Energy in Vietnam
The rapid economic growth of Vietnam has resulted in a significant increase in energy demand, which is expected to triple towards 2020 and increase eightfold in 2030. Vietnam is endowed with various energy resources, notably oil, coal and hydropower. Output in these three sectors is growing strongly, and the country is a net energy exporter. There is a strong tendency to use the natural resources to their full extent which could undermine the quality of Vietnam’s economic growth as Vietnam’s industrial production remains backdated and highly polluting. To ensure that the supply of energy meets the rise in consumption, Vietnamese policy emphasises the need to diversify the country’s energy mix, whilst maximizing the use of local energy reserves. There has been an increased focus in recent years on increased investment in the clean-technology sector and particularly energy efficiency, renewable energy technologies and waste management, which provide a number of future business opportunities for Dutch clean-technology companies as knowledge, expertise and technology will be needed.
The oil and gas industry is the country’s biggest foreign currency earner and a major procurer of imported technology, equipment and services. Business and investment opportunities (exploration, production, equipment, expertise and/or technology) can be found in many areas.
The market for renewable energy (RE) and energy efficiency (EE) in Vietnam is still limited in size but it is definitely emerging and its growth potential is high. There is an increasing awareness that continued economic and demographic growth and the subsequent increase in energy demand cannot be sustained if the energy shift is not made. The Vietnamese government is committed to the promotion of RE and EE and has taken several measures (including mechanisms, policies, incentives and supporting schemes) to improve the environment for expanding RE and EE during the last few years. In March 2016, the government revised its ‘7th Power Development Plan for 2011 to 2030’ and placed a stronger emphasis on RE. Fossil fuels and coal still are the main supply of Vietnam’s energy consumption and were scheduled to grow strongly in the 7th Power Development Plan of 2011. In the revised 2016 version, however, the 2030 target for coal production has been cut by approximately 30 percent from 76 GW to 55 GW. Instead, renewable energy – generated by solar technology in particular – will play a much larger role in 2030 compared to the 2011 estimate. Besides, the revised plan focuses on the liberalization of the market.
Dutch - Vietnamese cooperation in Energy
In 2011 the Netherlands and Vietnam signed a Memorandum of Understanding desiring to strengthen and further develop the cooperation in the field of energy on the basis of equality and mutual commercial interest. Besides knowledge exchange, Dutch companies and knowledge institutes - clustered under the Advanced Energy Technology International (AETIN) consortium - are supported by the Dutch government in exploring the Vietnamese oil and gas market. The development of Vietnam’s oil and gas industry provides a wide range of interesting business opportunities in the upstream, midstream and downstream segment. These include:
- Offshore oil and gas equipment and services, such as seismic research, maritime vessels (rescue boats, heavy maritime transport vessels, etc.), pipes, maintenance services, deep water drilling and production technologies, subsea technology and Enhanced Oil Recovery (EOR) technologies.
- Equipment and services for refineries and LNG terminals, including construction engineering and dredging (think of harbours, jetties, inland waterways, etc.).
- Waste management and environmental protection technologies, including produced water treatment, abandonment and clean up procedures and technologies and oil spill combat equipment.
Challenges will be faced when doing business in this industry as well. The Vietnamese energy sector remains dominated by public ownership, although market forces have been brought to bear in recent years and private sector participation is expanding. Public procurement provides opportunities, but will require a long-term investment in building up market intelligence and networks. The long-term investments are hampered by, among others, low feed-in-tariffs.
Vietnam has many and largely untapped renewable energy resources distributed throughout the country. The majority of Vietnam’s existing renewable energy resources are small hydro power, biomass energy, wind energy, solar energy and geothermal energy. Government attention to the development of this energy source is increasing. It is very likely that in the near future the investment climate – especially the feed-in tariffs – will become more favourable.
Dutch business opportunities in Vietnam’s renewable energy sector can be found in the following subsectors:
- Bioethanol/biofuel production (for export) projects
- Biomass projects: production of biomass for export, biomass for use in SME industry or biomass power plant
- Consultancy work on onshore wind energy
- Solar power projects, Feed-in-Tariffs for solar power are recently introduced.
For the longer term, the following areas could be considered:
- Waste to energy projects: waste-incineration plants, biogas capture, efficient waste separation
- Developing onshore wind energy projects
- Energy Efficiency: perform energy efficiency audits, implement energy-saving measures or developing a centralized database and energy-saving calculation model