Deregulating the gas market, with Thailand’s Energy Regulatory Commission (ERC) has assigned country’s prime power producer EGAT some 1.5 million tons per annum (mtpa) of import capacity at the Map Ta Phut LNG terminal. Prior to the market liberalization, only the state-owned oil and gas champion PTT was granted a license to import LNG.
Though PTT is mandated to provide gas 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 to fulfill its contractual LNG import obligations regardless of domestic demand. This has prompted the regulator to deny EGAT to enter direct long-term gas supply contracts, e.g. with Petronas of Malaysia.
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. For the time being, EGAT need to continue sourcing most of its gas for power generation from state-owned PTT.
Policy makers in Bangkok are actively backing a coal-to-gas shift in the power sector. Seeking to stop burning lignite eventually, the government expects more than 24 mtpa of LNG will have to be imported starting from 2027, compensating for depleting domestic resources. Costs for locally produced gas have reached $7-8/MMBtu, with analysts anticipating costs to rise further as PTT is forced to employ more field support measures to prevent production from collapsing.
To finally open up the gas market, Thailand’s energy ministry has proposed a free-trade hub whereby each company would be permitted to import and re-export LNG on the spot market. This would help balance the market and allow PTT to gradually turn away from ‘take-or-pay’ contracts. However, limited import capacity and vested interest from incumbents have so far hampered the realization of such a free-trade hub.