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Private Investment: The Key to Energy Development (20/01)

20/01/2012 - 16 Lượt xem

What were major energy contributions to economic development in 2011?

For any country, energy is always a vital segment of the economy. The energy industry in Vietnam made great efforts to contribute to economic development in 2011.

Specifically, despite many difficulties in 2010, including the low water level in many hydropower lakes, the power industry took power saving measures to ensure sufficient power for production and domestic use. Commercial power production amounted to 93.8 billion kWh in 2011, marking a 9.52 percent increase from a year ago. Of this, power for industrial production and construction increased 13.9 percent and accounted for 52.9 percent of total power supply; power for trading facilities, hotels and restaurants, 8.4 percent and 4.5 percent; and power for domestic use, 6.3 percent and 36.1 percent, respectively. Important decisions related to the power industry took effect in 2011, including Governmental Decision 37/2011/QD-TTg, regulating the price of power in compliance with the market mechanism. A competitive power market was launched on July 1, 2011. The changes are expected to motivate the development of the power industry and to ensure sufficient power supply.

Oil and gas exploration and extraction was fairly stable in 2011. Crude oil production was 15 million tonnes increasing 0.2 percent from 2010-2011. Natural fuel gas amounted to 8.9 billion cu.m, and liquefied petroleum gas 531,800 tonnes. Particularly, the Dung Quat Oil Refinery worked fairly stably producing about 5.6 million tonnes of gasoline and oil in 2011.

Together with the power and petroleum sectors, the coal mining industry also worked well in 2011, producing 47.8 million tonnes of clean coal and increasing four percent from 2010-2011.

The energy sector continued to play a major role in making profit from exports. For example, crude oil took second place among Vietnamese major exports with revenue at more than US$7 billion in 2011.

Capital shortage is currently one of the biggest barriers for the energy sector. However, work started last year on construction of many private large power investment projects. What role would the private sector play in solving capital shortage for the power sector in the near future?

Because Vietnam is developing fairly rapidly the demand for energy in general and electricity in particular is always higher than supply. Power projects require tremendous investment capital. For example, an average power plant would usually cost US$2-2.5 billion, or an oil refinery would need about US$10 billion in investment capital. Vietnam need to build many energy projects in the next 10-20 years to keep up with the growing need of energy for economic development. The power sector in particularly would need almost US$50 billion in investment capital in the next 10 years. However, state budget investment would be insufficient. For this reason, domestic and foreign private businesses would play an important role in investing to develop the energy sector.

Following the State's policies, investment in development of energy projects has progressively been expanded to non-state economic sectors, particularly the private sector. Currently, foreign investors are developing 11 Build-Operate-Transfer (BOT) thermopower projects in Vietnam at a cost of US$2-2.3 billion per project. Two BOT projects - Phu My 2-2 and Phu My 3 power plants - were built at a total cost of about US$1.5 billion and are currently operational. The Mong Duong 2 and Hai Duong thermopower projects are also underway, and construction of these plants would cost almost US$5 billion. We believe that after the power market is officially launched in the near future following the market-based power pricing policy, private investors would play an even more important role in developing energy projects.

Private investors have also participated in many renewable energy projects. What do you think about the future of renewable energy in Vietnam?

Vietnam has potential for development of renewable energy. Statistics show that Vietnam has great energy potential, including almost 9,000MW of wind power, 7,000MW of small hydropower plants, 800MW of biomass power, and 300MW of geothermal power. However, the country has developed a small part of the potential through small hydropower, wind power and biogas projects. This explains why the cost of renewable energy is fairly high when compared with the cost of power made from coal, natural gas and water.

Prime Minister Nguyen Tan Dung dispatched Decision 37/2011/QD-TTg on June 29, 2011, regarding the mechanism to support the development of wind power projects in Vietnam. The Ministry of Industry and Trade is looking to submit the Prime Minister drafts on a legal framework and mechanisms to help develop sources of solar energy, biomass energy and more. Together with the itinerary to build a competitive power market and to improve state support policies and mechanisms, I believe that Vietnam would make the most of potential for renewable energy development.

What policies would be continued in the short run to attract private investors in the power sector in particular and the energy sector in general?

Following the National Power Development Plan for 2011-2020, with a Vision to 2030, power plants will have a combined capacity of about 75,000MW by 2020 and 146,800MW by 2030. It is expected that total investment in the power sector will be US$123.8 billion in 2011-2020. Electricity of Vietnam (EVN) would be able to arrange about 47 percent of total investment capital, and the rest should come from other economic sectors. To achieve the goal, the Ministry of Industry and Trade is taking steps to diversify forms of investment in the development of power resources following the itinerary for reforming the Vietnamese power sector, in order to increase competitiveness and economic efficiency.

Major measures to raise investment capital for power development in the short term are (1) to step by step increase financial capacity of power companies by increasing work efficiency and ensuring sufficient equity capital for investment development, (2) to develop financially reputable power groups/corporations to reduce the cost of raising capital for power projects and to raise internal capital without the Government's support and (3) to raise capital through bond issuance at home and abroad to invest in power projects.

One of major steps for the near future is to apply a market-based pricing mechanism in the areas of power, coal, and oil and gas to ensure that power production businesses can reinvest and expand investment in power resources and power networks. State businesses will be equitized (i.e. become joint stock companies) to make them able to increase investment capital for power infrastructure projects. In addition, domestic and foreign joint ventures will be fostered to draw more investors. The sector will also attract foreign direct investment (FDI) capital, official development assistance (ODA) capital, foreign commercial loans, supplier credit and more for power sector development.

We hope that with comprehensive policies, tough direction by the Government, ministries and related agencies, the energy sector will develop strongly and steadily in the time to come to keep up with economic development need./.

Source: SaigonTimes.