Risks rise for Thailand’s power sector as PTTEP grapples with gas supply issues, warns Fitch


Thailand’s state-backed upstream player PTT Exploration & Production (PTTEP) faces significant gas supply issues that pose new downside risks to Thailand’s gas power sector. Southeast Asian nation, warned Fitch Solutions.

Thailand’s power sector is already facing downward pressure due to the shortage of imports from Myanmar, which is a major exporter of natural gas to Thailand. Following the military coup in Myanmar in early 2021, major upstream investors TotalEnergies and Chevron announced plans to exit the Yadana gas field. As a result, PTTEP (BKK: PTTEP) will take over as operator.

“This will strain PTTEP’s resources to maintain a steady supply of natural gas to Thailand. Apart from a majority stake in the Yadana gas field, PTTEP also owns an 80% share in the Zawtika gas field. Yadana and Zawtika contribute 11% and 6% of Thailand’s natural gas, respectively (including only domestic production and pipeline natural gas imports). With these developments in Myanmar, Thailand’s main natural gas supplier, we foresee downside risks to Thailand’s gas supply, and therefore gas-fired power generation,” Fitch Solutions said in a recent country and industry risk research report.

“Domestic gas supply has also fallen, exposing Thailand’s gas power sector to more international gas imports and leaving the electricity market more vulnerable to supply issues,” Fitch warned.

In April 2022, PTTEP took over operations at Erawan, Thailand’s largest gas field, from Chevron. A messy transition has seen production drop drastically at the block level, which will be hard to reverse. The transfer means that PTTEP faces additional pressure on its resources to manage domestic gas fields in addition to the fields they operate in Myanmar.

Notably, gas production from the Erawan gas field fell by more than 50% when comparing the level of February 2022 to that of February 2021. From January to March 2022, the market increased the purchases of natural gas (LNG) by 3%, compared to the February 2021 level. same months in 2021. This underlines how Thailand’s dependence on LNG continues to grow despite soaring world prices.

“A decline in domestic gas supply coupled with increasing exposure to soaring gas prices in the international market will present new challenges to the ability of Thailand’s gas-fired power sector to secure affordable supplies and natural gas for power generation,” Fitch said.

Moreover, with the commissioning of new gas-fired electric capacity, such as the two 2,650 MW natural gas-fired power plants operated by Gulf Energy in 2022 and 2025, the demand for natural gas will only increase. “If demand from the gas-fired power sector is not met, Thailand will need to tap into other power sectors to ensure that power supply matches the expected growing demand. For the At this time, we expect gas to remain the primary type of electricity generation in Thailand, growing from 113.9 TWh at the end of 2021 to 138.5 TWh in 2031 at an average annual rate of 2%,” Fitch noted.

To maintain a stable electricity supply, Fitch expects Thailand to strengthen its renewable energy sector as electricity imports increase.

Thailand has been a good player in renewable energy growth in Asia, strongly supported by its solar, biomass and waste-to-energy sectors. This trend should continue to ensure security of electricity supply.

The Thai government is also looking to electricity imports from hydroelectric dams in neighboring Laos with potential power purchase agreements being discussed.

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