Batch of deals propels LNG-to-power projects

November 06, 2020 | 08:46
The signing of a series of agreements to develop billion-dollar liquefied natural gas-to-power projects is expected to create a “big bang” and improve the ranking of US investment in Vietnam.
1516 p5 batch of deals propels lng to power projects
Global giants are keen on supplying liquefied natural gas for Vietnam’s power generation, photo Le Toan

At the Indo-Pacific Business Forum in Hanoi last week, the US Trade and Development Agency announced finalisation of new commitments and unveiled a series of initiatives that will serve to deepen economic ties between the United States and the Indo-Pacific region.

The highlight of the event was the signing ceremony of seven agreements between representatives of Vietnam and the US to develop projects in numerous sectors, including four liquefied natural gas (LNG)-to-power projects in the energy sector. These projects will be spread out from the north to the south of the country.

ExxonMobil Haiphong Energy Pte Ltd., Haiphong People’s Committee, and Japanese power generation company JERA signed an MoU to cooperate on a potential integrated LNG-to-power project in the city.

According to the agreement, these parties will expand their strong cooperation and exchange of expertise to jointly study natural gas market development opportunities, including LNG import facilities and gas-fired power plants.

“JERA is extremely pleased to participate in the Haiphong project being developed by ExxonMobil and we are eager to utilise our expertise in the entire LNG value chain for successful project implementation. We have more than 50 years of experience as the world’s first utility who introduced LNG to the power industry,” said JERA’s managing executive officer and senior operating officer James H. Vigil. “Vietnam is a very important country for JERA, and we would like to contribute to its prosperity through various initiatives, including this important project.”

Another agreement is a joint venture agreement between AES Corporation and PetroVietnam Gas JSC (PV Gas) for the development of the Son My LNG import terminal in the south-central province of Binh Thuan for about $1.4 billion.

Key milestones

This signing comes near the one-year anniversary of the historic agreement AES signed with PV Gas to build the Son My 2 combined cycle gas turbine (CCGT) power plant as witnessed by US Commerce Secretary Wilbur Ross.

Although the investment capital in this agreement is $400 million lower than the initial agreement signed last year, with the cost of $1.4 billion, the project is still expected to one of the largest foreign invested projects in Vietnam. The terminal is expected to achieve financial completion in 2022 and begin commercial operations in 2025.

“This is an important milestone for the development of the Son My LNG terminal and our CCGT power plant. With these two projects, AES is fully committed to the country’s growth in cleaner energy sources and offering the most reliable and affordable electricity to support the continued economic growth of Vietnam,” said David Stone, president of AES Vietnam.

Delta Offshore Energy, Bechtel Corporation, General Electric (GE), and McDermott International signed a master teaming agreement for the development of the Bac Lieu LNG-to-power project in the Mekong Delta province of Bac Lieu. The purpose of the partnership is to utilise $3 billion of equipment and engineering services from Bechtel, GE, and McDermott, utilising best-in-class US technology and engineering capabilities.

Besides this, the project has also appointed industry-leading US firms as advisors, including JP Morgan as project finance mandated lead arranger, Hogan Lovells as international counsel, Black & Veatch as technical advisor, as well as Marsh as insurance and risk advisor.

The project is the first privately-owned and operated LNG-to-power project approved in the National Power Development Plan as a 100-per-cent foreign direct investment under Vietnam’s Law on Investment.

Further was an MoU signing between GE and VinaCapital for the development of the Long An LNG-to-power projects with the total investment capital of $3 billion and providing 3,000MW of power to Vietnam. To support this project, VinaCapital will collaborate with GE for the supply of its gas turbines and associated equipment and services.

Promotion of investment

Along with the LNG-to-power sector, the representatives of the two parties signed cooperation agreements to develop projects in energy generation, ethanol production, and a pork consortium.

The total investment capital of the aforementioned projects is estimated at approximately $10 billion, a major boost to inflows to Vietnam. The projects are considered a flagship model for US-Vietnam bilateral trade, investment, and energy security and represents a new dawn for private sector-initiated investments in energy infrastructure in Vietnam

In addition, they will help improve the US’ ranking among foreign investors in the country.

According to statistics published by the Foreign Investment Agency under the Ministry of Planning and Investment (MPI), US investors rank 11th among those investing in the country. As of October 20, Vietnam was home to $9.39 billion worth of US registered capital, and in the first 10 months of this year, the figure was $234.7 million, $70.49 million of which went into 78 newly-registered projects, while $37.6 million was added capital to existing projects and $126.6 million was spent on 224 mergers and acquisitions deals.

Before the Indo-Pacific Business Forum 2020, a US delegation arrived to Vietnam on the country’s first investment promotion event this year.

The working group included representatives from the US International Development Finance Corporation (DFC), in addition to five other government agencies, including the Export-Import Bank of the US. Although no investment deals have been reached just yet, they are still interested in expanding their activities in Vietnam.

The US government’s assignment of a large-scale delegation demonstrated the importance of Vietnam to the US expansion strategy.

Josh Cartin, managing director, Indo-Pacific and senior advisor to the CEO at DFC, said that the corporation had established a team to work with the MPI to study the incentives the Vietnamese government has launched for foreign-invested projects.

He said that DFC is particularly strong in the energy sector, education, and seafood. The corporation is looking at numerous sectors in Vietnam. In the next few months, DFC will work closely with the MPI to study projects which could combine the strengths of Vietnam and the US.

Daniel J. Kritenbrink - US Ambassador to Vietnam

I am excited because numerous deals have been driven home in the framework of the Indo-Pacific Business Forum by the representatives of US investment in Vietnam. AES Corporation and PV Gas inked the term sheet of the joint venture agreement for the $3 billion Son My LNG terminal, which will be located in the south-central province of Binh Thuan.

The US Embassy’s mission in Vietnam is to strengthen relations between the two countries and help Vietnam succeed. As part of this mission, we promote US investment in the country and support fair trade between the two countries to both benefit. We have been working with the Vietnamese government to advocate policies that we believe would improve the business environment in Vietnam and make it an even more attractive destination for foreign capital.

Our focus is to ensure that the investment environment is free, fair, open, and transparent. In addition, we help to advocate specific projects and one result was the signing of the billion-dollar deals at this event. These deals show our and the two countries’ commitment. What we do is to help enterprises from the two parties to understand each other and deal with arising problems.

Furthermore, we are a bridge for the two business communities, help companies and investors to understand every opportunity here and in the United States and then bring two sides together.

Irtiza Sayyed - Energy director ExxonMobil Haiphong

ExxonMobil is honoured to work with JERA and Haiphong to explore innovative approaches to make competitive LNG-to-power projects in Vietnam. As a gas industry leader with strategic access to LNG supplies around the world, ExxonMobil is well-positioned to supply cleaner and reliable energy to power Vietnam’s future.

Once completed, LNG-fuelled power in Haiphong will provide a more environmentally friendly alternative to the currently proposed coal projects in the master plan.

The $5.09 billion plant will be built in two phases, each with a capacity of 2.25GW, the first going on stream in the 2026-2027 period and the second three years later. ExxonMobil has submitted a master plan application with a project concept for consideration and potential inclusion in Vietnam’s National Power Development Plan.

Haiphong has submitted a letter of recommendation to include power demand with potential locations of power plants and LNG import infrastructure. The project submissions are pending government approval.

By Oanh Nguyen

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