Fueling the Future: Vietnam’s Gas Demand Set to Soar by 12% Annually
Vietnam’s Shift to LNG: A Key to Energy Security and Sustainable Growth
According to Wood Mackenzie experts, the shift to using liquefied natural gas (LNG) will not only help maintain stability for the national power system but also ensure long-term energy security for Vietnam.
A recent study by Wood Mackenzie, a global provider of data, analytics, and consulting in the fields of renewable energy, energy, and natural resources, shows that Vietnam is facing a rapid increase in demand for gas. From current consumption levels, Vietnam’s gas demand is forecast to increase by an average of 12% per year and triple by the mid-2030s.
This puts great pressure on the energy sector, especially in the context of a significant decline in domestic supply from existing gas fields, with a 25% decrease over the past five years. Wood Mackenzie’s report forecasts that Vietnam’s gas demand will not only increase sharply in the 2030s but will continue to grow steadily until 2050.
The electricity sector is expected to continue to be the largest gas consumer, with 14% of electricity output expected to be supplied from gas in 2030, accounting for the majority of energy demand. By 2050, the electricity sector will remain the largest consumer of gas to maintain a stable electricity supply for the whole country.
Gas-fired power generation is increasingly needed to mitigate the potential for near-term power shortages, said Joshua Ngu, Vice President, Asia-Pacific, Wood Mackenzie. As coal-fired power generation is limited in the near term and renewables face challenges such as intermittent performance and grid constraints, gas and LNG will become the main fuel sources to ensure energy security and drive sustainable economic growth.
With demand forecast to increase in the coming time, Wood Mackenzie experts emphasized that signing long-term LNG contracts will help Vietnam stabilize prices and ensure gas supply for the coming years. Furthermore, signing long-term contracts for LNG will help Vietnam stabilize prices and minimize risks related to energy price fluctuations.
The approval of the Power Development Plan 8 by the Vietnamese government in May 2023 underscores the importance of LNG power projects, aiming to add 22.4 GW of LNG power capacity by 2030. However, for Vietnam to fully capitalize on the potential of gas and LNG, a dedicated energy mechanism is needed to focus on energy policy and regulation, said Yulin Li, Gas & LNG Research Specialist at Wood Mackenzie.
A strong policy framework is essential to attract investment in midstream and downstream gas infrastructure development, Ms. Li stressed. The development of new gas infrastructure will ease concerns about gas shortages.
Vietnam’s main pipeline network is currently concentrated in the southern region, where the economic hub of Ho Chi Minh City is located. Two LNG terminals have been built in southern Vietnam, with the Thi Vai LNG terminal already operational and the Hai Linh terminal expected to be operational by September 2024.
Several other LNG terminal projects are in the feasibility study stage and are expected to be operational in the early 2030s. In addition, according to Wood Mackenzie’s analysis, Vietnam should further develop cooperative relationships with solution providers capable of meeting national requirements, including many reputable providers operating in Vietnam, to utilize and improve technology to reduce emissions as well as enhance capacity for developing LNG power projects.
Key Statistics:
- Vietnam’s gas demand is forecast to increase by an average of 12% per year and triple by the mid-2030s.
- 14% of Vietnam’s electricity output is expected to be supplied from gas by 2030.
- 22.4 GW of LNG power capacity is expected to be added by 2030.
Related Topics:
- Energy Security
- LNG Power Projects
- Gas Demand
- Sustainable Growth