Thailand gas demand growth plunges

Thailand is cutting natural gas imports as consumption growth has sagged to two-decade lows.

The cutbacks threaten to idle costly fuel import facilities and force suppliers such as Myanmar to turn to rival buyers such as China.

Growth in gas use has stalled as the economy has taken a hit from months of political turmoil, putting in doubt long-term plans to increase imports of liquefied natural gas (LNG) and buy more piped gas from Myanmar as domestic output wanes.

PTT Plc has cut estimates for LNG imports and gas sales for this year as slowing consumption for power and petrochemicals is reducing gas demand.

The majority state-owned energy group has also cut its gas imports from Myanmar, which is now looking to China to take up some of the slack, a Myanmar government official said.

PTT owns the $880-million, Map Ta Phut LNG import facility, the second-largest in Southeast Asia with a capacity of 5 million tonnes per year. It also owns many of the cross-country pipelines running for hundreds of kilometres from Myanmar. Lower imports will mean these facilities risk being underutilised, analysts say.

A plan to expand the capacity of the Map Ta Phut terminal to import the supercooled gas could also be in jeopardy, they say.

Thailand’s economy contracted 2.1% in the first quarter from the previous three months, and the central bank last month cut its 2014 growth forecast to 1.5%.

The economy has begun to revive since the military coup in May but not all analysts believe the recovery will be as rapid as some people think.

“It will take at least two or three years for the situation to spring back to normay as we don’t see [an elected] government forming until mid- or late 2015,” said Sri Paravaikkarasu, an analyst at the energy consultancy FGE, predicting annual gas demand growth would be around 2% over the next few years.

The country’s gas demand grew just 0.4% in 2013, the lowest since 1989 when consumption fell 2%, according to the website of the Energy Policy and Planning Office.

The growth in 2013 compared with 7-8% in each of the previous three years. Full-year gas use for power generation rose by only 0.6%, while consumption by petrochemical plants fell 3.2%.

The trend has continued, with the country consuming 4,423 million standard cubic feet per day (mmscfd) of gas in the first quarter, down 5.4% from a year ago, according to EPPO data. By comparison, demand climbed 8.2% year-on-year in the first quarter of 2013.

The first-quarter decline has led PTT to cut its LNG import target from the spot market this year to between 1.4 million and 1.5 million tonnes from a previous estimate of 2 million, said Somkiat Masunthasuwan, executive vice-president of thenatural gas supply and trading department.

PTT has also reduced its gas sales forecast this year by 1-2% from a previous estimate of 4,700-4,800 mmscfd.

About 80-85% of Thai gas demand is met from local production and 12-16% from Myanmar, with LNG filling the remaining 3-4%.

Prior to the unrest, annual demand growth was expected to remain at the 7-8% level, with LNG imports and supplies from Myanmar filling in a large part of the rise.

While 2015 LNG imports will rise by about 500,000 tonnes as a supply deal with Qatar kicks in, a fall in spot purchases will neutralise this, said FGE’s Paravaikkarasu.

The declines in LNG spot imports may make suppliers seek alternative buyers, relegating Thailand to being a marginal player in the booming LNG business.

“Thailand will still be a significant LNG buyer in the long-term once domestic gas supply from the Gulf of Thailand begins to decline. However, for now, lower gas demand growth may impact its procurement of long-term LNG contracts and PTT’s plan to expand the Map Ta Phut regasification terminal,” said Zhixin Chong, an analyst at the energy consultant Wood Mackenzie.

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