Vietnam’s adoption last month of an updated National Power Plan 8 was a watershed moment for one of Asia’s fastest-grown economies.
It represented a concrete step towards reducing reliance on coal-fired power. At the same time, it identified a clear role for natural gas and particularly imported LNG to support increasing investment in renewables and underpin the country’s energy transition.
By 2030, Vietnam’s installed electricity capacity will have more than doubled and natural gas will provide 24.8 per cent of it. Sixty per cent of that will come from LNG, the first ever shipment of which is expected to land in Vietnam sometime between mid-June and late July.
For Asia – and the world – to achieve decarbonisation and net zero targets, many more countries will have to make plans like that of Vietnam.
But Vietnam’s transition pathway also highlights a fundamental challenge that nations in Asia will face this decade and beyond.
As they make their own significant forays into the global LNG market, they will be competing with European countries who have had to look away from piped Russian supply to meet their gas needs.
Germany, for instance, started 2022 with no LNG import capability but rapid employment of floating regasification infrastructure saw a million tonnes delivered in the first quarter of 2023. The country’s import capacity is expected to double between 2024 and 2028 and by the end of the decade Germany is projected to have the world’s fourth-largest LNG import capacity.
This is not to single Germany out, as such. France, the UK, Spain, Italy and Netherlands are among other major countries which have turned to LNG to ensure energy security. Only this month we saw the unusual spectacle of a shipment of LNG from Indonesia being delivered to Croatia.
Nor are we critical of German’s approach. A core component of the work undertaken by the Asia Natural Gas and Energy Association (ANGEA) is to advocate for natural gas as a commodity that can reinforce energy security and offer lower-carbon power generation (up to 50 per cent less emissions than coal), while also supporting growing uptake of renewables.
The logic behind that approach stacks up right around the world, not just in Asia.
But the German example stands out because the move to large-scale LNG imports was so swift and significant, and because it was seemingly at odds from a political standpoint.
Germany’s current government – led by the Social Democratic Party in a coalition that includes the Greens – had been elected on an energy platform of accelerated progress towards net zero highlighted by aggressive uptake of renewables in preference to fossil fuels.
The loss of Russian gas effectively put European countries like Germany in a situation that many Asian nations will find familiar: needing to find a way to keep the lights on to sustain economic growth that maintains and improves standards of living.
Within that equation, though, the differences between developed and developing economies is stark.
It’s estimated Europe has spent around $1 trillion since the invasion of Ukraine, sourcing alternative energy supplies to Russia’s gas and subsidising communities and industry against rising power prices.
For the developing nations of Asia, that’s a cost that’s simply impossible to entertain. A key learning of the past 18 months is that challenges of the global energy landscape have forced Asia to return to coal, at record usage levels, stalling progress on decarbonisation (as a sidenote, Germany itself pivoted back to coal for a period in 2022).
It’s exciting to see a country like Vietnam planning to transform its energy mix, in tandem with the Just Energy Transition Partnership it entered into with an International Partners Group late last year.
But as Vietnam aims at growing its gas-fired power capacity to 37GW by 2030, you also have Germany looking to add as much as an additional 25GW during that same timeframe.
Against a backdrop of elevated LNG prices, the spending power of one of them is likely to be much stronger than the other.
That’s why it’s crucial that governments and financial institutions in gas-producing countries continue to support and invest in projects that will help return stability and balance to the natural gas market.
Ensuring there is enough LNG supply to meet global needs is a key recommendation of the recent Rystad Study Into Energy Security in Southeast Asia, which included detailed analysis of Vietnam’s energy circumstances.