Thailand’s LNG Development Is Not The Way Forward For Its Energy Sector
22 May 2023 – by Tim Daiss
Thailand’s LNG development is gaining momentum. This comes as prices for fuel on the spot market in Asia dip to 22-month lows. According to industry estimates, the average price for June delivery dropped to USD 12 per metric million British thermal units (MMBtu) by April 21.
Buyers Reluctant to Ramp Up LNG Procurement
However, the region’s overall fuel demand hasn’t increased in lockstep with the reduced LNG price. This is largely due to the reluctance of buyers to rely on LNG in light of last year’s record-high prices that breached the cost-prohibitive USD 60 per MMBtu mark in March 2022, just weeks after the Russia-Ukraine war began.
Thailand Snaps Up Liquefied Natural Gas Imports on the Cheap
However, Thailand is one of the few countries in the region that have taken advantage of the lower LNG prices so far this year by issuing more tenders for delivery. Over the past several months, Thailand’s LNG imports have been increasing.
By March 9, it had issued five tenders for 29 LNG cargoes. Thailand’s PTT LNG, the country’s largest LNG buyer, bought nine summer cargoes for about USD 13 per MMBtu in a tender that closed in early April. The country mostly uses the fuel for its power and industrial sectors.
Thailand’s LNG Buying Rationale and Energy Security
An argument can be made that Thailand has little choice other than to take advantage of the nearly two-year low LNG prices to help its energy security. After all, the country of some 71 million people has the second-largest economy among the Association of Southeast Asian Nations’ (ASEAN) 10-member bloc. It needs gas to help drive its economic recovery after its COVID-19 economic contraction.
However, the answer to Thailand’s energy quandary is more complex than just needing more gas to power an economic recovery.
Gas-based Economy of Thailand
Thailand is relying more on liquefied natural gas again because it’s a natural gas-based economy. Gas-based thermal power generation accounted for nearly 64% of the country’s total power mix in 2021.
Thailand’s Long Gas History
That gas usage comes along with an enormous carbon footprint. When used for electricity generation, gas emits around 50% of the carbon emissions when compared to coal – the world’s dirtiest burning fossil fuel.
Thailand’s natural gas history runs even deeper. It can be traced to the country finding substantial gas reserves in the Gulf of Thailand as far back as 1973. The first gas supply was produced in the Gulf with the help of US oil major Chevron by 1981.
Dwindling Gas Reserves and Domestic Gas Production
However, over the past decade, the Gulf of Thailand’s gas reserves have been quickly depleting, causing the country to import more pipeline gas from neighbouring Myanmar and other countries globally. This dynamic has ushered in a perfect energy supply storm, making Thailand the largest LNG importer in Southeast Asia.
The increase in LNG imports is problematic given the volatile nature of LNG spot prices and the lack in security of supply for several years to come. However, adding to the country’s energy supply dilemma, Thailand relies on domestic production for about 70% of its gas demand.
Meanwhile, major fossil fuel and LNG infrastructure financier Japan continues to support Thailand’s LNG development and fulfill gas demand.
In November, Tokyo Gas Engineering Solutions (TGES) won further work for a proposed grassroots LNG import project in Thailand. In March, Kyushu Electric and Tokyo-based energy giant INPEX signed a memorandum of understanding (MoU) with Thai state-run energy giant PTT to consider LNG investments and procurement.
Meanwhile, last April, Japan pledged more investment in Thai LNG development under the guise of “clean energy”. Japan had already been an investor in the country’s gas-to-power sector.
For Thailand, it’s a Catch-22 situation. It based its economic development over the past four-plus decades on gas. Now, it seems locked into that choice, as much of the world tries to pivot away from fossil fuel usage.
Yet, Thailand’s energy past doesn’t have to dictate the path it can take going forward.
Renewables Policies Remain Modest
To its credit, the Thai government is implementing new renewable energy policies to lower greenhouse gas emissions from its gas-intensive energy sector. This includes establishing a National Climate Change Policy Committee (NCCPC).
The NCCPC will have the authority to suggest policies, measures and regulations, necessary operations and model schemes to the country’s cabinet and state agencies regarding climate change management.
The government is also revising other incentives and measures under its Nationally Determined Contribution (NDC) to achieve a new National Energy Plan (NEP) to lower emissions.
This includes drafting an act that helps to regulate greenhouse gas (GHG) emissions and involves cooperating with international agencies to support climate change solutions. It also sets the goal of carbon neutrality between 2065 and 2070. But, that’s some 15 to 20 years after most developed nations’ net-zero 2050 pledges.
Thailand also supports voluntary GHG reduction through the Clean Development Mechanism (CDM) in promoting the Thailand Voluntary Emission Reduction (T-VER) program.
However, it’s not enough.
A Gas Lock-in
“Thailand’s last shift in power sector planning, from a dependency on coal to fossil gas over the next two decades, lowers the overall emission pathways in its planned policies but nevertheless exacerbates fossil fuel (gas) lock-in and delays meaningful decarbonisation efforts,” a Climate Action Tracker report said in December.
In 2022, the report said that Thailand focused on securing fossil supply and doubled down on gas as the energy fuel for the future. This included a planned build-out of new LNG import capacity, approving a new 1,400 megawatt (MW) gas-fired power plant, and securing gas fields in Myanmar.
“The potential for [Thai] renewable energy remains high and largely untapped, with deployment stagnating since the pre-COVID pandemic,” it added.
As such, the report concluded that Thailand’s overall climate mitigation rating is “critically insufficient”.
by Tim Daiss
Tim has been working in energy markets in the Asia-Pacific region for more than ten years. He was trained as an LNG and oil markets analyst and writer then switched to working in sustainable energy, including solar and wind power project financing and due diligence. He’s performed regulatory, geopolitical and market due diligence for energy projects in Vietnam, Thailand and Indonesia. He’s also worked as a consultant/advisor for US, UK and Singapore-based energy consultancies including Wood Mackenzie, Enerdata, S&P Global, KBR, Critical Resource, and others. He is the Chief Marketing Officer (CMO) for US-based lithium-sulfur EV battery start-up Bemp Research Corp.Read more