21-02-05 One of Thailand's major challenges in the next decade will be to meet the increasing demand for power generation. Thailand will have to import more energy -- an issue with business, economic and political implications -- and will have to recast relations with countries in the region and beyond -- such as Myanmar and Cambodia -- with whom it has not always seen eye to eye.
Energy import options include LNG from various possible sources -- from the Middle East, Indonesia and Australia; hydropower from Mekong neighbours; and more natural gas from Myanmar.

Energy demand should also be an incentive to resolve a long-standing maritime boundary dispute with Cambodia in the Gulf of Thailand. This has long prevented exploration and development of a very large oil and gas prospective 30,000 sq km area in the northern Gulf of Thailand, known as the Overlapping Claims Area.
Thailand's power generating capacity currently is overwhelmingly based on natural gas -- more than 70 % of generation is gas based -- supplied mainly from Thai fields in the Gulf of Thailand (operated mostly by Unocal of the US) and also from Myanmar from the Yetagun and Yadana fields in the Gulf of Martaban (operated by Malaysia's State-owned Petronas and France's Total, respectively.) 25 % of the total of Thai gas supply is now provided by Myanmar.

But the existing power and fuel supply system is inadequate to meet the emerging scale of demand. Thailand's economic growth has returned to the high levels experienced before the 1997 financial crisis as reflected in energy demand projections. With Government planners anticipating annual GDP growth of the order of 6 or more % to 2015, there is an ever-widening gap opening up between expected gas demand -- mainly for power but also for industry boilers -- and supply from existing fields and fields under development in the Gulf of Thailand and Gulf of Martaban.
Gas demand is projected by the partly State-owned and now listed Petroleum Authority of Thailand (PTT) to grow by an annual average of 8 % from 2004 to 2012. Average consumption would rise from about 2,900 mm to about 5,200 mm.

The prospect of a growing gas deficit comes on top of the problem of an already large oil deficit. The Gulf of Thailand produces little oil compared with its large gas output. In 2004, Thailand imported 950,000 bpd of crude and products against domestic production of 80,000 bpd of crude. This deficit is projected to grow further.
Thailand does have a large refining capacity, and there are hopes in Government that this may enable Thailand to become a more important oil products exporter, even if local crude production is small.

As far as power demand and associated fuel supply are concerned, the Thai Government must now make long-term decisions to meet the future shortfall. A range of options includes new development in the Gulf of Thailand and construction of a fourth major transmission pipeline from offshore platforms to shore. But there is debate as to just how much additional gas could be supplied on top of maintenance of existing production levels.
Important additional gas supply should flow from the Thai-Malaysia Joint Development Area (JDA) in the lower Gulf of Thailand. A gas pipeline is being constructed from the JDA to Northwest Malaysia, and a link is under development north into the Thai system. Another long-term possibility is supply from Vietnamese fields adjacent to the Thai maritime border in the Gulf of Thailand.

Another solution could be to import LNG. To this end, as well as discussing oil imports, in December, Thai energy minister Prommin Lertsurideh visited Iran, where several ambitious projects are being pursued by Tehran. Despite US economic sanctions on Iran, non-US oil majors, including Shell, Total of France and Petronas, are all manoeuvring for positions.
Apart from Thai interest, India and China have also recently signed preliminary agreements with Iran for large volumes of LNG. LNG imports to Thailand are not new. In the mid 1990s, when gas demand grew quickly driven by power generation fuel needs, Thailand signed an MoU for LNG imports from Oman. The plan was put aside with the 1997 financial crisis and the collapse of demand.

Another option before the Government is to shift power generation reliance away from gas. Hydro is currently favoured over turning to coal-fired generation. Coal, which would have to be imported from Indonesia and Australia, has been rejected, at least for the time being, because of the derailing of two large planned coal-fired independent power plant projects by community and environmental group protest in 2002.
Hydro projects can also be difficult to advance in Thailand now because of community and environmental concern. As a result, Thai planners are looking at more reliance on imported hydropower from Myanmar, Laos and Yunnan in China. Thailand already imports a small amount of hydropower from Laos.

Myanmar is emerging as possibly a critical source of energy for Thailand. Governments of the two countries are proposing to jointly construct 7,000 MW of hydropower on the Salween River, part of which forms the border between Thailand and Cambodia. The significance of this is underlined by the fact that Thailand's total power generation capacity is currently 24,000 MW. Another possibility is to take more gas from the Gulf of Martaban.
Several companies, including Thailand's partly State-owned and listed upstream PTT Exploration and Production (PTT), are exploring in the Gulf of Martaban. Others include Malaysia's state owned Petronas, and the Chinese State-owned and listed CNOOC.

For Myanmar's military regime, the energy sector has become a critical source of foreign exchange. Gas exports to Thailand are worth $ 1 bn a year and represent 40 % of legal exports. Apart from royalties and taxes, Yangon gains revenue through participation of the State-owned Myanmar Oil and Gas Co in these operations.
Elsewhere in Myanmar, another Chinese State-owned oil company, PetroChina, is operating onshore. The idea of a Sino-Myanmaroil pipeline has also been put forward to provide Southern China with an alternative to import of oil via ship through the Malacca Straits. Offshore to the west near the border with Bangladesh, a consortium including ONGC and the Gas Authority of India, and South Korean companies Daewoo and Korean Gas Corp., have declared discoveries of large reserves of natural gas. In January, a meeting of Government ministers from India, Bangladesh and Myanmar in Yangon put forward the idea of a pipeline to India via Bangladesh.

Interest in Myanmar by Thailand, India and China as a source of energy points to the fact that US economic sanctions and pressure elsewhere in the West on companies who do or may wish to do business in Myanmar because of the regime's human rights abuses and failure so far to allow democratic processes, have had little effect on Asian-based oil and gas companies.
They now have both the technical expertise and finances to operate in ways they arguably could not have done a decade or so ago.