LNG to shift to buyers’ market, make ways for Vietnam energy solutions
The global gas market has undergone drastic changes this past year. 2023 was said to be the first full calendar year of minimal Russian pipeline flows to Europe, causing heavy impacts on the rest of the global gas market right after the announcement. The most recognizable one was the abnormal fluctuations in LNG price levels due to the switch of traditional Russian pipeline buyers in Europe to the US and the Middle East – key LNG suppliers for Asian markets.
However, European gas prices continued to fall even throughout mild winter weather as a result of high storage levels, with May TTF front-month averaging at 10,11 USD/MMBtu, 25% lower m-o-m. European storage levels stood at 62 Bcm at the end of April 2023, 80% up on the levels one year earlier, and well above the five-year average of 40 Bcm.
Asian industrial demand has not been back yet and the absence of significant supply shocks has dragged Asian LNG prices down to $9.882/MMBtu (June delivery, assesed on May 5 by Platts), considered the lowest for the past two years. China's spot demand for LNG has been below expectations as the country decided to resume utilizing coal and renewable energy to meet its requirements. Downstream trucked LNG prices, which provide a significant source of demand for imported LNG, have also been lower than spot LNG prices. Japan, Korea and India still have ample supply to meet weak domestic demand.
Global LNG market is expected to reach a balance between 2026 and 2027 with a wave of new liquefaction projects to come online. North American gas exports are expected to reach 135.8 bcm in 2023, 14% higher y-o-y. In the US, an additional 104 MMtpa of export capacity is in various stages of development. Mexico will soon become a net LNG exporter, with FLNG Altamira on the Gulf Coast starting exports toward the end of 2023.
A super-chilled solution for the country’s energy demand
Resolution No. 55-NQ/TW of the Politburo on orientations of Vietnam's national energy development strategy to 2030, with a vision to 2045 has set out some key goals: “To firmly ensure security national energy and provide adequate, stable, high-quality energy at reasonable prices for fast and sustainable socio-economic development to eventually ensure national defense and security, improve people's living standards and contribute to the protection of the ecological environment”, “To efficiently and economically ultilize domestic energy resources in combination with rational energy exportation and importation” and “ To domestically produce key equipment in the energy sector and implement advanced and modern electricity transmission and distribution grids”. In line with that Prime Minister Pham Minh Chinh's commitment at COP26 to achieve net zero emissions by 2050 has clearly shaped the problem of LNG energy development in the future.
The Ministry of Industry and Trade issued Decision No. 2976/QD-BCT (dated 30 December 2022) on the Plan for electricity supply and operation of the national power system nationwide in 2023. In which, gas-fired elecricity accounts for about 10.4% of the total national production. However, in Q1/2023, the mobilization of natural gas for power generation was low, with the amount of gas demanded for power plants by the end of April only reaching 96% of the plan assigned by the Ministry of Industry and Trade.
From the above data and market indications, it can be inferred that LNG can meet the demand for not only power generation but also the input fuel for production and business activities of industrial customers in Vietnam. With the risk of power outage from hydroelectric plants as well as the increasing demand among domestic industries, PV GAS is aware of the urgency in importing LNG to supplement the rising crave for gas and replenish the decreasing domestic gas supply, ensuring the national energy security as well as giving a boost for the development of domestic industries.
Thi Vai LNG Terminal is expected to come online from July 2023 with a supply capacity of 1 million tons/year in Phase 1 with the oil and gas giant Shell being the supplier for the first LNG consignment. In addition, PV GAS is currently negotiating with world-class LNG suppliers to build an efficient LNG value chain capable of offsetting Vietnam's growing energy shortage. The first LNG shipment will be a remarkable milestone to open up business prospects for PV GAS, and establish an important position of the business in the long-term transition to LNG-fueled power in Vietnam.
The introduction of LNG in Vietnam is a breakthrough for PV GAS – a pioneer in Vietnam's energy industry, thereby affirming its leading role, as well as PVN’s, in implementing the Govnerment’s guidelines and strategies to ensure national energy security.