Novatek, PetroVietnam sign LNG, power deal: Update

Adds comment on status of ECV project in last paragraph

Russian producer Novatek has signed an agreement with Vietnam's state-owned PetroVietnam Power (PV Power) to develop LNG infrastructure projects in the southeast Asian country to meet its growing electricity demand.

It is also in discussions with the firm to supply LNG from its projects to Vietnam.

"Vietnam's electricity consumption has been growing at an average annual rate of 10pc over the past 10 years," Novatek chairman Leonid Mikhelson said, adding that Novatek is "ready to meet this growing market's needs."

Novatek intends to help Vietnam realise its goals to phase out coal-fired power generation and transition to clean energy from natural gas, he added. Vietnam is among a number of coal consuming countries which signed up to a coal phase-out coalition at the Cop 26 summit in Glasgow last month.

Novatek did not provide details about the LNG infrastructure projects and supply volumes. The firm operates the 17.4mn t/yr Yamal LNG plant in Russia, and has a 50.1pc stake in the project. It also leads with a 60pc stake the 19.8mn t/yr Arctic LNG 2 export project in Russia, which is currently under construction. The first three of six 6.6mn t/yr production trains are expected to be commissioned in 2023.

Novatek in May 2019 signed a preliminary agreement with Vietnam's Ninh Thuan province to construct an LNG-to-power project, which includes an LNG regasification terminal and new gas-fired power plants in Vietnam. But there were limited updates on the project thereafter.

The Novatek-PV Power agreement follows PetroVietnam Gas' (PV Gas) announcement last month that the country's first LNG receiving facility - the 1mn t/yr Thi Vai LNG import terminal - is expected to start operations next year. PV Gas and PV Power are subsidiaries of PetroVietnam.

The Thi Vai terminal, which began construction in November 2019, is 90pc complete and will begin operations in the third quarter of 2022, PV Gas said last month.

PV Gas is also jointly developing the 8.6mn t/yr Son My LNG import terminal with US firm AES, with commercial operations scheduled to start in 2026.

LNG imports will help to meet the country's growing gas demand, 70pc of which is expected to come from gas-fired generation power plants, and compensate for the country's declining gas production, PV Gas said. Customers from the petrochemical, industrial and transport sectors will account for the remaining 30pc of the country's gas demand.

Russia's state-owned Gazprom in April 2020 received approval from the Vietnamese government to build a gas-fired power plant in Vietnam's central Quang Tri province.

Swiss trading firm Gunvor and US-based project developer Energy Capital Vietnam (ECV) last December formed a joint venture to trade LNG and deliver supplies to Vietnam. Gunvor will supply the LNG to the joint venture under a long-term supply agreement to feed ECV's planned 3.2GW LNG-to-power project in Mui Ke Ga, Binh Thuan province.

A final investment decision on the ECV project was expected late this year, ahead of commercial operations starting in 2025, Gunvor said in December.

But market participants suggest that there is a possibility that the ECV project has been scrapped as it has not been included in official documents showing planned capacity additions in Vietnam, although this has not yet been confirmed with the joint venture.

By Joey Chua