Current record temperatures in Thailand are expected to boost energy demand and encourage liquefied natural gas (LNG) imports as domestic natural gas production and pipeline imports continue to face constraints, according to market analysts and industry sources.
Record demand for electricity in Thailand
High temperatures in Thailand, along with extreme weather and drought in other parts of Asia, are expected to set a floor for demand for power generation fuels in the coming years, and contribute to changing trade flows, prices, and fuel supply strategies.
Thailand had originally forecast a slightly later than usual summer season, but temperatures have risen sharply since early April and set new provincial records in the week ending April 18. Thailand’s electricity demand has been growing at 2% to 5% per year since the steady economic growth, and increased by 3.5% in 2022 to 197.3 TWh, a growth rate not seen since 2016.
Thailand’s energy mix dominated by natural gas
Thailand’s energy mix relies on natural gas for more than half of its electricity generation, while coal and imported electricity account for 15% to 20% respectively and renewable energy accounts for about 10% or less. For natural gas, it relies on domestic production for about 63% of its total demand, while 16% comes from pipeline imports via Myanmar and maritime LNG accounts for about 22% of demand.
The share of domestic production has declined sharply since 2020 from more than 70 percent as reserves were depleted and upstream investment declined, and imports from Myanmar have also been affected by pipeline problems and the difficult political climate that has limited foreign investment upstream of the border.
A growing share of LNG in Thailand
Meanwhile, LNG’s share has increased from 15% to 22% and is expected to continue to grow. In 2022, Thailand’s largest LNG importer, PTT, continued to import spot LNG at prices above $35/MMBtu to support domestic demand. Present this year, it has been one of the largest importers of spot cargoes on the decline in spot LNG prices. Platts valued the JKM for June at $12.512/MMBtu on April 17. More recently, PTT awarded a tender for about seven LNG cargoes for delivery from May to July to traders and oil majors, according to Singapore-based traders. The tender closed on April 12 and market sources said that one cargo for the May 28-29 window was awarded at about $11-12/MMBtu, while two cargoes for June 19-20 and June 27-28 were awarded at about $12.5/MMBtu and two cargoes for delivery on July 1-2 and July 24-25 were awarded at about $13.5/MMBtu.
S&P Global analyst Trang said Thailand’s regasification terminal capacity is 19 million tons per year and the Map Ta Phut 2 LNG terminal became fully operational in March. Its three largest suppliers of LNG in 2022 were Qatar, Australia and Malaysia, and it even saw higher imports from the United States at a time when most U.S. cargoes had been diverted to Europe. Extreme weather conditions will continue to see Thailand turn to the spot market for LNG supply.
