Running out of gas? Thailand struggles to avert energy crunch

BANGKOK, April 4 Wed Apr 3, 2013 5:00pm EDT

BANGKOK, April 4 (Reuters) - The annual maintenance shutdown of gas fields in Myanmar doesn't normally make headlines in Thailand, but this year shows the failure of Thai electricity generation to keep up with economic growth.

Government electricity-saving plans - including agreements with factories such as a Thai unit of Toyota Motor Corp to stop operations on April 5 - may prevent blackouts in the short term but point to the potential long-term economic impact.

The supply crunch also highlights the difficulties in securing alternatives. Liquefied natural gas is much more expensive, while cheaper coal faces strong opposition after problems caused by pollution in the early 1990s at a coal-fired power plant.

The shutdown at gas fields in Myanmar that supply fuel to power plants in Thailand runs from April 5 to 14, one of the hottest times of the year in Thailand. Typically, the work is planned for the new year holidays around the middle of the month, when demand falls, but problems with a rig forced operator France's Total SA to change the timetable.

"Disruption to Myanmar's gas supply will cause chaos," said Pailin Chuchottaworn, CEO of state-owned energy giant PTT Pcl , the country's sole gas supplier. "We don't have enough power plants to serve demand, while consumption keeps rising."

Thailand uses natural gas for almost 70 percent of its power generation, and one-fifth is imported from Myanmar. It also uses gas in petrochemical plants, households and vehicles.

It produces 3,700 million cubic feet per day (mmcfd) and imports 1,100 mmcfd from Myanmar, just about enough to feed domestic needs of 4,850 mmcfd.

"In the next 20 years, gas demand will rise to 7,000 mmcfd. If we don't have enough supply, it will affect the economy," said Songpope Polachan, head of the energy ministry's Minerals Fuels Department.

Unless new gas fields are discovered, domestic output will be stable for the next five years but drop to 1,000 mmcfd in 20 years from now, Songpope said.

From 2014, gas imports from Myanmar should rise as the Zawtika field in the Gulf of Martaban is due to come on stream.

But that will be the last new gas to be sold to Thailand: as Myanmar opens up and Western investors move in, it will need to keep its gas to feed a growing industrial sector and the 75 percent of the population with no access to the national grid.

One hope lies in a 26,000 square kilometre (10,040 square mile) petroleum field in the Gulf of Thailand, but Cambodia has designs on that, too, and talks on ownership and exploitation have stalled for years.

"We need to seek sustainable resources like renewables," said Suthep Liumsirijarern, director general of the state-run Energy Policy and Planning Office.

In the next decade, Thailand aims to cut the proportion of gas used to generate electricity to 45 percent and raise renewables to 25 percent from 18 percent now.

ASEAN POWER GRID

To strengthen electricity security, Thailand aims to develop an ASEAN power grid to link transmission systems among Southeast Asian countries, said Pongdith Potchana, deputy governor at the state-run Electricity Generating Authority of Thailand.

Thailand has already signed deals to buy up to 7,000 megawatts of power from Laos and is aiming to buy either hydro or coal-fired power from Cambodia and Myanmar, he added.

But for real security, Thailand needs to double its electricity generation capacity to 70,000 MW by 2030 and the most cost-effective way to do that - and the most controversial - is through coal-fired plants.

Imported coal provides power at 2.94 baht per kilowatt hour, cheaper than 3.96 baht for natural gas, as well as the 3.00-5.20 baht for biomass and wind power and the 12.50 baht for solar energy, according to government data.

But air pollution and related respiratory disease in 1995 affected thousands of residents near the Mae Moh lignite power plant in Lampang in the north. Court cases and bad publicity have made it difficult to build coal-fired plants ever since.

The government cancelled two coal power projects in Prachuab Khirikhan in 2002 after protests. It now plans to build four power plants using clean coal technology, starting with an 800-MW plant near the tourist town of Krabi, but they are also facing protests by Greenpeace activists.

To secure energy supplies, the PTT group has been active in buying assets overseas, including the $1.9 billion acquisition of Cove Energy, which has given Thailand access to massive gas finds off the coast of east Africa.

PTT also started importing LNG in May 2011 and imports may reach 23 million tonnes a year, equivalent to 3,220 mmcfd of piped gas, by 2030 from about 500,000 tonnes a year now. But LNG costs two or three times as much as natural gas.

Another way the government can tackle the looming gas shortage is to dampen demand by allowing prices to rise. It has said it wants to raise prices of cooking gas, or liquefied petrolem gas (LPG) and natural gas for vehicles to reflect costs.

PTT ran up losses of 62 billion baht from gas for vehicles from 2004 to 2012, while the state Oil Fund has subsidised imported LPG to the tune of 133 billion baht since 2008. ($1 = 29.26 Baht) (Additiong Reporting by Wilawan Pongpitak and Paul Carsten; Editing by Alan Raybould and Michael Urquhart)