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US-Australia LNG collaboration key to powering Vietnam

Liquefied Natural Gas, or LNG, produces less CO2 and air pollutants than coal and oil, making it capable of bridging the gap between fossil fuels and renewables. Although a non-renewable source of energy, LNG can deliver natural gas to homes and electricity to grids in larger capacities and with better reliability than current renewable technologies can. 

Australia and Qatar are currently the world’s largest LNG exporters, closely followed by the US, which is expected to take the top spot by 2025. The US’s dramatic rise in LNG production is primarily due to a shale gas revolution in the US, drastically changing the US’s global position as a formidable gas producer. As for Australia, it is home to massive LNG projects such as the Chevron-operated Gorgon Project in north Western Australia and two notable gas companies, Woodside and Santos, are incorporated in Australia. 

Japan has been the largest LNG importer in the Indo-Pacific (and the world) for several years, although LNG consumption in China and India is expected to grow at larger rates to become the most dominant in the region up until 2050 and beyond. In a similar vein, many other economies in Asia will see increased consumption of LNG as an incremental power supply to help the energy mix wean away from coal.

Source: Pixabay, 2009

Vietnam is one such nation that is undergoing significant energy policy changes, opening up opportunities for key LNG exporters such as the US and Australia. Firstly, many of Vietnam’s local oil ventures are declining in production after years of service, leaving an oil and gas supply void. Secondly, the country’s rapid economic expansion, industrialisation and population growth is seeing demand for energy rise at rates of about 8.5 per cent until at least 2025 – rates the country’s current energy supplies cannot keep up with. 

Vietnam’s National Power Development Plans are key policy initiatives drafted by the Vietnamese Ministry of Industry and Trade (MOIT) that address strategies to ensure Vietnam remains reliably powered into the next several years. They also focus on shifting away from fuels such as coal and towards renewables and cleaner burning fuels such as LNG. The next is National Power Development Plan VIII, expected to be formally submitted in October this year, which will have guidelines for reforms until 2045 and will continue to put emphasis on renewables and the importing of LNG for gas-fired power plants.

The US and its oil and gas firms are strategically eyeing both the export of LNG to assist in Vietnam’s  National Power Development Plans, but also the development of Vietnamese gas fields themselves. One such example is ExxonMobil’s development of the Blue Whale field, although the future of this project has come under recent uncertainties that could mean Vietnam will need to import more of its LNG in the next five to ten years than initially expected. 

Of course, there are other factors at play off the coastal waters of Vietnam. Notably, China has been mounting pressure on Vietnamese oil and gas exploration that Beijing considers to be within its infamous “nine-dash line” of the South China Sea. Therefore, the strategic significance of having American firms developing fields in this region, or at least sending US LNG exports near these seas, is critical for both Vietnam and the US. 

Source: Flickr, 2011

What is missing from this whole story is Australia. Despite the wealth of local LNG knowledge and experience, Australia is failing to capitalise on LNG export, gas exploration and gas infrastructure opportunities with Vietnam. There have been insufficient trilateral negotiations between the US, Australia and Vietnam in ensuring that all three nations play fair roles in the Vietnamese LNG market. Instead, the US and Australia have viewed each other as competitors in a region where cooperation is economically and strategically beneficial for all three nations involved.

The US, Australia and Vietnam should draft agreements that seek to secure fair, long-term LNG sales contracts from both the US and Australia to Vietnam. These agreements also need to consider how both the US and Australia can invest in gas exploration, infrastructure, and innovation opportunities in Vietnam (see innovation in the Vietnam-Australia Strategic Partnership). Of course, such talks must consider ensuring the security of LNG operations in the region indefinitely.

These agreements are proposed to create a fair playing field whereby Australia and the US can work together to ensure that both nations have thriving LNG export markets and are committed to the LNG industry’s development and protection in the region. Doing so allows Vietnam’s massive energy needs to be satisfied for the next few decades, maintains order in hotly disputed waters, and most importantly, helps to transition the world to cleaner-burning fuels, reducing the impacts of global warming.

Infographic by Matthew Biletic

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