 Vietnam’s success in attracting investment, generating growth and adding jobs is under threat from looming shortages of what keeps modern economies running: electricity. The risk of shortages took a turn for the worse last week when state-owned Vietnam Oil & Gas Group said talks with Chevron Corp. (CVX) to develop a natural gas field had failed due to price disputes, which will delay supply of the fuel to electricity generators. Consultant IHS Energy said last month that demand in the country may exceed gas supply by 2015. “The main problem is that Vietnam has a cumbersome consensus-based decision-making system that slows down the whole process of getting new power projects up and running,” said Graham Tyler, the Singapore-based manager of Southeast Asian gas and power at energy consultant Wood Mackenzie. While the government is raising electricity prices to make power projects a more attractive investment, they may not be in time to prevent shortages in southern Part of the problem is retail electricity prices are not attractive enough to draw investors to the power industry, said Minister of Planning & Investment Bui Quang Vinh. “When you have such low retail power prices, it will lure investment into industries that consume lots of electricity, such as cement and steel plants,” said Vinh. “So we are in a situation in which we can’t attract electricity producers while there are more and more power consumers coming in, and that has worsened our power shortage.” Non-alignment Failure of the deal with Chevron more than a decade after plans to develop the field were announced is emblematic of the hurdles Developing natural gas requires a complicated dovetailing of interests from the company at the well head to the end user to “make sense,” said Duncan van Bergen, a Singapore-based general manager for global gas and liquefied natural gas market development for a unit of Royal Dutch Shell Plc. “That’s why some gas projects take quite a bit of time,” he said. “These are complex value chains, where a lot of parties have to be aligned.” Price cap In “What we offered Chevron is the highest we could give, under The average price paid by retail consumers for electricity in The new pricing will make Huge investment The failure of the agreement with Chevron, which took over the $4 billion project when it bought Unocal Corp. in 2005, will delay gas-to-power production plans in the southern Mekong Delta city of That’s a blow to plans to increase the share of gas in While Doorstop answer At least in Despite the failure of the Chevron pact, exploration continues, with a group led by Exxon Mobil Corp. (XOM) finding gas reserves that Hau of PetroVietnam estimates at 6 to 8 trillion cubic feet. That would represent about a third of A venture operated by Eni SpA (ENI), Italy’s biggest oil company, is drilling in the Cua Lo area in northern Vietnam, which Canaccord Genuity Group said is “highly promising” with the potential of as much as 14 trillion cubic feet of gas. The question, given the Chevron experience, is whether “This is a huge issue for the large industrial and manufacturing sector in the south,” said Gerner at the World Bank. “There’s no doubt that unless more generating capacity is brought on line this could have a significant adverse impact on growth.” Bloomberg |
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