Thailand LNG hub comes together quickly

Since late last year, the Energy Ministry has been announcing efforts to push forward a plan to promote Thailand as a free-trade hub for liquefied natural gas (LNG).

This move means every state agency and company will have greater access to the LNG market — both import and export — under the third-party access (TPA) concept, which came into play in 2016.

LNG is the only natural gas that can be transported by petroleum vessels, with other types requiring pipelines. LNG is chilled at extremely low temperatures for easier shipment.

Natural gas contains fundamental substances for cooking gas and power generation, as well as raw materials for plastic and chemical products.

Turning point

The Energy Ministry has been pushing for a free-trade hub for LNG since 2016, but the policy has yet to be enacted because LNG use is a new segment and Thailand also has natural gas resources in the Gulf of Thailand for the country’s consumption.

With this low response from energy companies, the government decided to grant the LNG shipper licence to the state-run Electricity Generating Authority of Thailand (Egat) in 2018.

Egat began to seek LNG suppliers globally to import 1.5 million tonnes in August 2018 and selected Malaysia’s Petronas LNG to be the supplier in May 2019. The deal has since been put off by the government.

The Energy Ministry reasoned that Egat should import LNG from spot markets instead of making long-term purchase agreements to avoid a financial burden for Egat when import volumes are not used for power generation.

Egat also buys natural gas from PTT, the national oil and gas conglomerate, under purchasing contracts.

Egat’s entry into the LNG market was fast, reaching an import volume of 130,000 tonnes at a spot market price, supplied by Petronas.

The first batch of 65,000 tonnes was delivered on Dec 28. The remaining volume will be imported in April.

The 130,000 tonnes of LNG is stored at the receiving terminal owned by PTT in Map Ta Phut, Rayong.

Egat has a lease agreement with PTT for the receiving terminal and gas pipeline, with a plan to feed the natural gas to its power generation.

Samerjai Suksumek, chairman of the Energy Regulatory Commission (ERC), which licenses LNG trading, said the agency will discuss appropriate conditions and a business model to serve the creation of an LNG trade hub in the coming years with PTT.

PTT has been the sole LNG operator since 2011, when less than 100,000 tonnes was imported. PTT operates the LNG receiving terminal in Map Ta Phut at a capacity of 11.5 million tonnes a year.

PTT is developing another receiving terminal in Nong Fab, Rayong with an annual capacity of 7.5 million tonnes.

By 2021, PTT will have a total LNG capacity of 19 million tonnes.

“These LNG infrastructures will be vital to the TPA concept,” Mr Samerjai said.

He said the relevant state agencies and private companies interested the LNG trade business are considering how to make a pool price for LNG in a bid to ensure fairness for gas buyers who are power producers.

Thailand’s gas pool market has gas resources from the Gulf of Thailand and Myanmar’s Gulf of Martaban, all of which go to the LNG receiving terminal in Rayong.

Each LNG resource has different prices, but all have the same benchmark.

PTT unveiled a LNG trading plan in October to provide small-scale distribution through marine vessels and heavy duty trucks. The company also plans to develop a gas pipeline to supply LNG to the power generation system.

Wuttikorn Stithit, senior executive vice-president for gas business, said PTT is ready to provide services after having tested this business model for a few years.

PTT is in the ERC’s sandbox scheme and submitted two projects, including the LNG trading plan, to the ERC to test energy innovation efforts before implementation.

PTT imports roughly 5 million tonnes of gas per year.

A model of a gas pipeline under development by PTT to support the LNG trade plan. Apichart Jinakul (Source: bangkokpost)

Four companies have announced ambitious plans to request LNG shipper licences: Ratch Group, B.Grimm Power, Gulf Energy Development and Siam Gas and Petrochemical.

Kijja Sripatthangkura, chief executive of Ratch, said the company applied for the licence in order to use natural gas for the 1,400-megawatt Hin Kong power plant in Ratchaburi.

This site is a renewal power project where Ratch holds an operating licence.

“Ratch is working on many options for gas purchase deals with PTT and Egat, and we also plan to make imports ourselves,” Mr Kijja said. “Ratch has time to prepare for the LNG shipper licence this year.”

He said the Hin Kong power plant has a commercial operation date in 2024-25.

Preeyanart Soontornwata, president of B.Grimm, said his company plans to import LNG to feed seven small power plants under construction because gas prices are expected to be much lower.

Each plant generates 140MW for a combined cost of 38.5 billion baht.

“B.Grimm is ready to diversify into the LNG shipping business, and we have tentatively contacted many LNG producers to possibly join the business after B.Grimm is granted a shipper licence,” Mrs Preeyanart said. “B.Grimm has witnessed the LNG free-trade movement globally and is developing a floating storage regasification unit in ocean.”

She said remote areas cannot access power transmission lines and gas pipelines, so both power and gas businesses have potential in Asia-Pacific.

Sarath Ratanavadi, chief executive of Gulf, said the company is ready to enter the LNG shipping arena in Thailand and Vietnam.

“Gulf expects to obtain a shipping licence with a plan to use the Map Ta Phut site,” Mr Sarath said. “Gulf and PTT won the right to be developers of Map Ta Phut port’s phase three, with a requirement to develop the LNG receiving terminal for capacity of 5-8 million tonnes.”

Supachai Weeraborwornpong, managing director of Siam Gas, said his company plans to develop an LNG containing facility in Sri Racha district, Chon Buri province for 20 billion baht in development costs.

“The company has acquired an oil tank farm and seaport from Thai Public Port in a deal worth 3.36 billion baht,” he said. “Siam Gas plans to operate cooking gas storage, and there are sufficient plots to develop LNG storage nearby.”

Mr Supachai said the LNG shipper business is still related to Siam Gas’s core business. The company has been a liquefied petroleum gas distributor for more than 30 years.

Mr.Sontirat Sontijirawong, Minister of Commerce

Energy Minister Sontirat Sontijirawong said the ministry is working to set up a gas market model and draw up investment conditions as part of a greater strategy to promote Thailand as a global LNG trading centre.

According to the national gas plan, Thailand will import LNG at more than 24 million tonnes a year by 2027 because gas resources in the Gulf of Thailand and the Gulf of Martaban will be depleted in the future.

Meanwhile, the use of other fuels, like coal and lignite, will not be increased for power generation purposes.

“Thailand needs to import a massive volume of LNG, which will be the core fuel for national power generation,” Mr Sontirat said.

Egat is also studying the feasibility of a third LNG shipment in order to take advantage of the baht’s appreciation and low gas prices in the global market.

Tawatchai Jakpaisal, Egat’s deputy governor for fuel, said a third shipment for LNG is planned at roughly 1 million tonnes for three of Egat’s gas-fired power plants: South Bangkok in Samut Prakan, Bang Pakong in Chachoengsao and Wang Noi in Ayutthaya.

“Egat wants to respond to the government’s policy to accelerate massive imports of fuels after the LNG reference price from the Japan-Korea market dropped to US$4 per million British thermal units recently, compared with $7 per million BTU last October,” Mr Tawatchai said.

“Locally produced natural gas has a price of $7-8 per million BTU in the state pipeline pool,” he said. “Egat has to seek other possibilities to maintain or cut power tariffs.”

Egat plans to proceed with the third LNG shipment contracts in the first half, which means the shipment will be delivered in the third quarter, he said.

A large vessel transfers LNG at PTT’s receiving terminal. (Source: PTTLNG)