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Viet Nam’s gas projects stall amid investor claims of unbankability and a renewables pivot
13 July 2026 at 20:53
The country has bet on reaching 22.5 GW of LNG by 2030, but unbankable contracts and policy gaps have stalled its plans four years to the deadline
An aerial view of Vietnam’s only operational LNG power plants, Nhon Trach 3 and 4 PHOTO: Nam Phong / Dialogue Earth
In September 2025, Viet Nam’s then prime minister, Pham Minh Chinh, joined the country’s wealthiest person, Pham Nhat Vuong, to break ground on what was to be the country’s largest liquefied natural gas (LNG) power plant.
At the time of the ceremony, Viet Nam only had one operational LNG power project. But the slated $US6.7 billion, 4.8 gigawatt (GW) plant in the northern industrial hub of Hai Phong was expected to bring the country closer to its ambitious goal of 22.5 GW of LNG capacity by 2030.
Just six months later, its developer VinGroup proposed scrapping the project, according to Reuters. It reportedly cited high fuel prices caused by the Southwest Asia conflict, and the foreign exchange pressure of importing the roughly 5 million metric tonnes of LNG it would require annually – an estimated $US3.5-3.8 billion in foreign currency expenditure.
In its place, VinGroup proposed a hybrid renewable energy project paired with a battery energy storage system, which stores and discharges power during peak demand.
The reversal marked the starkest signal yet of Viet Nam’s struggle with LNG. Developers have long put the situation down to unbankable power purchase agreements, the state electricity buyer’s weak finances, global gas turbine shortages, and price volatility driven by the Southwest Asia conflict.
With new leadership less enthusiastic about LNG, Viet Nam appears to be pivoting toward renewables and storage.
The LNG sweet spot
Viet Nam revised its national energy plan in 2025, nearly a year before the global energy landscape would be shaken by the conflict in Southwest Asia. Its LNG goal was ambitious even then.
The plan staked between 9.5-12.3% of the country’s targeted 2030 electricity capacity on LNG with projects totalling 22.5 GW, and a strategic bet that the fuel could bridge the country’s transition from coal to renewables.
“LNG occupies a rare sweet spot in Viet Nam’s energy calculus,” said Le Hong Hiep, a senior fellow and coordinator of the Viet Nam Studies Program at the ISEAS-Yusof Ishak Institute in Singapore. “It is cleaner than coal, scalable enough to anchor a national grid, and flexible enough to backstop the intermittency of renewables.”
But four years from that deadline, Viet Nam still only has one complex of two operational LNG power plants with a combined capacity of 1.62 GW, with a second 1.2 GW project in progress. The rest of the pipeline is either stalled, delayed or scrapped.
Unbankable contracts
The most widely cited explanation for the delays is the unbankability of Viet Nam’s LNG power purchase agreements (PPAs) – the contracts between plant developers and the state’s sole electricity buyer, Electricity Viet Nam (EVN). Compared to such contracts globally, these PPAs guarantee developers a much lower purchase of a plant’s generated power.
For a large-scale LNG project, lenders rely almost entirely on the project’s own cash flows for repayment, said Lam Pham, an Asia analyst at the energy think-tank Ember.
A multi-billion-dollar power plant cannot attract financing without a long-term guarantee that someone will buy its electricity. International lenders have historically required 15- to 20-year “take-or-pay” contracts, under which the plant will be paid for most of the electricity it produces – typically 80 to 90% – whether or not that electricity is used, Lam added.
Under current law, the state utility EVN is only obligated to purchase 65% of a plant’s average annual generation for up to 10 years from the date commercial operations begin. What happens after that is left to future negotiations. This rate, according to Lam, falls materially short of international thresholds.
The ministry, Viet Nam’s main energy regulator, has proposed raising the guaranteed purchase level to 75% and extending the cap to 15 years. However, a May 2026 summary of feedback received and published by the ministry shows investors saying it is not enough.
Feedback from different ministries and stakeholders across the LNG pipeline – including the Japanese Chamber of Commerce and Industry in Viet Nam, Tokyo Gas, VinGroup and several LNG consortia – show investors pushing for various measures.
These include higher minimum purchase commitments, payment guarantees if EVN fails to dispatch enough power, mechanisms to share risks of rising LNG costs, foreign exchange rate guarantees, and potential government buyout if a PPA is terminated early through no fault of the developer.
Though the industry ministry acknowledged the issues raised, it rejected almost all proposals.
The ministry was adamant on keeping the guaranteed purchase ceiling at 75%, citing calculations by the National Electricity System and Market Operation Company (NSMO) showing that an 80% rate or higher would force EVN to pay for pricey LNG power even when cheaper alternatives are available and the grid does not need it.
The NSMO is a state-owned but independent system operator that was spun out of EVN’s former dispatch center to run Viet Nam’s power system and electricity market.
Viet Nam has capped the price for LNG-fired power at VND 3,327 ($US0.13) per kilowatt-hour – significantly higher than solar power price ceilings, which range from $US 0.03 to 0.07.
EVN currently prioritizes buying the cheapest unit of power available, meaning solar, coal and hydro power plants are usually favoured. This only compounds the risk for LNG investors banking on steady utilisation.
EVN’s own financial position deepens the problem. By the end of 2024, it had accumulated losses of around $US 1.7 billion, limiting its appetite and ability to absorb risk on behalf of private developers.
Despite a strong 2025 fiscal year, the company says it still carries accumulated losses of $US 216 million. The turnaround has been attributed to a shift in the power generation mix, with a greater share of low-cost power sources and reduced reliance on costlier ones.
Beyond Viet Nam’s control
Viet Nam’s LNG pipeline also faces pressures that no policy revision can fix.
