Energy-hungry Vietnam has guaranteed a minimum offtake of 65% of electricity annually generated by power plants using imported liquefied natural gas for 10 years. Investors wanted a higher ratio.

Just issued by the Vietnamese government, Decree No. 100 serves as a development framework for LNG-fired power projects in the country, which cannot produce LNG yet and is poised to increase purchases of LNG and Boeing aircraft in the hope of balancing trade with the United States after the Trump administration announced 46% tariffs on Vietnamese goods in April.

The new rules say that LNG power plants using imported gas will receive guaranteed power offtake commitments, with specific offtake ratios to be negotiated by the seller, or generator, and the buyer – state utility Vietnam Electricity ( EVN ). However, the ratios have to be at least 65% of the generator’s multi-year average annual output.

The new regulations apply to LNG-to-power plants starting commercial operations before January 1, 2031.

Stable cash flow

The guarantee applies throughout the loan period, both principal and interest, and will last no longer than 10 years from the power plant’s commercial operation date. After that period, electricity transactions will be based on negotiations between the seller and the buyer.

“The offtake guarantee is designed to provide stable cash flow, helping investors meet debt repayment obligations,” states Decree 100. “Gas suppliers and transporters also typically require an offtake guarantee to ensure predictability in fuel volume and pricing in the long term.”

The 65% ratio aligns with recommendations by EVN, which is in charge of electricity transmission in the entire national grid in addition to running its own large-scale power plants and its role as the electricity market’s largest buyer. However, the ratio is lower than investor expectations as many project developers had asked for offtake guarantee levels between 72% and 90%.

In a national power development plan issued in 2023, better known as PDP VIII, the Vietnamese government set a target of having 13 LNG-fired power plants with a combined capacity of 22.4 gigawatts by 2030, accounting for 15% of the country's total power generation mix.

The plan is being revised towards using more LNG-fired power. Under the draft amendment, Vietnam would need nearly 37.5GW of new gas-fired power by 2030. Of which, 60% – or 22.524GW – would be sourced from imported LNG; the balance would be based on local sources.

New industrial hub

Vietnam’s first LNG power project, Nhon Trach 3 and 4 plants in Dong Nai province next to Ho Chi Minh City, is doing a trial run for commercial operations, set for this June.

The investor is PV Power, part of Petrovietnam – the country’s state-run oil, gas and power group. LNG for the project is imported and supplied by Petrovietnam’s subsidiary PV Gas’ Thi Vai LNG terminal in Ba Ria-Vung Tau province, the country’s oil and gas hub.

Over the next three months, Ba Ria-Vung Tau and the industrial province of Binh Duong will be merged into Ho Chi Minh City to form a new southern economic hub with the same name of Ho Chi Minh City, but the new population will increase by roughly 40% from around 10 people to almost 14 million people. The new metropolis region will be responsible for a quarter of Vietnam’s GDP.