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Vietnam, Philippines heat up LNG demand in Southeast Asia

Yuji Nitta Monday | 07/17/2023 15:30

Vietnam's first imports of liquefied natural gas reached the PetroVietnam Gas' Thi Vai terminal this month. Photo by Yuji Nitta.

Vietnam and the Philippines have begun importing liquefied natural gas, that has turned the region into a major market as countries embrace the fuel as an alternative to coal.

On Monday, a ship carrying Vietnam's first imports of LNG docked at the Thi Vai LNG terminal in the southern province of Ba Ria-Vung Tau. The shipment consisted of 70,000 tonnes of Indonesian LNG purchased by state-run PetroVietnam Gas.

The Thi Vai terminal has a 1 million-tonne annual capacity and will receive up to 15 tankers a year, according to the company.

"LNG will be a main product for the company in the future," PV Gas CEO Pham Van Phong said, adding that the company will invest 195 trillion dong ($8.24 billion) by 2030 for tanks and distribution systems.

Vietnam plans to gradually phase out carbon-intensive coal power under a national energy plan approved by Prime Minister Pham Minh Chinh in May. To help offset the shift, Hanoi aims for LNG to account for around 15% of its power generation by capacity by 2030, up from 0% currently.

PV Gas will expand capacity at the Thi Vai terminal to 3 million tonnes a year. It will build a second terminal in Binh Thuan province, also in the south, and is "looking for another location in the northern central region for a third facility," Phong said.

The Philippines also received its first imports of the fuel about a month before Vietnam, at a terminal in Batangas on the northern island of Luzon, for use at a gas-fired power plant. The purchase was handled by AGP International Holdings, backed by Osaka Gas and the Japan Bank of International Cooperation. 

A unit of local conglomerate Lopez Group has partnered with Tokyo Gas to start purchasing the fuel as well.

Vietnam and the Philippines are embracing LNG as part of their decarbonization efforts. Storage batteries, which are key to renewable energy adoption, have been slow to catch on in these countries, leaving few options for ensuring a stable electricity supply while curbing coal reliance.

Elsewhere in Southeast Asia, Thailand, Singapore and Malaysia began importing LNG in the 2010s, as did Myanmar in 2020. Cambodia is preparing to start taking shipments, with a three-step plan to promote the fuel's adoption at home.

Many Southeast Asian countries produce their own natural gas. But a large portion of the region's reserves, including at the Malampaya gas field in the Philippines, are expected to run dry in the near future.

Philippine President Ferdinand Marcos Jr. said importing LNG at the same time as developing new gas fields will be important.

As shipments to Southeast Asia grow, Japan, China and the rest of East Asia are expected to eventually account for around 30% of global demand -- down from around 50% currently. Global demand could outpace supply around 2030, and a long-term rise in prices looms large over many countries.

Building a large-scale LNG terminal or LNG power plant can require hundreds of millions of dollars in investment. Countries with lower credit ratings could struggle to raise the necessary funds.

Source: Nikkei Asia

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