Mon, 12/12/2016, 09:06 GMT+7
Prospect of Vietnam Gas Industry - Reality and Solution
To assess the prospects for development of Vietnam Gas Industry until 2020 with orientation to 2035 and thereby identify the advantages, disadvantages and challenges to determine the development orientations for Vietnam Gas Industry, on 02nd December 2016, Vietnam Oil and Gas Group (PVN) organized the conference "Overview of Vietnam Gas Market – Reality and Solution".

Attending the conference were Mr. Hoang Quoc Vuong – Deputy Minister of Industry and Trade, the representatives for the Government Office, the representatives for the Finance Committee – the Office of the National Assembly, the leading representatives for the ministries, governmental departments, and the representatives for Vietnam Electricity (EVN). Representing the Vietnam Oil and Gas Group to attend the conference were President & CEO Nguyen Vu Truong Son, members of the Board of Directors, the Executive Management Board and heads of the Group’s affiliates.


After more than 20 years of establishment and development, Vietnam Gas Industry has so far made significant contributions to the cause of social and economic development in general and the oil and gas industry in particular. By the end of 2016, Vietnam Oil and Gas Group has supplied more than 100 billion m3 of gas. In particular, the gas for power generation makes up about 90% of total production, contributing to producing about 30% of the national total power output; the gas for fertilizer production accounts for about 8% of total production, contributing to producing about 70% of total fertilizer demand in the country. This has partly helped to ensure the national energy security and food security.


An overview of the conference


At the conference, Mr. Vu Dao Minh – Deputy Head of the Group’s Petroleum Production Division made a presentation about the development plan for the gas fields from now until 2035. Besides the existing gas fields which are being exploited, the Vietnam Oil and Gas Group has actively accelerated the development of other potential gas fields in Cuu Long Basin, Nam Con Son Basin, the Middle and Southwest of Vietnam. At present, the annual gas supply of about 10 billion m3 of gas per year is expected to be maintained until 2020. From 2020 onwards, the existing gas fields will decline, affecting the ability to ensure the gas supply to customers. Not only the decline in gas production, the development of new gas fields will be likely to face such difficulties as: high levels of contaminants (CO2, H2S), deepwater locations, far distances from the shore and being located in the sensitive areas. These factors will cause impacts on the costs of extraction, collection and processing and thereby affect prices of the gas supplies to consumers.


The presentations on "the demand-supply balance and the infrastructure of gas collection/ transportation and the charges in the period from 2016 to 2035"; "the LNG import solution and the development plan for LNG market of Vietnam" and "the gas pricing policy - the difficulties in negotiating and implementing the gas sale and purchase agreements" was also made during the conference. The representations showed a clear picture of gas supply-demand balance for each region including the Southeast, the Southwest, the Middle and the North of Vietnam. Accordingly, from 2017 to 2035, the country's total gas supply will be over 268 billion m3 of gas, while the total demand in this period will be over 344 billion m3. Thus, the supply will not meet the demand due to the depletion of the existing gas resources and the development of additional new power plants under the Power Development Master Plan VII. To offset this shortfall, it is necessary to develop new gas sources, build the infrastructure for collection, develop the marginal gas fields and import liquefied natural gas (LNG). According to the forecast of the imported LNG volume, the Vietnam’s Southeast will start importing LNG from 2020 with an output of about 0.6 million tons which will be increased to about 1 million tons when both the Nhon Trach 3/4 power plants are put into operation. After 2025, the demand for LNG imports will increase from 5 million tons/ year in 2025 to 11 million tons/ year in 2030 and reach 13.9 million tons in 2035. The Northern Region will also start importing LNG from 2025 to offset the gas consumption of the customers in Thai Binh and the neighboring provinces in the Northern Region.


Vietnam is now not only in lack of supplies, causing us to import LNG but also facing a sharply decrease in the outputs of lower-price gas resources as well as a trend of higher gas prices (higher than 5 USD/ million BTU) of new gas resources to be exploited in the next 3-5 years. With higher prices of the new gas sources, PVN must continue investments for collection/ transportation of gas from small and marginal fields located far from the main pipelines, causing the total price of gas supply to consuming households to be higher. This will be a challenge for the comprehensive development of the gas industry in the near future. This requires suitable mechanisms, policies and investment incentives from the government in case of necessity. In particular, it is necessary to set forth a policy of different gas prices for different types of customers such as Power, Petrochemical and Industrial customers. This will help to promote the development of the gas market, to ensure the effectiveness of the investment projects and the significant contribution to the energy security, maritime security and protection of the sovereignty of Vietnam.


Deputy Minister of Industry and Trade Hoang Quoc Vuong was expressing the leading ideas at the conference


Representing the leadership of Ministry of Industry and Trade, Deputy Minister Hoang Quoc Vuong appreciated and recognized the achievements of Vietnam Oil and Gas Group in the gas industry in the recent years. Ministry of Industry and Trade will continue reviewing, supplementing and adjusting the development master plan of Vietnam Gas Industry until 2020 with an orientation to 2035 in line with the development of the gas industry in particular, and of Vietnam Oil and Gas Group in general. Moreover, Deputy Minister Hoang Quoc Vuong also required PVN to make researches and propose the reasonable gas price policies, in order to ensure the harmony of interests between the State and the enterprises, the people and among the enterprises themselves as a solid foundation for the strong development of Vietnam gas industry.


Based on the direction of the Deputy Minister of Industry and Trade, the Group’s President & CEO gave specific requirements to PVN’s functional divisions and relevant units. Accordingly, they must strengthen the exploration and evaluation to increase the amount of verified reserves to ensure stable and long-term supplies, speed up the construction and improvement of the infrastructure to supply gas to consumers. Furthermore, they will also research and propose the suitable gas price policies and mechanisms to the Government and the Ministry of Industry and Trade for the sustainable development of Vietnam gas industry.