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Thailand Pushes for Domestic Gas Market Liberalisation as Pressure to Grow Supply Rises

Offering gas import licenses has attracted both public and private players to facilitate an ambitious plan to more than quadruple LNG imports by 2027 in an effort to expand power delivery throughout the country

Undeterred by a continuous decline in domestic gas production, Thailand has been implementing concurrent policies of discontinuing the growth of lignite imports and expanding power delivery throughout the country. Consequently, the country is looking to slate LNG as its fastest growing energy import by freeing-up the domestic LNG economy to attract third party vendors.

Robust demand growth since 2011, Map Ta Phut operating at capacity already

Thailand’s LNG imports have grown robustly from less than 0.1mmt in 2011 to 5.3mmt in 2019, with last year seeing annual growth of almost 0.7mmt (15%). As a result, the country’s 5mtpa Map Ta Phut LNG terminal has reached capacity in 2019, which means new solutions need to be found to continue the necessary growth of LNG imports.

First attempt at liberalisation in August last year

A fundamental aspect underpinning this growth has been a policy push for deregulating the domestic gas market, with Thailand’s Energy Regulatory Commission (ERC) allowing the Electricity Generating Authority (EGAT) to receive 1.5mtpa of import capacity at the country’s Map Ta Phut LNG terminal in August last year. Prior to this move, only the state-owned oil and gas champion PTT was granted a license to import LNG.

Despite nominal deregulation, status quo effectively unchanged

Although under Thailand’s third-party access (TPA) rules PTT would have to provide storage capacity to EGAT until the latter’s LNG stock has gradually been fed into its thermal power stations, PTT is bound by ‘take or pay’ clauses regardless of domestic LNG demand. This has led the Thai government to deny EGAT permission to enter into a long-term supply contract of its own with Malaysia’s Petronas. Instead, EGAT has been limited to buying relatively small volumes of LNG on the spot market, with the first of two cargoes arriving in December last year and second not due before April this year. Meanwhile, EGAT has already been purchasing gas under long-term contracts from PTT, which is likely to have damped enthusiasm in government circles further. As neither PTT nor EGAT are licensed to re-export any excess gas they have bought, Thailand’s prime gas supplier has thus remained state-owned PTT.

Ambitious plans to expand power network requires more fuel

Thailand has since seen a push for expanding its national electricity grid in line with similar policies in neighbouring states such as Myanmar to support economic growth in areas further away from coastal boom towns. As such, four companies – Siam Gas and Petrochemical, Ratch Group, Gulf Energy Development and B. Grimm Power have announced ambitious plans to grow gas utilisation. Ratch Group, for instance, is vying for independent gas supply to feed its 1,400MW Hin Kong power plant in Ratchaburi by 2024-25. B. Grimm, meanwhile, plans to import LNG to feed seven 140MW gas-fired power plants currently under construction in more remote areas of Thailand.

Quadrupling of LNG imports as relatively expensive domestic gas reserves dwindle

According to Thailand’s latest national gas plan, it will have to import more than 24 mtpa by 2027 as commercially viable gas reserves in the Gulf of Thailand and the Gulf of Martaban will be depleted and pollution from burning lignite is to be contained. Costs for locally produced gas, however, have reached $7-8/mmBtu, with a likelihood to rise further as PTT is forced to employ more field support measures to prevent production from collapsing.

Thai government bets on domestic free-trade hub

To finally open up the market, Thailand’s Energy Ministry thus envisions a free-trade hub whereby every Thai state agency and company would be permitted to both import and export LNG on the spot market to balance the nation’s gas economy amid declining offshore reserves. The idea of a national LNG hub is not new, with the Energy Ministry pushing for such a project since 2016. However, limited import capacity, reliance on domestic offshore gas resources in the Gulf of Thailand and vested commercial interests seem hitherto to have prevented sufficient pressure build-up to attract a critical mass of support.

Capacity expansion fundamental to achieving 2027 goal

Crucially, both PTT and private enterprises have recognised the necessity for more LNG import capacity. Accordingly, PTT is developing another receiving terminal in Nong Fab, Mueang Rayong District with capacity of 7.5mtpa whilst Gulf Energy Development and PTT won the right to increase Map Ta Phut port’s capacity to 8mtpa, though a delivery horizon for the project remains to be set.