BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR PRIVACY & COOKIE NOTICE
X


US, Japan break into Vietnam's LNG market

Singapore (Platts)--13 Nov 2017 936 pm EST/236 GMT


Vietnam's LNG ambitions moved closer to reality last week, following several preliminary agreements signed with US-based and Japanese entities, aimed at securing LNG supplies, building regasification infrastructure and developing downstream markets in the southeast Asian country.


  • Emerging Asia growth key to global LNG players
  • US aims to facilitate Vietnam's energy infrastructure
  • Japan continues Asia LNG expansion campaign

The expectation that the LNG industry will remain oversupplied into the 2020s is creating an incentive for Vietnam and other emerging Asian markets to develop import infrastructure and accelerate energy reforms to support gas penetration in the energy mix.

Meanwhile, international investment is pouring in across the region, as global LNG market participants seek to create new demand outlets, amid rising global supplies from the US and Australia, and stagnant demand growth in the legacy markets of Japan and South Korea.

For the US, this emerging demand presents an opportunity to secure buyers for the multi-billion dollar LNG export projects being built along the US Gulf Coast, and reduce trade deficit in goods with its Asian trading partners.

For Japan, opening new demand centers in the region is a key priority, as the world's largest LNG consumer is faced with a combination of contractual over-commitment, slowing domestic demand growth and downstream market deregulation.

The deals were signed as Vietnam held the 2017 Asia Pacific Economic Cooperation Summit (APEC) in the central city of Da Nang.

LNG imports by emerging Asian buyers

Article continues below...



Download our special report:
Dawn of a global commodity: LNG trading transformed

arrowbullet

S&P Global Platts examines the key forces driving commoditization in the LNG industry, and the actions industry stakeholders are taking to capture opportunities in the changing business landscape. The report includes insights and forecasts by Platts, PIRA Energy, Ratings and Market Intelligence, as well as interviews with key industry stakeholders and experts.

Download our latest special report to read about the LNG industry's coming of age



US VIETNAM DEALS


Vietnam's largest gas company, PetroVietnam Gas, on Sunday signed two memorandums of understanding with US energy companies, during an official visit to Hanoi by US President Donald Trump.

Under the first MoU, Virginia-based AES Group will evaluate participating in the construction of PV Gas' proposed Son My LNG terminal project in the central province of Binh Thuan, the Vietnamese company said in a statement Sunday.

The initiative had the full support of the US government.

"This project is in line with OPIC's initiative to promote the expansion of LNG markets in the Indo-Pacific region," said Ray W. Washburne, president and CEO of the US Government agency Overseas Private Investment Corporation.

OPIC looks forward to facilitating critical investment into Vietnam's energy infrastructure and supply, he added, including the LNG terminal project and a 2,250 MW combined cycle power plant, which would provide around 5% of the country's power generation capacity.

Vietnam is targeting to build the Son My terminal, with a capacity of 1-3 million mt/year, between 2023 and 2025, as part of the government's 2035 gas market development master plan, released in January this year.

PV Gas on Sunday signed another MoU with Alaska Gasline Development Corporation, or AGDC, to collaborate on potential Alaska LNG supplies into Vietnam.

The two sides will also evaluate the possibility of PV Gas investing in Alaska's upstream gas fields.

"Vietnam is a new entrant to the LNG industry, but has the potential to be a rapidly growing customer of LNG," said Keith Meyer, president of AGDC, in a statement Sunday.


JAPAN VIETNAM DEALS


Vietnam's Ministry of Industry and Trade, and Japan's Ministry of Economy, Trade and Industry inked an MoU November 9, aimed at facilitating cooperation in LNG and other sectors, METI said in a statement. This was followed by another agreement between state-owned PetroVietnam and Japan's Mitsui November 10, seeking cooperation opportunities in LNG supply and the construction of gas-fired power plants in southern Vietnam.

The presence of Japanese companies in emerging Asian LNG markets has increased remarkably, and the trend is likely to continue.

The Japanese government last month announced a $10 billion public-private initiative to support LNG expansion in the region. The initiative will provide financial support to projects supplying LNG to Asia, or supporting demand creation in the region, which already accounts for over 70% of global consumption.

This is especially important at a time when METI is leading efforts to eliminate destination restrictions in long-term contracts, which could result in significant volumes of Japan-destined LNG bursting onto the markets.


VIETNAM'S LNG AMBITIONS


Vietnam plans to import 1 million mt/year of LNG by 2021, around 4 million mt/year by 2025 and between 6 million mt/year and 10 million mt/year from 2026 to 2035, according to the government's gas market development master plan.

The country's first LNG import facility, the 1 million mt/year Thi Vai terminal in the southern province of Ba Ria Vung Tau, is in construction and due to commence operations in 2020.

PV Gas in 2014 signed two LNG sale and purchase agreements with Russia's Gazprom Marketing & Trading and Anglo-Dutch Shell for deliveries into Thi Vai.

PetroVietnam, through its gas arm PV Gas, supplies natural gas to meet 35% of Vietnam's electricity and 70% of its fertilizer requirements.

-- Abache Abreu, abache.abreu@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com




Copyright © 2018 S&P Global Platts, a division of S&P Global. All rights reserved.