$4 bln LNG plant asking price too low: trade ministry

The trade ministry supports inclusion of a 3,200 MW liquefied natural gas-fired power plant in the Mekong Delta province of Bac Lieu as part of the national power plan. However, it expressed concerns that investor, Singapore-based Delta Offshore Energy (DOE), has proposed a selling price too low at 7 U.S. cents per kWh.

This is lower than the average electricity production price in Vietnam. In the south, even coal-fired electricity is priced at 7.8 cents per kWh, the ministry confirmed, adding a gas-fired project could typically charge 8.39 cents per kWh.

Although the 7 cent price tag would benefit Vietnam, the ministry is concerned the investor won’t be able to honor its commitment in the long run.

The plant’s location holds an additional geographical disadvantage: a fairway is needed as the plant is 35 kilometers from the LNG terminal, it said.

The southwestern region of the country already boasts many thermal and wind power projects, which means an addition investment of $285 million in a 355-kilometer transmission line is needed to ensure load.

These factors could increase investment in the project and therefore the 7-cent price tag may increase, the ministry said.

If the investor cannot keep its commitment and later raises its price, the retail electricity price would have to increase also, it added.

The Bac Lieu LNG-fired project has recently hit the spotlight as lawmakers question when construction would start, with local authorities having submitted a proposal 18 months ago.

Minister of Industry and Trade Tran Tuan Anh said on November 7 the ministry is awaiting final approval from the government, and that the project could enter the implementation phase next year.

Additional concerns relate to the investor having borrowed 85 percent of its capital for the project.

Foreign investors have expressed interest in developing LNG-fired power plants in Vietnam, a fast-growing economy hungry for power as supply of coal, gas and oil dwindles.

Vietnam plans to operate six LNG terminals at a total cost of more than $6 billion by 2025, with vision to 2035.