DA NANG – Vietnam was coming to grips with impending energy and electricity shortages when the coronavirus struck.
Foreign oil and gas companies including several US majors were all set to invest in Vietnam’s liquefied natural gas (LNG) sector, including various gas-to-power projects in the country’s southern provinces.
But travel bans and increasingly gloomy economic forecasts mean their executives, engineers and planners are now staying away from the so far only lightly infected country with 153 confirmed Covid-19 cases.
Just last month, major multinational energy companies visited both Hanoi policymakers and provincial authorities to strike LNG supply deals or propose investments in gas-fired power plants.
A source with an energy advisory firm operating in Vietnam told this correspondent that foreign energy firms, many that have already struck MoU’s with various Vietnamese provincial governments, could stay away from Vietnam for at least six months and even up to a year, while waiting for coronavirus pandemic to completely subside.
Doanh Chau, president of state-run Vietnam Gas Group, told this correspondent that all Vietnamese energy projects are pending until further notice from the government because of the Covid-19 pandemic. He did not say, however, if any proposed or agreed projects have been cancelled.
The problem for Vietnam is that even when the pandemic ends, a prolonged absence of foreign energy players will push the timeline for new LNG receiving terminals and gas-to-power infrastructure out even further. Those delays, energy analysts say, will exacerbate a power crunch that has caused rolling brownouts and blackouts across the country.
Six months before the coronavirus started its lethal spread, Vietnam’s Ministry of Industry and Trade said that the nation was at risk of severe power shortages beginning in 2021, as electricity demand outpaces new power supplies.
Vietnam’s electricity demand was projected to exceed supply by 6.6 billion kilowatt hours (kWh) in 2021, increasing to 15 billion kWh by 2023, or equivalent to about 5% of forecasted demand for electricity then, the ministry said.
It’s not clear if, or by how much, those projections will need to be revised downward in the event of virus-induced slower economic growth.
Reuters said last year that a lack of energy infrastructure could put the brakes on foreign investment inflows into Vietnam, one of Asia’s fastest-growing economies, and challenge its position as one of the top global beneficiaries of the US-China trade war.
Vietnamese state media said around 47 of the country’s 62 electric generation projects of 200 megawatts (MW) or more faced delays, with some at least two years behind building schedule.
It’s not for lack of supplies. But the hydrocarbon-rich Southeast Asian nation’s inability to access gas reserves in its own 200-nautical mile UN-mandated Exclusive Economic Zone (EEZ) due to interference from China has caused serious disruptions.
Beijing’s notorious nine-dash line, which lays claim to around 90% of the South China Sea, overlaps with much of Vietnam’s EEZ and thus inhibits its gas exploration and production plans. Brunei, China, Taiwan, Indonesia, Malaysia, the Philippines, and Vietnam all have various overlapping South China Sea claims.
Beijing has forced Hanoi and its energy partners to cease oil and gas exploration activities at least three times since 2017, while US oil major ExxonMobil’s massive $10 billion Blue Whale gas project proposal, near China’s nine-dash line, is also under Chinese pressure.
The problem, at least from Beijing’s perspective, is that ExxonMobil and its PetroVietnam partner would likely tap a certain amount of gas inside China’s self-proclaimed jurisdiction due to its proximity.
The off-shore site is located in deep-water Block 118, about 88 kilometers off the Vietnamese coast in the South China Sea, and is estimated to hold some 150 billion cubic meters (bcm) of reserves, according to energy industry reports.
The resource is large and deep enough to provide power to a city the size of Hanoi for more than 20 years, according to ExxonMobil.
To make up for the loss of new gas resources needed to replace diminishing offshore reserves and meet rampant demand that has risen in lock step with Vietnam’s economy (which has averaged more than 6% gross domestic product (GDP) growth for over a decade), Hanoi has increasingly looked towards LNG.
LNG-fuelled power stations, moreover, requires the creation of a network of import and regasification terminals. Vietnam has at least six major LNG import terminals on the drawing board, with one already under construction in southern Vung Tau province, and numerous gas-to-power projects of various sizes planned.
Khanh Cong Le, a Ho Chi Minh City-based engineer and energy power consultant, told this correspondent that that if foreign companies pull back planned investments in Vietnam’s gas infrastructure due to the Covid-19 pandemic, related LNG projects will likely be delayed at least a year.
“Vietnam will still need to import either gas or coal and will also need to have investors to build power plants needed to offset the coming power shortage, because the Vietnamese government doesn’t have the money to finance these projects,” he said. “The coronavirus impact and delays will make the situation more severe.”
“2020 could be a disaster year,” he added, predicting the pandemic’s economic impact could take as long as two to three years to overcome. “It’s very serious for the country’s power generation sector.”