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A tale of two LNG-import markets – Thailand versus Indonesia

Mon 08 Jan 2018 by Hong Liang Lee

A tale of two LNG-import markets – Thailand versus Indonesia
Irma Surya: FSRUs can reap almost immediate results

Different dynamics are shaping LNG-import demand in Indonesia and Thailand – two of Asia’s most exciting growth markets

Indonesia faces a unique challenge to secure and distribute gas for its expanding population. The country has a voracious appetite for energy and its people are spread over an archipelago of more than 17,000 islands.

The struggle to provide a larger percentage of clean energy across the country is real and efforts to do so are weighed down by an absence of the requisite infrastructure, slow development and the lack of a monolithic grid of either pipelines or wires to interconnect a vast number of islands.

With gas demand projected to grow at an average annual rate of 5% over the next 10 years and with power plants absorbing the main chunk, Indonesia will rely on gas for 50% of its total energy needs, up from 23% in 2015, according to Pertamina general manager, LNG sales, Irma Surya.

The country’s state-owned energy firm is also expecting to become a net importer of LNG by 2020 in view of rising gas demand reaching an expected 5,100 Mcfd in 2035 from 3,500 Mcfd in 2017.

“Indonesia will become an LNG net importer by 2019-2020 for the first time,” Ms Surya told LNG World Shipping on the sidelines at the Gas Asia Summit in Singapore.

She added that the country's preference is for gas for a greener environment in a nation whose industrial growth is continuing alongside its rise in population.

But as many islands individually cannot support the establishment of the infrastructure needed to provide a base for a transition to LNG, Pertamina believes that small-scale projects and FSRUs are feasible solutions that can reap almost immediate results.

“Pertamina’s long-term infrastructure development plan is to make gas supply accessible to the many islands of the country. We have seen growth in small-scale LNG projects, but we still face challenges in completing the logistics chain and providing acceptable prices to end-users,” Ms Surya said.

Fuel switch

There has been resistance from consumers to switch from their current fuel source, mainly diesel, due to the higher cost and uncertainties in the availability of alternate energy supplies, including LNG. In addition, the country lacks a comprehensive network of virtual pipelines needed for a more efficient inter-island distribution, according to Ms Surya.

And the availability of gas is uneven across the archipelago, with a surplus in the east and deficits in the west and south. “We are also looking at FSRUs as a cheaper option compared with building onshore facilities,” Ms Surya said.

She noted that Pertamina aims to hook up a new FSRU by securing supplies from Mozambique, but she declined to share more details. It was reported earlier that Pertamina has partnered Sojitz and Marubeni to build a new FSRU to support the Marubeni-led Jawa 1 project in Cilamaya, West Java province.

Indonesia currently operates an FSRU project in Bali. Mangesh Patankar, head of business development at Galway Group, said a small-scale LNG project is a viable solution to facilitating gas supply across the country. He noted that Indonesia also has huge untapped offshore oil and gas resources, but softening oil prices have significantly curtailed sea-based exploration and production activities.

“If upstream developments do not materialise, the country will become a net importer of gas in the next decade,” Mr Patankar said.

Thai hopes

Thailand, Asia’s new emerging LNG import market, has laid out ambitious goals for becoming a major LNG player by way of securing more long-term import contracts as the country faces dwindling domestic gas production and rising energy demand.

“Thailand relies 70% on gas to generate power but domestic production will soon decline at a rapid pace and we will need to import more and more LNG,” said Porrasak Ngamsompark, acting director for the LNG management bureau, department of mineral fuels, ministry of energy, Thailand.

Apart from a diminishing national output, Thailand is also facing shrinking upstream oil reserves and has an uncertain relationship with neighbouring Myanmar concerning pipeline gas imports due to the latter’s growing domestic market.

With Thailand importing 5.2 mta of LNG under four long-term contracts today, it is thinking about enlarging its import sources with the aim of securing 35 mta by 2036.

Qatargas is supplying 2 mta of LNG to Thailand under a 20-year contract. Malaysia’s Petronas is delivering 1 mta to Thailand in 2017 and 2018, and will increase the volume to 1.2 mta from 2019 as part of a 15-year contract. BP and Thailand have inked a 20-year contract for 1 mta, and Shell has a contract to supply 1 mta over 15 to 20 years. Thailand is also stepping up spot imports, which brought in 2.9 mt in 2016.

“We need more long-term LNG contracts from around the world. Currently we are looking at a long-term FSRU deal with Mozambique,” Mr Ngamsompark said.

The LNG supply will come from Mozambique’s Rovuma Area 1 offshore project operated by Anadarko Petroleum Corp. With approximately 50 mta of availability, Mozambique is seen as the new emerging LNG supplier to the global market.

To meet the aim of a seven-fold increase in LNG import volumes to 35 mta by 2036, Thailand is looking to double its annual regasification capacity to 20 mta from the current 10 mta over the next decade. State-owned corporation PTT is studying a proposal for the construction of a storage and distribution LNG terminal with a capacity of around 3 mta in neighbouring Myanmar. The terminal will facilitate onshore LNG transportation to Thailand.

PTT may soon no longer be the only LNG importer in Thailand as compatriot Electricity Generating Authority of Thailand has received approval to build a 5-mta FSRU in the Gulf of Thailand.

These plans are in line with the government’s goal of ensuring that 70% of LNG imports are from long-term contracts and the remaining 30% from the spot market, according to Mr Ngamsompark.

The serious attempts made by Thailand to bolster its LNG imports came despite the country being one of Asia’s biggest oil producers alongside China, Indonesia and Malaysia. The softening of crude oil prices since 2014 has led to an average annual base decline of around 7% within Thailand’s existing oil fields, according to data from analyst Wood Mackenzie, forming the basis for the drive for greater LNG imports to the country.

“Our LNG infrastructure capacity will need to double from now to 2030 and the government is calling on foreign investors to help build up the infrastructure,” Mr Ngamsompark said.

Thailand’s ambition is to become the LNG hub for the countries of the Association of Southeast Asian Nations, he concluded.

 

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