvietpetro, a joint venture company established in 2008, is successfully operating in Russia’s Nenets Autonomous Area. It has already extracted over 35 million tonnes of oil in the harsh conditions of the far north.
“Gazprom, in turn, is engaged in gas extraction in Vietnam, while another major Russian company, Novatek, intends to implement LNG projects on Vietnamese territory.”
Novatek is one of the few energy groups licensed by Russia to export LNG directly. Among the 11 cooperation documents signed between the ministries and enterprises of the two countries during Putin’s visit, one was a memorandum of cooperation in Vietnam between the Vietnam Oil and Gas Group and Novatek.
Earlier, Putin stated that Russia was ready to establish long-term direct supplies of hydrocarbons, including LNG, to Vietnam and Russian companies were ready to join large-scale projects using LNG as co-investors and suppliers.
In September 2023, Novatek chief executive officer Leonid Mikhelson said that the company’s Vietnamese partners made a number of specific proposals to enter the republic’s market, but negotiations are complicated by the lack of a legislative framework for such projects and problems with demand.
The Vietnamese government has placed LNG at the centre of its Power Development Plan VIII (PDP8) as a means to transition away from coal. Under PDP8, no new coal-fired power plants will be developed after 2030.
The plan also imposes a deadline of June 2024 for coal plants to proceed with their projects, otherwise, delayed or abandoned coal-fired ventures will be terminated and replaced by renewable or LNG-based power plants.
According to PDP8, Vietnam expects to derive 25%, or 37,000 megawatts (MW) power, from LNG by 2030.
This will require significant sector growth and investment. Domestic LNG projects currently produce just seven billion cubic metres per year of usable gas, which is not enough to fulfil Vietnam’s current needs.
In 2018, Vietnam imported 55% of the total LNG used domestically. By 2020, that number had grown to 70%.
According to Vietnam’s industry development plan, the country will need to import one to four billion cubic metres of LNG per year from 2021 to 2025, increasing to six to 10 billion cubic metres per year by 2026.
Before Putin’s discussion about plans to provide long-term LNG supplies to Vietnam, Russian media had frequently addressed the issue.
The Novatek group has shown interest in the LNG sector in Vietnam on at least three occasions. LNG is regarded as the cleanest fossil fuel available today, as it does not produce soot, smoke, or dust during the its combustion.
Furthermore, LNG-powered electricity is less dependent on weather conditions compared to wind or solar power, making it less prone to interruptions.
With these exceptional advantages, LNG has become an important resource across continents. In the United States, Spanish newspaper El Pais reported that the appeal of LNG is akin to a modern-day gold rush, shaking energy centres to their core. Numerous LNG facilities have been constructed to meet export demands, making the United States the world’s largest LNG exporter in 2023.
According to a January report by Fortune magazine, LNG terminals are proliferating along the European coastline. Last year, more than 20 new or expanded LNG terminals were planned across the European Union (EU). These terminals are now becoming operational, resulting in an increasing influx of LNG into the EU.
In Asia, Reuters reported that LNG imports reached a record high of 26.61 million tonnes in December 2023, establishing the continent as the world’s leading LNG importer.
In a July 2023 article, the Russian news agency Sputnik highlighted the LNG trend in Vietnam. Following its first shipment of 70,000 tonnes of LNG from the multinational energy group Shell last year, Vietnam has officially integrated into the global LNG trend.
Sputnik assessed that LNG serves as a “bridge fuel” in Vietnam’s transition from fossil fuels to cleaner energy sources. It is also considered a sensible choice given future challenges, as coal-fired power cannot be expanded and hydropower has no further development potential. Under PDP8, Vietnam aims to increase the share of gas-fired power from LNG to 14.9% by 2030.
According to an October 2023 report by CNBC, experts have identified Vietnam as one of the South-East Asian countries poised to become a key driver for the LNG market by 2030. With LNG demand expected to surge in the coming years under PDP8, Vietnam is predicted to become a standout in the LNG market and is on track to become a major force in the sector.
“LNG demand from Europe is projected to peak in 2027 and then decline by 2030. At that point, South-East Asia, particularly Vietnam, Thailand and Indonesia, will drive growth,” said Tony Regan, head of the Asia-Pacific gas division at NexantECA, an energy and refining consultancy.
Recognising the significant opportunity in Vietnam, Novatek established a representative office in Hanoi as early as August 2021, aiming to develop a range of LNG supply projects for the country.
According to Interfax, in October 2022, Leonid Mikhelson, the founder and chairman of Novatek, informed Russian media that the group was exploring the possibility of supplying LNG to both existing and newly constructed power plants in Vietnam. — Viet Nam News/ANN
