In a report  released on September 5, Wood Mackenzie, a UK-based energy research and consulting firm, forecasts that Vietnam’s economy will grow at an annual average rate of 4.7% over the next 27 years. 

To ensure a stable energy supply for economic development, Vietnam’s natural gas consumption (both compressed and liquefied LNG) is expected to increase by 12% annually, from 8 million tons of oil equivalent (Mtoe) in 2020 to 20 Mtoe by 2035. By 2050, this figure is projected to reach 32 Mtoe. At the same time, the share of coal will decrease by 7 Mtoe by 2050.

Therefore, Vietnam’s gas demand by 2035 will need to triple its current level to sustain economic growth, according to projections by the energy consulting firm.

Mr. Joshua Ngu, Vice President of Asia-Pacific at Wood Mackenzie, stated that gas will play a crucial role in power generation, ensuring national energy security. This will become increasingly essential as coal power production stagnates in the coming years, and renewable energy continues to face challenges such as intermittent efficiency and grid limitations. It is predicted that gas-fired power will account for 14% of total electricity generation by 2030.

“Gas-fired power generation is becoming increasingly necessary to prevent potential electricity shortages in the near term”, Mr. Ngu recommended. 

According to Vietnam’s National Electricity Development Plan 2021 to 2030 (Power Development Plan 8 (PDP8)), the country prioritizes maximizing domestic gas for electricity generation. By 2030, gas and LNG-fired power plants will reach over 37,000 MW, accounting for nearly 25% of total power capacity. 

This marks a significant increase from 2023 when this energy source represented only 8.9% of total capacity, equivalent to nearly 7,200 MW, according to Vietnam Electricity (EVN).

However, the development of gas power in Vietnam faces supply challenges. Existing gas fields, primarily located in the Southeast region, are entering a depletion phase, leading to a 25% drop in domestic supply over the past five years. 

“The lack of contracted LNG supply, coupled with dwindling domestic resources, increases Vietnam’s exposure to potential price volatility and raises the risk of future blackouts or gas rationing,” said Mr. Raghav Mathur, Principal Research Analyst, Gas & LNG at Wood Mackenzie. 

“The misalignments in LNG-fired electricity prices, power purchase agreements, and construction delays in LNG-to-power projects have been substantial obstacles for LNG contracting in Vietnam” he added

Additionally, Vietnam’s gas transportation and distribution infrastructure is currently concentrated in the southern region, with only two LNG terminals—Thi Vai LNG, which began operations last year, and Cai Mep LNG, expected to start this month. 

Ms. Yulin Li, an expert in Southeast Asian gas and LNG markets at Wood Mackenzie, noted that Vietnam does not yet have a backbone gas pipeline connecting the north, central, and south regions, which would enable the distribution of gas produced in the central region to the north and south.

"There is still significant potential for developing pipeline systems, storage facilities, and regasification terminals in Vietnam," Ms. Li emphasized.

To address these challenges, Wood Mackenzie experts recommend that Vietnam collaborate with major solution providers to boost investments in gas power, contributing to national energy security. 

Additionally, Vietnam must improve infrastructure to alleviate concerns about future gas shortages. Projects like Block B, expected to deliver its first gas by 2026 after years of delays, could supply an additional 11.3 million cubic meters per day by 2030. Furthermore, the construction of a gas pipeline from the Tuna PSC project (Indonesia) in the Natuna sea is expected to transport gas to Vietnam starting in the 2030s.