Petronas' gas pipeline project with Thailand put on hold

Petronas' multi-million ringgit gas pipeline project with the Petroleum Authority of Thailand has been put on hold for at least one year because of uncertainties over the global economy, according to the Thai oil company. PTT has postponed the gas pipeline project together with another multi-billion baht development for its fifth gas separation plant.
A senior PTT executive was quoted as saying the expected slowdown in natural gas demand as a result of uncertainty in the domestic economy as well as abroad had forced the company to delay the investment plan.
"We have to gauge future demand and supply of natural gas as a key factor in our investment decisions," said Pichai Chunhavajira, PTT's deputy governor in charge of finance. Pichai said PTT wanted to keep a close watch on the US economy first because the country was a major importer of petrochemicals. Most petrochemical businesses need gas separation plants.
The company would postpone its plan to invest in both gas pipeline projects for around one year before reassessing it, he added. "We are rather careful about investment now. What we see as unnecessary will be delayed so our operating results remain stable. We won't invest a lot and be too optimistic as we were before."

PTT has projected that Thailand's oil demand this year would remain at the same level as last year or 600,000 bpd. Local refining capacity would exceed 830,000 bpd. Oil demand was not expected to match supply until 2005, Pichai said. The 350 km pipeline project was delayed as a result of yet-to-be-approved EIAs (environmental impact assessments) by Thai authorities. It was to have started on March 1.
The project, which includes two gas separation plants in southern Songkhla province, will move gas from the offshore Malaysian-Thai Joint Development Area. A fortnight ago, Thailand accepted Malaysia's request to expedite the project, with a commitment to resolve problems related to it by July.
The delay had raised the possibility of Petronas being penalised if it could not meet its gas delivery requirements under the project. A purchase deal was signed in November 1999 for the sale of gas to Petronas and PTT for use in Thailand and Myanmar. But Petronas faces the possibility of being slapped with a penalty if it could not deliver the gas by July 2002.
Petronas president and CEO Tan Sri Mohd Hassan Marican had said it could use an alternative route from its existing infrastructure in the Gulf of Thailand to the east coast of Peninsular Malaysia to enable it to deliver on schedule.