Thailand's PTT LNG, a subsidiary of state-owned oil and gas company PTT, is going ahead with plans to double capacity of its existing 5 million mt/year LNG import terminal despite severe under-utilization of the facility.
"The government has a clear policy to ensure stable supply of natural gas for industry, especially for power generation and this includes going ahead with Phase II on schedule," an official with PTT LNG said last week.
The expansion of the terminal, referred to as Phase II, includes building a new jetty, processing and regasification facilities and storage tanks. The government last year approved investment of $698 million on the expansion.
The existing terminal in Thailand's eastern Map Tha Phut Industrial Estate in Rayong province has a capacity of 5 million mt/year and became operational in September 2011.
It has, however, been under-utilised -- running on average at one-fifth of its capacity, the PTT LNG official said, adding that this has not had any influence on the company's decision to go ahead with the expansion work.
According to Thailand's customs data, the kingdom imported 973,240 mt of LNG in 2012. Though this was up 37.4% year on year, it represented under 20% of the terminal's capacity.
Moreover, all the imports have been on a spot basis. PTT last December signed a long-term sales and purchase agreement with Qatargas for 2 million mt/year of LNG starting 2015, but this volume represents only one-fifth of the terminal's expanded capacity.
Recent reports in the media had said that PTT may look to delay the project, but the PTT LNG official said that the expansion is expected to be completed as per the original schedule of late 2016 and the new capacity would be operational in the first quarter of 2017.
The company expects to sign an engineering, procurement and construction contract for the expansion before the end of this year and construction will begin in early 2014, he said.
SEVERAL HURDLES REMAIN
One local LNG industry source cast doubt on the expansion on grounds that several hurdles remain, the most significant of which is environmental permits required for the expansion.
"It is surprising to see expansion of a terminal that is performing well below its design," the source said, adding that PTT was also not even close to finalizing more long term contracts.
Moreover, serious environmental compliance hurdles are still to be overcome before construction work can begin, the source said.
Map Tha Phut Industrial Estate is Thailand's energy heartland and has huge oil, gas and petrochemical operations as well as hundreds of other industrial complexes that utilize its advanced infrastructure and deep-sea port facility.
Following a 2010 court verdict -- which led to the suspension of several projects on the industrial site -- the government has imposed stringent approval conditions for new projects in the area.
The verdict was initiated by local residents fighting against the adverse effect of the projects on the environment and their health.
PTT's decision to pursue the terminal's expansion comes at a time when the country's indigenous gas resources are declining and neighbor Myanmar is increasingly hinting at cutting exports as its own gas demand grows. Myanmar currently supplies around 1 Bcf/d of gas to Thailand.
According to Thailand's Department of Mineral Fuels, the country's proven gas reserves fell by 6% from 10.7 Tcf in 2005 to 10.06 Tcf in 2011, and production has reached its peak of 3.6-3.8 Bcf/d.
Gas demand, meanwhile, has consistently grown over the last several years and currently stands at around 4.5 Bcf/d, data from the Energy Policy and Planning Office showed.
The National Energy Policy Council expects gas demand to rise to over 7 Bcf/d by 2030 as power generation capacity grows. The power sector accounts for 60% of the kingdom's total gas demand.
