Feature: Thailand eyes more LNG imports as natural gas shortage looms
Thailand is moving forward with its plans to expand its LNG import capacity and ramp up overseas upstream investment to prevent a potential natural gas shortage, as growing consumption is not being met by a parallel growth in supply, hit by falling domestic production and uncertain pipeline gas imports.
Gas demand is forecast to see ample growth through the next 20 years, driven by growing population, an expanding economy, and increased utilization of gas in transport, as petrochemical feedstock, and in the power generation sector where it accounts for more than 60% of fuel consumption.
Thailand’s natural gas demand is forecast to increase by 7.4% to 5.06 Bcf/d by 2036, up from 4.71 Bcf/d in 2016, according to data by the Energy Policy and Planning Office under Thailand’s Ministry of Energy.
With declining domestic production due to dwindling upstream reserves, and uncertain pipeline gas imports as neighboring Myanmar diverts more and more volumes to its growing domestic market, LNG imports look set to fill the supply-demand gap.
Thailand is forecast to import more than 20 million mt/year of LNG by 2025 and 34 million mt/year by 2036, up from 2.9 million mt in 2016, according to EPPO. In comparison, the world’s largest LNG importer Japan received 79.8 million mt in 2016, Platts Analytics show.
“Thailand’s pipeline imports and domestic production are declining,” said Ruengsak Thitiratsakul, energy markets researcher with the Tokyo-based Asia Pacific Energy Research Centre.
“Natural gas demand is climbing, and Thailand needs at least another three LNG regasification terminals of 5 million mt/year each during the period of 2015-2036 [in addition to the Map Ta Phut expansion],” Thitiratsakul added.
SUPPLY DOWN IN 2016
Thailand saw its first negative gas supply growth — including domestic production and imports — in 2016, which fell 1.8% to 5.02 Bcf/d from 5.11 Bcf/d in 2015, according to latest data by EPPO, published February 10.
Domestic gas production fell for a second consecutive year in 2016 to 3.77 Bcf/d, down 2% from 3.85 Bcf/d in 2015, after having peaked at 4.07 Bcf/d in 2014.
Pipeline gas import volumes dropped by almost 7% to 0.859 Bcf/d in 2016, after having peaked at 0.923 Bcf/d in 2015, with new production at the Zawtika field operated by Thailand’s state-owned upstream producer PTT Exploration and Production failing to offset declining imports from Yetagun.
Imports of LNG were the only supply source that increased in 2016, rising 15% to 0.390 Bcf/d of gas equivalent, from 0.339 Bcf/d of gas equivalent in 2015, EPPO data showed, as Thailand’s state-owned buyer PTT has stepped up procurement from Qatari producer and long-term supplier Qatargas.
Limited gas availability has resulted in lower gas consumption and an increase in diesel demand from the power generation sector, which rose by 27.6% year on year to 37 million liters (636 b/d) in 2016, according to fuel consumption data by the Electricity Generating Authority of Thailand. Thailand imported a total of 917,554 b/d of petroleum products in 2016, up 2.2% from 897,424 b/d a year earlier.
Thailand’s gas consumption, on the other hand, decreased for the first time in 28 years, falling from 4.76 Bcf/d in 2015 to 4.71 Bcf/d in 2016. As a result, the share of gas in the country’s primary energy mix declined to 43% from 44.2%, while the share of petroleum products rose to 38.1% from 36.9%.
CONTINUED LNG GROWTH
Thailand’s LNG demand growth is expected to continue, as domestic demand surges, new long-term agreements kick in, and the bearish global outlook for LNG makes spot purchases more attractive.
PTT, the country’s sole LNG importer, is due to receive at least 4 million mt of LNG from 2017 onwards from existing long-term contracts.
BP is due to start delivering 1 million mt/year of LNG from 2017, as part of a 20-year supply contract, signed last December. BP will deliver the LNG from its global portfolio, including the Freeport LNG Project in the US, due to start up in 2018.
Elsewhere, Malaysia’s Petronas will deliver 1 million mt/year in 2017 and 2018, and 1.2 million mt/year from 2019 onwards, as part of a 15-year contract.
PTT also won approval from Thailand’s National Energy Policy Committee in August 2015 for the purchase of 1 million mt/year from Shell Eastern Trading over 15-20 years, but the contract is yet to be signed.
PTT is currently receiving 2 million mt/year of LNG from Qatargas as part of a 20-year contract, and is also stepping up spot imports, with more than 900,000 mt of LNG being delivered outside contractual obligations in 2016.
Almost all the volumes imported by Thailand in 2016 — 31 out of 32 cargoes — were sourced from Qatargas, according to Platts trade flow software cFlow, as the Qatari producer is faced with increased supply competition in its traditional markets of Europe and Northeast Asia.
Spot purchases are likely to continue, as a bearish global supply and demand outlook for LNG means spot prices will remain competitive, particularly amid higher crude oil prices following OPEC and 11 non-OPEC producers’ decision to cut output.
EXPANDING LNG CAPACITY
To accommodate growing LNG imports, PTT is in the process of doubling the capacity of its existing 5 million mt/year terminal at Map Ta Phut in Rayong. The project is due to be operational by the end of 2017.
Thailand’s Committee on Energy Policy Administration has also approved Map Ta Phut’s expansion by another 1.5 million mt/year by 2019, and final investment is pending approval from the National Energy Policy Committee.
A second onshore terminal with a capacity of 5 million-7.5 million mt/year is waiting for governmental approval and could be completed by 2022. PTT is also considering setting up a floating storage and regasification unit in Myanmar and a third LNG onshore terminal.
Additionally, PTT may no longer be the sole LNG importer in Thailand, as state-owned EGAT is also looking at building a 5 million mt/year FSRU in the Gulf of Thailand.
UPSTREAM INVESTMENT BOOST
PTTEP is looking at accelerating upstream projects in Thailand and Southeast Asia to enhance upstream reserves and production.
“Our focus areas are in Thailand and Southeast Asia, especially in Myanmar, areas where PTTEP has extensive experience and has low cost structure and low risks,” a PTTEP source told Platts in January, following the company’s 2017 investment budget announcement.
PTTEP plans to allocate 64% of its estimated capital expenditure in 2017 to Thailand, and focus primarily on maintaining production levels at existing projects.
Another 24% will be allocated to projects in neighboring countries, especially those in either the production or exploration stage in Myanmar. The remaining 12% is for projects in Australia, Africa, and North and South America, including the PTTEP Australasia project and the Mozambique Rovuma Offshore Area 1 project, operated by US-based Anadarko, for which the final investment decision was initially expected by the end of 2016.
Capital expenditure over 2017-2021 is expected to peak at $1.98 billion in 2019, before falling to $1.44 billion by 2021.