Sunday, October 14, 2007

Thailand in search for energy supply from neighbouring countries

BATAM, Indonesia (AFP) — Southeast Asia's biggest offshore oil platform, weighing in at 16,800 tonnes, is near completion in Indonesia's island of Batam. Destined for the Arthit gas fields in the Gulf of Thailand, the half-billion-dollar behemoth is expected to soon take centre stage in Thailand's bid to escalate drilling and secure energy supplies.

Natural gas generates nearly all of the electricity in Thailand, which long ago shed its rural roots and is galloping towards greater urbanisation and a broader industrial base.

Demand for gas is expected to rise by an annual average of 8.4 percent through to 2015, and Thailand's top energy firm PTT Exploration and Production (PTTEP), which will take control of the Batam rig, hopes to be operating the nation's largest gas production facility by February 2008.

Even with capacity of nearly 370 million cubic feet per day, the massive Arthit project will not be able to supply power-hungry Thailand which is already looking further afield to meet demand.

"The existing domestic supply of natural gas is likely to be wiped out in the next 18 years," said PTTEP spokesman Sidhichai Jayant.

"Consequently, we are in need of natural gas supplies from neighbouring countries such as Myanmar, Cambodia and Vietnam, which have larger reserves than us, to fulfill future consumption."

While domestic gas supplies currently account for about half of Thailand's consumption, PTTEP plans to invest some 70 billion baht (two billion dollars) in overseas energy projects over the next five years as it anticipates heavier reliance on foreign gas reserves.

"Energy supplies from abroad are critical for Thailand, especially for long-term reliability as local supplies of gas and oil are limited," said Chavalit Pichalai of the Energy Policy and Planning Office.

"Even though we are diversifying to coal-fired and nuclear power generation, natural gas will remain a key source of electricity. We need to diversify our overseas gas supplies for long-term stability," he said.

This could prove tricky in a region beset by territorial disputes and, in the case of Myanmar, Thailand's largest supplier, political instability.

Myanmar's bloody crackdown on anti-government protests has sparked international condemnation and could force Bangkok to re-assess its trade relationship with its neighbour, which accounts for more than 30 percent of Thailand's energy supplies.

Although PTTEP says exploration is continuing in Myanmar's lucrative M-9 gas field in the southwestern Gulf of Martaban, experts warn that Thailand's supply lines, and reputation, could suffer with continued unrest in military-ruled Myanmar.

"Any interruption of the gas supply from there will put Thailand in a difficult position," said Suthiphan Chirathivat, associate professor of economics at Bangkok's Chulalongkorn University.

"Thailand should prepare contingency plans for any emergency in Myanmar.

"Meanwhile, the Thai government has to be more cautious in continuing its economic partnership with Myanmar if we don't want to have conflict with Western countries," he added.

Thanatthep Chatarakarn, energy analyst with Bua Luang Securities, said Thailand should look to alternative gas suppliers such as Indonesia and the Middle East.

"If negotiations for Myanmar's M-9 are affected by ongoing unrest there, PTTEP will be hard-pressed to secure more gas from abroad, especially if the Thai economy grows more than is projected," he said.

Diversifying energy sources could be difficult as the region's other booming economies also try to meet their own needs.

Indonesia's government has already said it wants to focus on supplying its own domestic energy needs from 2010.

PTTEP's Sidhichai said a significant oil project is now online in Vietnam and is expected to provide 20,000 barrels per day from the second half of 2008.

Elsewhere PTTEP has partnered with Malaysia's Petronas Carigali in a natural gas project expected to start next year, while two onshore drilling ventures have begun in Indonesia.

Since discovering oil in 2005, Cambodia is also being eyed as a source.

Thailand has acquired exploration rights for two projects in oil fields that are partially shared with its eastern neighbour, which is believed to have hundreds of millions of barrels of oil in its vast undersea reserves and could begin production as early as 2010.

However, boundary disputes have delayed drilling in one field, although talks are reportedly underway to resolve the disagreement and free up access to millions more barrels.

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