Vietnam has officially inaugurated its first cluster of liquefied natural gas (LNG)-fired power plants, a key milestone in the country's efforts to diversify its electricity supply with cleaner fossil fuels amid rapid economic growth.
The Nhon Trach 3 and 4 plants, located in Dong Nai province, an industrial hub northeast of Ho Chi Minh City, were commissioned on Sunday, December 14.
The US$1.4 billion project has a combined capacity of 1.6 gigawatts (GW) and was developed by PetroVietnam Power Corporation (PV Power), a subsidiary of state-owned PetroVietnam, with construction handled by a Lilama-Samsung C&T consortium.
The plants, which broke ground in 2022, represent Vietnam's first LNG-fired power project to secure nearly US$1 billion in financing without government guarantees, a milestone closely watched by both local and international investors.
Earlier this year, PV Power signed a 25-year LNG supply agreement with its sister company, PetroVietnam Gas (PV Gas), securing 530 million cubic metres per year for the first five years. Both PV Power and PV Gas are publicly listed on the Ho Chi Minh City Stock Exchange, with market capitalisations of 27 trillion dong (S$1.3 billion) and 148 trillion dong respectively.
Vietnam sees LNG as a crucial "bridging fuel" between coal and renewable energy, offering lower carbon emissions and air pollutants.
Gas-fired plants also provide reliable base-load power to stabilise the grid as wind and solar capacity expands rapidly. Under the country's revised Power Development Plan VIII (PDP8), LNG-to-power capacity is expected to rise from less than 1 GW today to 22.5 GW by 2030, accounting for around 10% of the energy mix.
To encourage LNG investment, the government has introduced incentives such as reducing LNG import tariffs from 5 per cent to 2 per cent, setting annual ceiling prices for LNG power generation, and guaranteeing that Vietnam Electricity (EVN) will purchase at least 65% of annual LNG plant output for up to 10 years, with fuel costs passed through to electricity prices.
However, investors have called for stronger guarantees. Many argue that a 65% offtake level is insufficient to cover high fuel costs and complex financing and have petitioned the government to extend guarantees to 90% over the contract term. Without such reforms, many planned LNG projects remain stalled, with VIS Rating estimating that nearly a quarter of PDP8's 21 planned LNG plants lack investors, and more than half face construction delays. Currently, only three projects, including the 1.6 GW Hai Phong plant, are under construction.
Recent proposals submitted to the National Assembly suggest raising the minimum long-term contracted output to 75% and extending contract durations up to 15 years, which analysts say could boost investor confidence and accelerate LNG investments in Vietnam. VIS Rating predicts project development will pick up from 2026 onward, with construction timelines of four to five years and commercial operations targeted before 2031.
Vietnam began importing LNG in 2023 through the Thi Vai and Cai Mep terminals in Ba Ria-Vung Tau, and PV Gas is expanding import and storage capacity nationwide to offset declining domestic gas production.
PV Gas imported about 400 million cubic metres of LNG in 2024 and aims to reach 500 million cubic metres in 2025. National plans project LNG imports will rise to 15.7–18.2 billion cubic metres annually by 2030, then gradually reduce to 10.6–12.2 billion cubic metres by 2050 as some plants switch to alternative fuels or retire. Early LNG supplies have come from Indonesia, Malaysia, Qatar, and Russia, with increasing interest in US cargoes.
The Nhon Trach 3 and 4 plants mark a significant step in Vietnam's transition toward a cleaner and more reliable energy mix, demonstrating the potential for LNG to play a central role in the country's power sector for decades to come.
