,Vietnam

COVID-19 to weigh on Vietnam's power consumption in 2020

Gas-fired generation will take a hit amidst depletion of domestic reserves.

The effects of the COVID-19 outbreak could dent Vietnam’s power consumption. As a result, Fitch Solutions lowered its projections for 2020 to 6.2%.

Vietnam’s large manufacturing sector (which contributes 16% of GDP) could come under heavy pressure in H1 2020, from supply chain disruptions as a result of the outbreak in China.

Gas-fired generation could take the biggest hit to power generation in the near-term, as domestic gas reserves and output continue to deplete. “Our Oil & Gas team forecasts Vietnam's self-sufficiency in natural gas to end by 2022,” Fitch Solutions said.

The government has also largely focused on developing coal and non-hydro renewables generation sources at present, with favourable policies to fast-track development in the near term.

Still poised for growth
Despite the near-term revisions, Vietnam’s power sector as a whole is still poised for robust growth over the coming decade. “Positive economic growth fundamentals in Vietnam will stimulate an ongoing surge in power demand and consumption over the coming decade. Whilst manufacturing is weighed by the outbreak in the near-term, we believe that growth will rebound relatively quickly, in line with fiscal and monetary support from the government, and possible backlog of orders upon normaliSation,” Fitch Solutions said.

Power consumption in Vietnam to grow by an annual average of 6.5% between 2020 and 2029, which still remains one of the fastest growth rates in Asia.

Gas-fired generation could also pick up after 2023, given an increasingly favourable investment environment towards LNG. The anticipated commissioning of PV Gas’ 1.4bcm Thi Vai LNG terminal in the Ba Ria-Vung Tau province in end-2022 will allow Vietnam to begin importing LNG for the first time, which could offer some relief for gas-fired generation thereafter.

“The government has recently highlighted the use of LNG as a source for power generation, and will look to create more favourable conditions for foreign investors to develop such projects. This has already translated into strong investor interests in LNG projects over the past six months, and a robust LNG-to-power project pipeline,” Fitch Solutions said.

There are now approximately 26GW worth of gas-fired power projects in the pre-FID phase in Vietnam, which are slated to come online between 2022 and 2029. “We expect a rebound in gas generation to occur only after 2023, assuming that some of these projects will come online as planned. That said, we stress that the lack of FIDs to date means that some of these projects are inherently exposed to a certain level of risk, including delays at the bureaucratic level, and we thus do not incorporate all of this capacity into our forecasts,” Fitch Solutions added. 

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