The country stands to be directly impacted by the global gas turbine shortage, which relies heavily on three companies: GE Vernova, Siemens Energy and Mitsubishi Heavy Industries.
“These firms are overwhelmed with orders,” said Lam, “and are in no hurry to expand their production capability due to uncertainties of declining demand, avoiding the mistake GE made in the 2018 gas turbine market crash.”
For Viet Nam, which entered the LNG market late and has a track record of policy volatility, this means its projects are not being prioritized, according to industry experts Dialogue Earth spoke to.
The conflict in Southwest Asia complicates the issue. Disrupted LNG shipping routes and higher spot prices have exposed the vulnerability of Viet Nam’s import-dependent strategy amid declining domestic gas supply.
Viet Nam currently only has one long-term LNG contract with a foreign provider, with deliveries that will not start until 2027. In the meantime, to circumvent the Southwest Asian crisis, Viet Nam has diversified its LNG supplies with expensive spot shipments from Malaysia, Brunei, Canada and Australia.
“Volatility of this magnitude forces lenders to price in substantially higher risk premiums,” Lam said. “Without a long-term, stable offtake to anchor cash flow projections, projects struggle to achieve financial close,” when funding is secured and construction begins.
Changing appetites
VinGroup’s decision to abandon a flagship LNG project for renewables and battery storage signals an altered energy direction for the Vietnamese government.
“They [VinGroup] don’t do anything lightly,” said Gary Zieff, an energy expert who worked in Hanoi on a US-backed technical assistance programme that advised the government and industry on renewable energy. The decision to scrap “a major project with sunk costs would have been taken very carefully,” he said.
For Zieff, VinGroup’s retreat is a signal about where the market is heading, one that clean energy developers should pay attention to.
Former prime minister Pham Minh Chinh, who made Viet Nam’s net-zero pledge at COP26 in Glasgow and was a strong internal proponent of LNG, left office in April 2026.
His successor, Le Minh Hung, a former central banker, has taken a more measured view of Viet Nam’s energy future, said an analyst with direct knowledge of ongoing discussions in Hanoi, who spoke to the reporter on condition of anonymity.
“There are signs of a change of heart,” said the analyst. “Following the election cycle and the leadership transition, there is a noticeable shift in how [the industry ministry] talks about LNG. The enthusiasm is no longer there.”
For the new government, the challenges might be more acute than those faced by its predecessor, Hiep noted. Global LNG prices are volatile, and the Southwest Asian conflict is illustrating just how exposed energy importers can be.
Viet Nam has already developed one of Southeast Asia’s most extensive renewable energy networks. The country now accounts for 41.55% of the region’s renewable energy market share.
From 2018 to end-2020, generous feed-in tariffs triggered a solar boom that grew capacity from 86 MW to 16.5 GW – 20 times the 850 MW that the incentive was originally designed to support. The unexpected growth severely strained EVN’s financials.
In 2018, EVN spent $US 4.5 billion to buy power. By 2023, this number had surged to $US 11.5 billion, despite electricity consumption only rising 36%, from 203.7 terawatt-hours (TWh) to 277.5 TWh.
By 2025, the government had walked back some of its feed-in tariff commitments, prompting anger and threats of legal action from foreign investors.
The government has since moved to resolve those disputes. The willingness to accept financial penalties rather than contract cancellations, Le Hong Hiep noted, is a signal that Hanoi wants to clear the path for fresh renewable investment.
Viet Nam has also set an aggressive goal for its battery storage capacity of up to 16.3 GW by 2030, from under 100 MW as of April.
The battery storage development at grid scale, however, carries its own complications, including incomplete technical and safety regulations, grid integration challenges and conflicting pricing mechanisms.
“When something is very new – and battery storage is a new topic in Viet Nam – it takes time for banks and for state stakeholders to understand how to finance it, how to structure a deal,” said Sunita Dubey, a Hanoi-based energy transition expert.
Developing that storage capacity will also require Viet Nam to rely heavily on foreign supply chains and technology, particularly from China.
Around 70% of Viet Nam’s battery materials are sourced from the country, and Viet Nam’s first domestic cell factory is a joint venture between Chinese manufacturer Gotion and VinGroup subsidiary VinES.
LNG stalemate
“There are signals of continued commitment, though more out of necessity than enthusiasm,” Hiep noted.
More than a dozen LNG-to-power projects and supporting infrastructure worth billions of dollars in potential investment remain in the pipeline.
The country is also scrambling to get any power project online to support its ambitious growth targets. Le Ngoc Son, chairperson of the state-owned PetroVietnam, estimates that sustaining double-digit economic growth would require electricity demand to grow 12 to 15% annually.
However, policymakers worry that without a stable source of baseload power, a role LNG was expected to play, economic growth could be threatened.
Dubey was sceptical of that framing. The traditional concept of gas as “baseload” or a “transition fuel” is outdated, and Viet Nam could leapfrog straight to renewables, she said. But she added that a small LNG share – about 10% to 15% – could still provide some flexibility.
Despite difficulties attracting investors to planned LNG plants, state-backed investment has continued. State-owned PV Gas, the sole domestic distributor of LNG, is reportedly committing over $US 3.8 billion from 2026-2030 to develop LNG infrastructure, including terminals and pipelines.
Hanoi also has geopolitical reasons to keep the fuel on the agenda, according to Hiep. LNG imports from the United States serve as a useful lever in managing the bilateral trade relationship with Washington.
“The core problem,” said Hiep, “is that while investors need long-term offtake guarantees and protection against price swings and exchange rate exposure to make the numbers work, EVN and the government are unwilling to absorb those risks on behalf of the state.
“Neither side has blinked.”
This story was originally published by Dialogue Earth.
