Thailand turns off tap on gas imports as economy falters

BANGKOK/SINGAPORE (Reuters) - Thailand is cutting natural gas imports after consumption growth in Asia's fourth-largest user of the fuel has sagged to two-decade lows, threatening to idle costly fuel import facilities and force suppliers to turn to rival buyers such as China.

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

PTT, Thailand's biggest energy conglomerate and sole gas supplier, has cut estimates for LNG imports and gas sales for this year, an executive of the firm said. That comes as slowing consumption for power and petrochemicals is reducing gas demand in Southeast Asia's second-biggest economy.

State-controlled PTT 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 US$880 million, 5 million-tonne-per-year Map Ta Phut LNG import facility, the second-largest in Southeast Asia, and parts of cross-country pipelines running for hundreds of kilometres from Myanmar. The 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 military seized power in May after nearly seven months of political deadlock that hurt tourism, domestic demand and confidence. The economy contracted 2.1 per cent in January-March from the previous three months, and the central bank last month cut its 2014 growth forecast to 1.5 per cent.

"It will take at least 2-3 years for the situation to spring back to normalcy as we don't see a government forming until mid- or late-2015," said Sri Paravaikkarasu, an analyst at energy consultancy FGE, predicting annual gas demand growth would be around 2 percent over the next few years.

Thai gas demand grew just 0.4 per cent in 2013, the lowest since 1989 when consumption fell 2 per cent, data from the Energy Ministry's website showed. The 2013 growth compared with 7-8 per cent in each of the previous three years.

First-half 2013 demand was still a healthy 7 per cent but nine-month demand slowed to 2.8 per cent, showing the impact of the political unrest, which gathered pace in the third quarter. Full-year gas use for power generation rose by only 0.6 per cent, while consumption by petrochemical plants fell 3.2 per cent.

The trend has continued, with Thailand consuming 4,423 million standard cubic feet per day (mmscfd) of gas in the first quarter, down 5.4 per cent from a year ago, the Energy Ministry data showed. By comparison, 2013's first quarter saw demand climb 8.2 per cent.

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

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

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

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

While Thailand's 2015 LNG imports will rise by about half a million 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, analyst at energy consultant Wood Mackenzie.