Thailand’s endeavour to address rising gas demand
Thailand’s surging economy and a growing population have led to a huge increase in the demand for gas over the past decade. In fact, Thailand has the second highest primary energy demand in the Association of Southeast Asian Nations (ASEAN). Although Thailand’s gas production increased at a compound annual growth rate (CAGR) of 9.5 per cent from 26 billion cubic metres (bcm) in 2007 to 41.4 bcm in 2012, it is still insufficient to meet its domestic consumption of 51.2 bcm. Moreover, its domestic gas reserves are expected to run out in seven years.
As a consequence, Thailand has been importing liquefied natural gas (LNG) in an endeavour to address the demand–supply gap. However, as the gap is expected to widen further in the future, the country anticipates that it will have to increase its LNG imports.
Declining gas reserves
Thailand’s proven gas reserves fell to 9.04 trillion cubic feet in 2013, 10 per cent lower than in 2012. The Ministry of Energy estimates that natural gas production will peak in 2017 and thereafter decline, thus compounding the challenge for the government.
Meanwhile, World Energy Outlook 2013 predicts that natural gas consumption in the country will continue to grow in tandem with Thailand’s development and reach 65 bcm in 2035.
High natural gas consumption
At present, natural gas accounts for a third of Thailand’s total energy consumption mix. According to EIA International Energy Statistics, this conventional source of energy constitutes around 30 per cent of the total energy consumption in Thailand.
About 60 per cent of the natural gas consumed in Thailand is used by the power sector to generate electricity. In 2013 (January to October), the share of natural gas in electricity generation was close to 67 per cent.
Although the share of the power sector in natural gas consumption gradually declined from above 80 per cent before 2000 to about 60 per cent in 2012, the sector is still the largest gas consumer in Thailand. In addition, the demand from gas separation facilities and the industrial sector has also surged in order to meet their operational requirements.
Despite the increase in production in the country, Thailand remains heavily dependent on natural gas imports to meet its domestic demand. Almost all of the country’s natural gas reserves are located offshore in the Gulf of Thailand. Since 1998, Thailand has been supplementing its domestic production exclusively with pipeline imports from the offshore fields of neighbouring Myanmar. The imported quantity amounted to 8.5 bcm in 2012.
In addition to its pipeline imports, Thailand commenced the operation of its first regasification terminal at Map Ta Phutin in the Rayong area in 2011, making it the first Southeast Asian country to import LNG. In 2012, the terminal received 1.4 bcm of LNG from Yemen (0.5 bcm), Peru (0.4 bcm), Qatar (0.3 bcm), Trinidad & Tobago (0.1 bcm), and Nigeria (0.1 bcm).
PTT LNG, a subsidiary of PTT Public Company Limited (PTT Pcl) – Thailand’s state-owned oil and gas conglomerate and operator of the Map Ta Phut LNG terminal – plans to almost double the terminal’s annual capacity to 14 bcm by 2017 from the current capacity of 5 bcm per year. The estimated cost of the expansion project is 21 billion baht.
Expansion of the existing pipeline network
The country’s existing gas transmission pipeline network comprises 1,437 km of onshore pipelines and 2,198 km of subsea pipelines, which include the Thai segments of the pipelines that bring gas from Myanmar. The offshore transmission system links fields in the Gulf of Thailand to the country’s six gas separation plants supplying gas by-products to petrochemical facilities and other markets. Meanwhile, the onshore portion links the gas separation plants and gas pipelines from Myanmar to power facilities.
The cross-border pipeline network between Myanmar and Thailand includes the Yadana–Ratchaburi pipeline (completed in 1998) and the Yetagun–Ratchaburi pipeline (completed in 2000).
PTT plans to expand its gas network to meet the increasing demand. It is currently implementing a project to transport LNG from the Rayong terminal to the Wang Noi–Kaeng Khoi pipeline. The company also has two major pipeline projects under way. The first is the Nakhon Sawan pipeline that will start at the Wang Noi metering station and end at Yang Tan district in Nakhon Sawan province. However, this pipeline is currently facing opposition based on environmental grounds. It is likely to become operational in 2015. The second project is the Nakhon Ratchasima pipeline project that will run from Saraburi to Nakhon Ratchasima.
Need to liberalise onshore distribution
To increase gas production and promote greater efficiency in Thailand’s gas sector, the liberalisation of its onshore natural gas distribution system is needed. Currently, the gas supply market in Thailand is dominated by one key player: PTT Pcl.
PTT Pcl has been the sole distributor of offshore gas since the country’s first natural gas production from the Erawan field in the central Gulf of Thailand in August 1981. Although PTT was partially privatised, with access to its offshore pipelines liberalised in 2001, the firm still retains control over all other aspects of the natural gas network, which essentially gave PTT a monopoly over natural gas transmission and distribution in the country. Thus, gas producers and suppliers are mandated to sell gas to PTT and use its gas grid to transport natural gas to consumers. As a result, natural gas is not distributed efficiently in Thailand. The liberalisation of onshore natural gas distribution, which would allow third-party access to gas distribution to onshore pipelines and the Map Ta Phut LNG terminal, would boost production and increase efficiency in the sector.
Meanwhile, Thailand’s upstream segment is relatively more liberalised, as foreign investment is allowed for the exploration and production of natural gas, mostly through joint ventures (JVs) with PTT Exploration and Production (PTTEP), PTT’s subsidiary. PTTEP, in which PTT holds a 65 per cent stake, accounts for about 28 per cent of the country’s domestic gas production, which indicates that foreign players supply the bulk of Thailand’s natural gas output. US-based Chevron Corporation is the largest foreign operator in the upstream segment of the natural gas sector, generating about 31 per cent of Thailand’s gas production from 19 offshore blocks.
Stopgap solution: LNG imports
As Thailand’s natural gas demand continues to grow, the government faces a huge challenge to increase domestic gas production. The Ministry of Energy expects gas production to peak in 2017 and then begin to decline until new production sources come online. Therefore, the country’s dependence on imports is likely to continue for a long time.
Against this backdrop, securing long-term contracts has become vital for Thailand’s economy. In 2012, PTT signed a long-term LNG contract with Qatar Gas for the delivery of 2 million tonnes of gas per annum, starting from 2015. PTT is also involved in talks with many LNG traders in the US, Australia, and Africa about the possibility of forming JVs in some areas of resources. The LNG terminal at Map Ta Phut in the Rayong area is underutilised, with only 30 per cent of its capacity being used. However, as Thailand increasingly focuses on securing long-term LNG contracts to meet domestic demand, experts estimate that the first 5 million tonnes (mt) of storage capacity would be utilised by 2018 and 10 mt by 2021. In the meantime, imported LNG supplies are likely to play a key role in Thailand’s natural gas sector.
