Thai gas demand’s medium-term resilience
Thailand’s updated energy policy aims to slash the Southeast Asian country’s dependence on fossil fuels in the coming decades through the development of renewable power generation capacity.
The National Energy Plan (NEP) 2022, which has been approved by the Energy Committee, has set a target of reaching carbon neutrality by 2065-2070. To achieve this, the government has said at least half of all new power generation will come from the renewables space.
Given that the country relies on natural gas for more than half of its power output, Thailand’s embrace of renewable power generation will have a profound impact on long-term domestic demand for the fossil fuel. But Bangkok’s short to medium-term plans for gas are more conservative, with energy planners expecting the fuel to play a key role in the country’s energy transition for years to come.
Over plan
NEP 2022 serves as a master document that integrates the country’s five long-term energy strategies and development plans, including the draft Gas Plan 2018, the Power Development Plan (PDP) 2018 Revision 1, the draft Alternative Energy Development Plan (AEDP) 2018, the Oil Plan 2018 and the draft Energy Efficiency Plan (EEP) 2018.
NEP 2022 will require the energy sector to lower its carbon footprint while at least half of all new power generation will need to be clean and renewable energy projects, the Energy Ministry’s Permanent Secretary, Kulit Sombatsiri, said during a talk at the Future Energy Asia (FEA) conference in late August.
Gas has long been the primary feedstock of choice for the country’s power sector, accounting for around 57% of the country’s 205 TWh of total power generation in 2020. This was followed by coal-fired power with around 17%, then imports with 12%, renewables at 10% and also hydropower with 3%.
Under Bangkok’s new energy strategy, however, gas and coal’s domination of the power mix will be slowly eroded in the coming years.
Rystad Energy analyst Shubhang Dwivedi told Natural Gas World that annual renewable power generation could grow by around 110 TWh by 2050, based on total power generation growing by an annual average of 2.5% to 420 TWh.
Dwivedi noted that while renewables might account for half of new power generation between now and 2050, their share of installed capacity could be as much as 60%.
He said: “Considering the comparatively low-capacity factor of renewables [compared] to natural gas, if we look at the new projects from a capacity point of view, the renewable addition is going to be significantly more than gas addition. From an installed capacity perspective, renewables (addition of around 60%) will dominate the capacity mix followed by gas.”
He said: “A 50% share of renewables in new power generation will mean a significant reduction in natural gas and coal-fired generation.”
For gas, however, the process could take a number of decades.
Transition fuel
The country’s total installed generation capacity amounted to 47 GW at the end of 2019, with gas-fired power plants accounting for 30 GW of that figure, according to an International Energy Agency (IEA) report in May. Thailand was served by 11 GW of renewable power capacity as well as 6 GW of coal-fired capacity.
The Southeast Asian nation is slated to have 77.21 GW of installed power capacity by 2037, according to the 20-year PDP 2018 Revision 1. The power plan envisions retiring 25.31 GW of existing capacity by 2037, while adding 56.43 GW of new projects. The IEA noted that the government was aiming to see renewable power projects account for 29 GW – or 36% – of the 2037 total.
The government’s goal of replacing gas with renewables makes sense when considering that domestic gas reserves are on course to run dry up within the next couple of decades. Reserves shrank from 294.86bn cubic metres in 2011 to 143.08 bcm in 2020, according to BP’s Statistical Review of World Energy 2021. And yet, the Thai government does not expect renewable power capacity to supercede that of gas for many years.
When Bangkok signed off on PDP 2018 in April 2019, government spokesperson Nathporn Chatusripitak told reporters at the time that gas was projected to account for 53% of capacity – or 40.9 GW – by 2037.
The government’s carbon neutrality timeline of 2065-70 affords Thailand extra leeway in terms of reducing its dependence on fossil fuels. But while coal-fired power projects and transportation fuels will face growing restrictions, gas has been viewed on a global scale as a bridging fuel in the energy transition.
As such, Bangkok has set its sights on using carbon capture and storage (CCS) to lower gas generation’s carbon footprint. State-owned PTT Exploration and Production’s (PTTEP) CEO, Montri Rawanchaikul, said in August that the pursuit of greener gas made CCS an “inevitable” outcome.
Support for gas demand over the short to medium term remains, despite declining domestic production, this will lead to a greater dependence on liquefied natural gas (LNG) imports.
Supply challenges
“There haven’t been any large domestic gas discoveries for some time, and the Myanmar coup seems to have frozen investments on that side of the border, so piped gas supply to Thailand could be facing increasing declines – which could put more impetus to increase Thai LNG import capacity,” Rystad Energy analyst Readul Islam told NGW.
Thailand’s state-owned PTT is set to expand the country’s LNG import capacity to 19mn tonnes per year when it brings its 7.5mn tonne per year Nong Fab facility on stream in the first half of 2022.
In the longer-term, the Australian government forecast in October 2019 that PDP 2018’s support for gas-fired power generation would lead Thailand to import 23mn tonnes per year of LNG by 2037. Australia is the world’s largest exporter of the super-chilled fuel.
Bangkok’s commitment to carbon neutrality poses a long-term threat to domestic gas demand, but the effects of this political shift may not be felt for decades. In the meantime, Thai demand for LNG imports will grow on the back of domestic production challenges as well as disruptions to near abroad piped gas imports.