AES’ natural gas plant and a US trade delegation

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This is a few days old, but a US-based energy company, AES, just signed an agreement to build a $1.7 billion gas-fired power plant in Vietnam. This follows up on the company’s approval to build a $1.4 billion LNG terminal near the power plant.

The signing was held as part of the Commerce Secretary, Wilbur Ross’, trade visit to Vietnam. It was one of two major energy deals. The other was a production sharing agreement with Murphy Oil, Vietnam Oil & Gas Group, PVEP and SK Innovation for an offshore block. There was also a deal between Pratt & Whitney and Vietnamese Airlines.

  • This is the second big LNG deal that I have heard about for Vietnam. I wrote about the first back on September 29. Then there was a big agreement to import 2m metric tons of gas.

  • Energy to be produced by the new plant is about 2.2 GW. This equates to about 1% of total electricity production (maybe a bit less when it comes on line - it was 1.2% back in 2016). Although it won’t come online until 2024.

  • This is just a small part of the overall energy plan for Vietnam. According to Forbes: “Starting from zero, the country expects to ramp up LNG imports to 10 million tons by 2030, while natural gas generating capacity more than doubles from 9 to 19 GW by 2030.”

  • These imports, LNG, airline parts, along with potentially coal (!?!?!), will help offset Vietnam’s trade surplus with the US. According to the article, the trade surplus through Sept. was $34bn, up from $25.5bn previously. That’s a big jump: about a third higher.

  • Natural gas is better for the environment than other fossil fuels, and definitely better than coal. So it is a good intermediate step. I would prefer there to be greater investment in renewables, but, as the Stones sang, you can’t always get what you want.

I always wonder about these trade delegations, like this one lead by Ross. Do they really matter? These deals would probably get signed, but having a deadline can really focus the mind. For example, reading between the lines, it seems like it was taking AES a while to get final authorizations so it could start investing. Now it can.

It doesn’t help that Vietnam is under a lot of pressure to get off of Trump’s radar with the trade deficit. These deals definitely show progress.

You can read Wilbur’s remarks at a Vietnam CEO’s luncheon here.