Shell inks 5-year supply deal with Petrovietnam

The world’s largest LNG trader Shell (SHEL) has signed a five-year LNG supply agreement with Petrovietnam, the Vietnamese state-owned company announced on January 8.

Under the terms of the deal, the London-headquartered firm will supply about 400,000 tonnes of the super-chilled fuel annually beginning in 2027.

It marks an historic occasion for the Vietnamese company as its first-ever long-term supply contract. Vietnam is a new player in the LNG market, only beginning to import LNG in 2023, as the country embraces fuel switching shifting from coal to gas to cut emissions.

The super-cooled gas will be delivered to Vietnam on an ex-ship basis and sent to southern Vietnam’s Thi Vai LNG terminal located 60 km southeast of Ho Chi Minh City. The terminal primarily supplies two gas-fired power plants.

Vietnam recently commissioned its first LNG-fired power plants bringing online the Nhon Trach 3 and 4 plants in Dong Nai province mid-December. 

Hanoi has plans to add at least 20 LNG-fired power plants by 2030 that would total 22.4 GW and comprise close to 15% of the country’s total power generation capacity.

Prior to this first long-term contract, the southeast Asian country relied solely on the LNG spot market to but cargoes, importing around 0.5mn tonnes in 2025 according to data from Kpler.

Vietnam is investigating expanding increasing LNG purchases from the world’s biggest exporter, the US. On the spot market, Hanoi has made purchases from Malaysia, Qatar, Indonesia, and Russia.

While Vietnam pivots away from coal, LNG-fired power plants also provide a reliable source of baseload power for the country’s energy grid to be mixed with increased use of renewable energy.

Although Vietnam has ambitious goals for its LNG sector, many of its projects are currently stuck in preliminary stages as developers continue to negotiate contracts and search for financing.