Analysis: Thailand faces a perfect storm as it seeks more LNG supplies

An employee of Thai energy giant PTT walks outside the company’s liquefied natural gas (LNG) terminal at the Map Ta Phut industrial estate in Rayong province, east of Bangkok on 7 September 2011. REUTERS/Sukree Sukplang

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  • Thailand expected to import 9.7 Mtpa of LNG in 2022
  • Erawan production down sharply as transfer to PTTEP delayed
  • LNG spot prices in Asia have doubled since January

BANGKOK, March 16 (Reuters) – A global energy crisis is sending liquefied natural gas prices skyrocketing, but Thailand must increase purchases to offset a sharp drop in output from its biggest gas field and as sanctions threaten supplies from Myanmar.

The Southeast Asian country has little choice but to join the rush for alternative gas supplies at a time when European demand is rising. Buyers are racing to secure cargoes to replace Russian gas and LNG as the war in Ukraine escalates.

The revenue shortfall for Thailand, a net importer of oil and gas that last year depended on imports for nearly 75% of its electricity, crude oil, coal and natural gas needs, could become more onerous as prices continue to soar.

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Thailand’s shortfall is largely due to the sharp drop in production from the offshore Erawan field, which supplies the lion’s share of the country’s gas needs. Threats of new US sanctions against Myanmar following a military coup have also cast uncertainty over gas imports from the longtime supplier. Read more

“We were facing a gas drop in the Gulf of Thailand and potential sanctions in Myanmar…we are now adding another situation of gas price spikes to the situation between Ukraine and Russia,” the secretary said. permanent at Energy, Kulit Sombatsiri.

PTT Exploration and Production Pcl (PTTEP) (PTTEP.BK), a unit of state-owned energy company PTT Pcl (PTT.BK), is set to take over the Erawan gas field from Chevron Corp (CVX.N) in April and is looking to build it. access since 2021.

Transitions between oilfield concessions are often collaborative, but delays in talks between PTTEP and Chevron come amid a dispute between the US oil major and the government over who should pay to remove offshore assets from the field. .

About a quarter of Thailand’s natural gas needs came from the Erawan field, which is expected to produce less than a fifth of its capacity next month.

The delayed transfer has also slowed investments needed to maintain production from the field, crucial to Thailand’s long-term energy security. Read more

In 2021, 54% of the country’s electricity used natural gas and a tiny fraction came from petroleum sources. It had planned to increase imports this year, but super-chilled fuel prices have doubled in just over a month due to sanctions imposed on Russia for its invasion of Ukraine, which Moscow has called a “special operation”. Read more

Thailand depends on natural gas to generate more than half of its electricity needs, says IEA

When Chevron comes out, production could be as low as 200 million standard cubic feet of gas per day (mmsfcd) before climbing to 400 mmsfcd in the fourth quarter, said SCB Securities analyst Chaipat Thanawattano.

In 2019, the field produced 1200 mmsfcd.

“The transition has not been smooth and we started to see a shortfall late last year,” the secretary general of the Energy Regulatory Commission (ERC) told Reuters. , Komkrit Tantravanich.

To compensate for Erawan’s decline, the ERC increased LNG import quotas. This brings total imports to 9.7 million tonnes this year from 6.4 million tonnes last year.

State-owned PTT will import 1.2 million tonnes from the spot market from January to April as the situation was “urgent and required quick decisions”, Komkrit said.

Finansia Syrus Securities analyst Suwat Sinsadok said he expects the quota to be fully used and he estimates it will take two years before Erawan reaches 800 mmsfcd – the production target for the Thai operator.

A Chevron spokesperson said in an email, “Despite the complex challenges presented by the transition, we are committed to achieving the goal of a safe Erawan transition in April 2022.”

PTT declined to comment on its existing reserves, LNG imports and Erawan field capacity.

FUEL SWITCH

Thailand will be reluctant to buy spot LNG if prices rise by around $40 per mmBtu, Komkrit said.

The average price for April delivery to Asia fell back to around $38 per mmBtu, after hitting record highs due to the risk of a Russian gas cut. Read more

Spot LNG prices in Asia soar with European benchmark as EU seeks more chilled fuel after Ukraine crisis

Some power plants will switch to using oil to generate electricity to reduce gas demand, Komkrit said, as the government extended the shutdown of a coal plant and biomass contracts.

“The best we can do is conserve energy…so that we can get through these uncertain times,” Energy Minister Supattanapong Punmeechaow told reporters last week. Thailand imported almost 90% of its oil needs last year.

Potential sanctions on supplies from Myanmar, which account for about 14% of Thailand’s natural gas needs, have also added to the uncertainty.

“If that happens we will have to find a replacement, but in the meantime we have increased the regasification capacity to be ready,” Komkrit said.

The government announced last week that it would begin partial operations at a regasification terminal six months earlier than planned in May, adding capacity of 2.5 million tonnes per annum (tpa) from 7.5 million of tpa.

LNG must be regasified before being used in power plants.

The decline of deposits in Myanmar would have a permanent impact on Thai demand for LNG in the long term.

“We estimate this could increase Thailand’s LNG imports by 2.3 Mt per year by 2030,” said Wood Mackenzie analyst Angus Rodger.

($1 = 33.4200 baht)

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Additional reporting by Isabel Kua; Editing by Florence Tan and Jacqueline Wong

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