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Gas Projects in Doubt as Bangkok Frets about Over-Reliance on Burma

William Boot by William Boot
January 21, 2015
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Gas Projects in Doubt as Bangkok Frets about Over-Reliance on Burma

A platform in Burma’s Yetagun Offshore Field in the Andaman Sea that produces natural gas exported to Thailand. (Photo: Reuters)

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BANGKOK — Thai investment in Burmese natural gas development might be curtailed because the army generals running Thailand are worried about dependence on supplies from its neighbor, according to reports.

Burma currently supplies about 25% of Thailand’s gas demand, mostly to fuel Thai electricity generation, but the post-coup military-led government of Gen. Prayuth Chan-ocha is apparently anxious to reduce this dependency.

The review of Thailand’s close energy supply links with its neighbor coincide with declining production at long-running offshore fields Yadana and Yetagun in Burmese waters and the rising cost of developing new offshore fields in the country, Platts energy agency in Singapore said.

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“Pipeline supply from [Burma], which accounts for approximately one quarter of Thailand’s gas consumption, has been declining as [Burma] continues to divert volumes to its growing domestic market,” Platts said.

It quoted Thai government-owned energy company PTT chief executive Pailin Chuchottaworn saying last week that Thailand’s gas demand was increasing and it was necessary to diversify sources.

PTT subsidiary PTT Exploration & Production (PTTEP) recently began pumping gas from the Zawtika field it has developed in Burmese waters of the Gulf of Martaban at a cost of hundreds of millions of dollars, however, plans to develop another field in the Gulf, the M3, might be halted.

The Irrawaddy reported on January 10 that PTTEP was due to begin exploratory drilling in the M3 block this year, but the continuing slide in international oil prices, and the knock-on effect on gas, is forcing the Bangkok-based firm to re-assess its expenditure plans. The M3 is now one of five possible candidates on a capital expenditure cut-back list, PTTEP chief executive Tevin Vongvanich said.

The Zawtika field began producing gas in 2014. Burma receives 50 million cubic feet of gas per day while about 250 million cubic feet per day is piped to Thailand.

“An increase in import volumes now looks as though it will more likely come from LNG [liquid natural gas] rather than piped gas from the Gulf of Thailand or [Burma],” Asia Oil & Gas Monitor said this week.

“Following the coup in May 2014 the military voiced concerned about Thailand’s dependency on [Burma] for 25% of the country’s gas supplies. The generals, looking to make Thailand more energy secure, will not have bargained on the oil price collapse of the last six months. The slide already appears to have had PTTEP scrambling to balance its budgets,” the Monitor said.

In recent days, Thailand has taken delivery of its first large cargo of LNG from Qatar as part of a long-term supply agreement between Bangkok and the Persian Gulf emirate.

The delivery is the first under a 20-year contract for 2 million tonnes per year from Qatar, said Interfax Natural Gas Daily.

“PTT is now working to double the Map Ta Phut terminal’s capacity from 5 million tonnes to 10 million tonnes per annum by 2017,” it said. “A recovering economy, following the political protests that paralysed [Thailand] early last year, is also expected to boost domestic gas demand,” Interfax said.

Map ta Phut is an industrial complex on the coast near Bangkok.

It’s unclear where this development and the investment-discouraging oil price collapse leaves PTTEP’s other planned developments in Burma.

In addition to the Zawtika field, which is Thailand’s biggest single gas production project at present among operations in nine countries, PTTEP is the majority stakeholder in five other exploration and production projects in Burma, both offshore and onshore.

Two of these offshore blocks, the M3 and the nearby M11, cover a sea area in the Gulf of Martaban of 11,700 square kilometres.

“Six months is a long time in this business when the global price of oil is halved and major international oil companies are forced to start laying off employees and cancelling or postponing big ticket offshore investments,” regional energy industry independent analyst Collin Reynolds in Bangkok told The Irrawaddy.

“Six months ago PTT and PTTEP were talking up Burma as their big investment destination. Even in September PTTEP said it was planning to spend $3.3 billion there in the five years up to the end of 2018. Before a revision of its five-year capex in December that would have been 15% of the company’s overall international capital spending.”

Gas imported from further afield in LNG form is more costly than gas still being delivered to Thailand from Burma’s Yadana and Yetagun and Zawtika fields, but in the short-medium term it avoids heavy capital expenditure costs on exploratory drilling.

However, it also threatens to undermine prospects for more much-needed gas being delivered to Burma as part of new post-2012 production sharing contract agreements, analysts said.

Meanwhile, PTT is still assessing the financial feasibility of reaching an agreement with the Naypyidaw government to build an imported LNG transhipment terminal on Burma’s southeast coast at Dawei. Such imports would be shipped to Thailand by linking into existing pipelines which carry the Yetagun and Yadana gas.

 

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William Boot

William Boot

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