Vietnam's National Power Development Plan For LNG Power Plants

Overview

In May 2023, the Prime Minister issued the long-awaited Decision 500, approving the National Power Development Plan, known as PDP8. Decision 500 took effect on May 15, 2023, and covers a 27-year period (2023–2050). It outlines general policies, objectives, and plans for the development of power generation and transmission infrastructure. It also deals with land use. It identifies key projects. On April 1, 2024, the Prime Minister issued Decision 262, approving the PDP8 Implementation Plan ("Plan"). After two years from the date of Decision 500, the actual implementation shows that a number of offshore wind power projects and coal fired power plants may not achieve the approved schedule, a number of new nuclear power plants and new LNG power plants have been approved. On April 15, 2025 the Prime Minister issued a new decision (Decision 768) approving the amended National Power Plan ("Amended PDP8") to address the actual implementation and changes of circumstances.

As of 2020, Vietnam's total installed power generation capacity had reached 69,340 MW. During the 2023–2050 period, Vietnam's GDP is projected to grow at an average annual rate of 6.5%–7.5%. To support this growth, Vietnam must double its current power generation capacity to reach 150,500 MW by 2030. From 2031, capacity will continue to increase and may reach 490,530 MW–573,000 MW by 2050. Power generated by LNG plants is expected to reach 22,525 MW by 2030, accounting for 9.5% ÷12.3% of total industry capacity.

Status of LNG Power Plants Under the Plan

Vietnam has five years (until 2030) to develop 15 LNG power plants. Timely execution is crucial, requiring extensive coordination among developers, regulatory agencies, EVN, PVN, Vinacomin, and local authorities.

Below is the table that provides the status of LNG power plants identified in the Plan and in Decision 768.

A number of new LNG power plants will be developed during 2031-2035 under the Amended PDP8. They are:

Under PDP8, Vietnam has no plan to develop NEW LNG power plants after 2035.

Potential Backup Locations: Thai Binh, Nam Dinh, Nghi Son, Quynh Lap, Vung Ang, Chan May, Mui Ke Ga, Hiep Phuoc 2, Tan Phuoc, Ben Tre, Ca Mau, and other locations have been identified as potential backup locations for the replacement of delayed and abandoned projects.

Key Challenges in LNG Power Development

The actual implementation shows that there are several obstacles that hinder implementation of the Plan:

1. Time-consuming contract negotiations: Power Purchase Agreements (PPAs) and Grid Connection Agreements (GCAs) require lengthy negotiations.
2. LNG port infrastructure: The development of LNG ports demands significant investment and must be completed before or alongside LNG power plants.
3. Lack of a pricing mechanism: There is still no specific LNG pricing framework for power projects.
4. Revenue stability concerns: No guarantees exist to ensure stable revenue for LNG power projects.

Government Support: Decree 56

To address these challenges, the Government has recently issued Decree 56¹, which provides guidance on LNG project development. Key provisions include:

1. Fuel Cost Pass-Through Mechanism (FCPTM):
   
   • LNG power plants can recover fuel costs through electricity tariffs in PPAs.
   • Fuel costs are calculated based on a weighted mean of invoices under LNG purchase agreements.
   • LNG power plants that invest in LNG ports can recover associated costs through electricity tariffs.
   • If multiple LNG power plants share the same LNG infrastructure, costs will include CIF price, storage, liquefaction, transportation, and distribution expenses.
2. Guarantee for Offtake Arrangements:
   
   • During the loan repayment period, at least 65% of the electricity output from LNG power plants can be sold to the national grid.
   • This provision ensures stable cash flow and enhances bankability for LNG projects.
   • The maximum guarantee period is 10 years.
3. Applicability to BOT Projects:
   
   • FCPTM and Offtake Arrangement provisions also apply to Build-Operate-Transfer (BOT) projects.
4. Selection of LNG Investors²:
   
   • If multiple investors compete for the same LNG project, selection will occur through a bidding process.
   • Electricity prices offered by investors must not exceed the ceiling price set by the Ministry of Industry and Trade.
5. Timeframe for Contract Negotiations:
   
   • Decree 56 (Article 20) mandates that EVN and LNG power plants finalize contract negotiations within three months of receiving all required documents.
   • This provision aims to expedite the traditionally slow PPA finalization process.

Future Outlook

LNG power generation is relatively new in Vietnam, and the market is still in its early stages. However, LNG will play a critical role in Vietnam's energy mix over the next decade and is integral to the country's net-zero commitments. Given its deep-sea port advantages, Vietnam is expected to import LNG not only for power generation but also for energy storage and other applications.

Despite its potential, LNG development faces risks, particularly due to reliance on limited supply sources and due to global energy uncertainties. Market entry considerations for LNG developers, distributors, and financiers will be crucial as Vietnam navigates this new energy landscape.

Footnotes

1. Decree 56/2025/ND-CP of the Government dated March 3, 2025 ("Decree 56"). Decree 56 took its effect on March 3, 2025.

2. To date, investors of 10/15 LNG power plants have been selected. Investors in the Thai Binh, Nghi Son, Hai Phong, Hiep Phuoc (phase 2) and Ca Na LNG projects have not been selected.

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