PTTEP the price of liquefied natural gas (LNG) is becoming increasingly important in Thailand’s electricity market, according to Kanita Sartwattayu, the company’s incoming CEO. She explained that a $3 per MMBtu increase in the price of LNG could raise electricity prices in the country by about 5 %. Sartwattayu made this statement at the Gastech conference in Bangkok, where she also emphasized the need to keep gas supply costs under control to ensure the stability of Thailand’s energy supply. Currently, about 30 % of the country’s electricity generation relies on LNG, according to Sartwattayu. If current conditions do not change significantly, that proportion could reach 70 % within the next ten years.
PTTEP seeks to sustain domestic gas production in Thailand
Given this scenario, the company considers it a priority to maintain domestic gas production for as long as possible. Thailand currently meets its needs through a combination of domestic production, pipeline imports, and cargoes. LNG furthermore, gas maintains a considerable weight within the Thai electricity matrix; government data for the six months up to June shows that this fuel represents more than 60% of the country’s electricity generation.
The availability of local resources could help reduce dependence on foreign supply, Sartwattayu noted, he pointed out that Thailand still has numerous marginal gas fields awaiting development; however, the evolution of currently producing fields presents another challenge. Erawan, Bongkot, and the Malaysia-Thailand Joint Development Area are entering maturity stages and facing a progressive depletion of their reserves, according to Tanya George, an analyst at BMI.
The spot market increases exposure to LNG prices
Another important factor is how Thailand acquires this fuel, data from Kpler indicates that around half of the LNG purchased by the country comes from the spot market. This model allows access to available shipments on the international market, but it also increases exposure to sudden price fluctuations, when LNG becomes more expensive, power plants that rely on imported fuel can face higher generation costs.
Furthermore, the energy research center IEEFA points out that more than a quarter of the gas used to generate electricity in Thailand comes from abroad, the combination of a high share of gas in electricity generation and a strong presence of spot purchases helps explain why international LNG fluctuations can be passed directly on to the country’s electricity rates.
LNG imports could gain more weight
In the medium term, this pressure could intensify. BMI forecasts that Thailand will increase its reliance on LNG imports as a result of declining domestic production and growing uncertainty surrounding pipeline gas deliveries. PTTEP and Chevron are conducting exploration activities that could yield new resources, however, to date, no large discoveries have been confirmed that would reverse the downward trend in domestic supply noted by BMI.
Adding to this scenario is the forecast of lower gas imports via pipeline from Myanmar, another source used to supply the Thai energy market. In this context, maintaining competitive LNG costs and advancing the development of domestic resources will be key factors for the stability of the market, energy system the challenge could increase if imports continue to gain share while gas maintains a dominant position within Thailand’s electricity generation.
Source: cna
Photo: Shutterstock
