State policies, domestic gas output may curb Thailand's LNG import growth in 2024

State policies to minimize LNG imports to reduce power costs, reliance on alternative power generation fuels and a ramp-up in domestic gas production will likely curb Thailand's LNG import growth in 2024.

However, LNG will continue to play a critical role in the country's power mix in the long term due to declining domestic gas and imports from Myanmar, according to Huyen Trang Vu, S&P Global Commodity Insights analyst.

"We expect power demand in Thailand to grow by 4% in 2024, and gas-fired power generation will continue to be the most important source of power, contributing to over half of the total supply," Vu said.

Thailand imported 17.1 million mt of thermal coal in 2023, 3.6 million mt lower than 2022, S&P Global Commodities at Sea data showed.

The natural gas supply for Thailand comes from a mix of domestic production sources, LNG imports and pipeline gas imports from Myanmar.

The country imported 11.55 million mt of LNG in 2023, up 40% year on year, according to S&P Global Commodity Insights data.

Domestic gas production over January-October totaled 2.64 Bcf/d, down 0.6% year on year, Energy Policy and Planning Office data showed.

The kingdom imported an average 588 MMcf/d natural gas from Myanmar over January-November, 21% lower year on year. Tighter US sanctions on Myanmar's state oil and gas company have made it tougher to route payments for the pipeline gas.

Power sector's base fuel

Thailand's natural gas consumption grew 6.3% year on year over January-October, with the power sector accounting for 62% of the total, the data showed.

"The key driver for higher LNG demand in 2023 was increasing power production," a Thailand-based power industry source said.

While the share of gas-based power in total has come down from 2021 as well from 57% to 54%, the absolute amount of power generated has largely stayed the same for gas-based generation whereas it has reduced for coal-based generation.

"What we have seen (in 2023) is that big power generators in Thailand have pushed for the use of gas as part of their switch to cleaner sources of energy for power generation," a Thailand-based coal trader said.

However, the outlook for LNG in 2024 is expected to remain subdued owing to the Ministry of Energy's plans to minimize LNG imports and reduce power costs, according to Vu. The ministry has promoted several policies including gas to oil switching, gas import from Laos, and delay of coal plant retirements.

On the other hand, the production from Thailand's Erawan gas field which saw declining outputs in the past is expected to increase, resulting in stagnant LNG demand around 11 million mt/year until 2025.

"We expect less LNG import into Thailand this year," a Thailand-based source said.

LNG activity

The LNG market saw a rise in Thailand's increased market activity in 2023 given the expected fall in domestic gas supply from the Erawan gas field earlier and the focus on reducing coal-based power generation in the energy mix.

In 2023, PTT, Thailand's oil and gas major, issued close to twenty LNG buy tenders and was heard to have awarded at least a dozen of them. State-owned Electricity Generating Authority of Thailand (EGAT) also awarded three buy tenders in 2023.

Other licensed LNG importers in Thailand have also expressed interest in beginning imports. "We are not in a hurry to import but would like to prepare for the future when domestic gas fields are depleted," one of those importers said.

While some Thailand LNG purchase tenders are on a flat price basis, others are on a JKM-linked basis. On Jan. 11, JKM for February was assessed at $10.133/MMBtu, and SEAM was assessed at a 12 cents/MMBtu discount to the JKM.

Non-power coal demand

Market players working on projections for 2024 were hopeful some normalcy may return to Thailand's import of thermal coal along with improvement in the country's economy.

They were also hopeful coal prices may finally find some stability, allowing end-users to step up their purchases of the material but may take it quarter by quarter.

Platts SEAT 4,200 kcal/kg GAR coal prices have softened in 2023 as it averaged $71.22/mt in 2023 compared to $86.41/mt in 2022.

However, the early parts of the 2023 saw prices remain elevated as they averaged $78.75/mt in the first six months, before falling as demand from most Asian countries slumped following the buying spree witnessed towards the end of 2022.

"So far we are not seeing much in terms of spot activity but there is an expectation that demand will pick pace from other sectors sooner or later as economy is improving," the Thailand-based trader said.