The power to step into the breach

PetroVietnam is rising as a heavyweight investor in electricity production with a string of projects in hand.

What will the state-owned oil and gas group do to ensure its projects do not fall into trouble like many other power projects in Vietnam? Nguyen Quoc Khanh, PetroVietnam’s deputy general director shares his thoughts with VIR.

Many power plant projects in Vietnam are lying dormant due to land clearance problems. What is the situation with PetroVietnam (PVN)?

For power generation projects, land clearance is, more often than not, a bottleneck and we can foresee it. PVN’s projects are not stuck with this chronic trouble. Still, fighting against it wastes time and

energy.

Currently, small parts of the sites for construction of Thai Binh and Long Phu power centres have yet to be cleared, while we have just embarked on land clearance for the Song Hau power centre project. Where ever we receive provincial government support, land clearance has occurred very quickly. Provincial authorities play a critical role in revving-up projects.

Does PVN have any special ways to inspire local government to help hasten land clearance?

We handed land compensation money over to the local government right after a decision is made on compensation prices. In such a way, land clearance can be one off.

Seeking partners for power generation projects is one of PVN’s top priorities during the group’s recent investment promotion tour to Japan. Are capital arrangements problematic for PVN’s projects like others in Vietnam?

As calculated, power plant projects listed in the Sixth Power Development Master Plan need up to $80 billion. Vietnam, thus, cannot solely rely on domestic financing but foreign sources as well. To foreign partners, PVN has suggested many investment vehicles like joint ventures or joint stock companies.

Some foreign investors wanted to team up with PVN to develop build-operate-transfer (BOT) projects instead of being independent power producers (IPP). They thought BOT investments are safer and have more preferences as compared with IPP projects. But, the Vietnamese government has yet to give the thumbs-up.

Over the past few years, Electricity of Vietnam (EVN) has been calling for foreign partners to make joint ventures or BOT investments in power generation, but the result is very modest. Will it be a similar case for PVN?

I think it depends on the point of time and context. Moreover, more than a half of foreign partners invited to PVN’s power projects are our long-lasting partners, operating in both oil and gas and electricity sectors. They know PVN’s working style very well. But of course they have to make thorough research given capital arrangement issues.

What is the unit cost of coal-fired power plant projects?

The unit cost of the EPC contract of Vung Ang 1 thermal power project which is now under construction is less than 1,000 USD/kW. For Thai Binh 2 project, we do not have an accurate figure as technical design and estimated total investment costs are not available. The total investment cost of the 600MW Nghi Son 1 thermal power plant is up to VND22 trillion ($1.16 billion).

A huge problem confronting thermal power plants is imports of coal. How has PVN prepared for this issue?

At the start-up, we choose to buy coal from a company with a global network and available abundance of coal. Later on, we might sign with owners of coal mines to diversify supply channels.

Has the local content in the execution of PVN’s power generation projects dramatically increased?

PVN is instructing its project management units to use domestically made equipment, components and materials as much as possible. The group’s leaders even ordered that in cases where we discover a domestically-made product that can replace imports, despite initial import agreement, we will use that made-in-Vietnam product.

At Ca Mau 1 and 2 power plants, the local content value is low since they are our first power projects. But for the next projects such as Nhon Trach 2, the local content will make up 30 per cent of the aggregate investment cost. – VIR

Tags: Vietnam electricity, Vietnam electricity market, Vietnam energy