The Ministry of Industry and Trade has recently completed Draft Decree No. 1, which defines the mechanism for developing power projects that use natural gas and LNG. The Decree will apply to organizations and individuals involved in investing in gas-fired and LNG-fired power plants, including power generators that own gas-fired power plants connected to the national power system. The Decree will also apply to power companies, including the Vietnam Electricity Group (EVN), the Vietnam National Oil and Gas Group (PVN), the system operator and the electricity market operator.
In terms of the mechanism for LNG-fired power plant projects, the Draft Decree states that organizations and individuals investing in such projects must actively implement projects included in the Power Plan in accordance with the regulations, ensuring efficiency and coordinating with enterprises that must negotiate, sign and be responsible for contracts and commercial agreements.
Perspective of Quang Ninh LNG Project – Photo: PVN
The Government agrees with the principle of the cost-plus mechanism for gas-fired power plants. During the period up to 2030, the Government stipulates that the proportion of electricity under long-term power purchase agreements must be at least 70% during the project’s debt repayment period, but not more than 7 years, in order to ensure the feasibility of attracting investment, avoid a strong impact on retail prices, and ensure equal competition with other types of power sources in the electricity market.
With regard to the mechanism for power plants using domestic natural gas, the Draft Decree stipulates that for key oil and gas projects that contribute significantly to economic development, ensure national energy security, national defense and security, and protect Vietnam’s sovereignty, the Government agrees in principle to switch from gas prices to electricity prices for power plants. The Ministry of Industry and Trade will provide guidelines for the mechanism for consuming the upstream gas output of the Ca Voi Xanh and Block B gas fields.
The Draft Decree also stipulates that the electricity generator shall sign a contract with the Vietnam Electricity Group according to the form issued by the Ministry of Industry and Trade in order to participate in the competitive wholesale electricity market and sell the power plant’s electricity to the spot market. The cost of purchasing electricity from power plants using domestically exploited natural gas or imported LNG shall be reasonable and legitimate costs and shall be calculated and adjusted in the retail electricity price.
The governing law and dispute resolution shall comply with the provisions of Vietnamese law. The parties may agree to apply foreign law to matters that are not fully regulated by Vietnamese law.
