Vietnam's Nuclear Delays Pressurizing its Gas Sector

Amongst countries that continue pursuing nuclear power, Vietnam is poised to be the first in the energy-hungry region of South-East Asia to realize its civilian nuclear plan, aiming at 10 reactors in operation by 2030, says Trang Nguyen of Douglas-Westwood Singapore, as she gives her opinion on the implications for Vietnam's offshore gas sector:

Nuclear energy was deemed to be a necessary alternative to sustain domestic electricity demand (projected to grow at 10.3 per cent p.a.) driven by rapid industrialization. By the end of 2013, Hanoi had successfully negotiated a number of deals with Russia, Japan and the US for the imports of nuclear technology and the construction of the first two plants. Due to the lack of preparation and financial agreements, however, the 4,000 MW Ninh Thuan 1 plant has been delayed by 4-6 years, which will potentially transfer the burden of supplying electricity fuel to the gas sector which currently accounts for 34 per cent of power generation.
 
As the development of nuclear energy remains uncertain, coupled with the anticipated gas shortage of 6bn bcm in Southern Vietnam by 2020, PetroVietnam plans to complete the $220m LNG import terminal by 2017 and intensify gas exploration and production, building gas pipelines to transport offshore gas to under-construction power generation power plants in Quang Nam and Quang Ngai provinces. These developments are expected to provide excellent opportunities for EPCI companies, drilling/offshore vessel contractors and OEMs and others throughout the supply chain. 
 
Additional gas capacity is expected to come from deepwater projects such as the US$4.3bn Phu Khanh basin Block B development, potentially the largest gas project in Vietnam with 4 tcf reserves which may be transferred to ONGC Videsh after a negotiation impasse on selling price between Chevron and PetroVietnam. With the additional pressure from the delay of nuclear power, PetroVietnam may need to escalate the sanction of block B with potential partners. 
 
Will Vietnam become the next significant gas producer in South-East Asia? It is not likely to be the case over the short to medium term due to the lack of infrastructure and human resources, the complexity in co-operating with PetroVietnam, and the South China Sea dispute which created high political and security risks for foreign investors. Yet, its potential is enormous and Vietnam will continue to demand the industry’s attention as it holds the largest oil and 3rd largest gas reserves in South-East Asia and considerably under-explored waters.