Oil and gas to Thailand
(Last updated: 3 Sep 2013)
Trends and opportunities
The market
Thailand is one of the fastest growing and most stable economies in Asia. Its energy mix has been changing over the last two decades with the proportion of oil to total energy consumption declining. In contrast, natural gas has become a strategic energy source for Thailand due to the larger indigenous natural gas reserves relative to other energy sources available in the country.
Thailand is active in both upstream and downstream petroleum businesses. 85 per cent of Thailand’s petroleum reserves are located in the Gulf of Thailand, where Chevron and PTT Exploration and Production (PTTEP) dominate upstream oil and gas activity. Apart from their domestic production, Thailand and Malaysia also jointly develop gas exploration in the lower part of the Gulf of Thailand. These activities are administered by the Malaysia-Thailand Joint Authority (MTJA), with each country owning 50 per cent of the Joint Development Area’s resources. The downstream businesses are dominated by PTT Group, the national oil and gas conglomerate, and the Siam Cement Group (SCG).
Key field production areas include the Arthit, Bongkot and Platong fields in the Gulf of Thailand, and the S1 onshore block. The most recent projects brought on stream are Chevron’s Platong II and PTTEP’s Bongkot South. Refinery businesses are mostly located on the Eastern Seaboard, where major industrial estates are located.
Investment in the Thai petroleum sector will continue its strong momentum although there has been some opposition from environmental groups. PTTEP will invest approximately US$5.9 billion in 2013 to maintain and increase production at its current fields and find additional reserves with potential for commercial development. Chevron will invest an additional US$300 million a year to expand its operations in Thailand.
Gas
Natural gas has become the dominant energy source for electricity, and its consumption is also increasing in the industrial and transportation sectors. The growing energy demand spurred by new gas-fired power plants represents a major challenge for Thailand to keep up with demand due to its limited resources.
Thailand’s gas output is estimated to peak at 3.4 billion cubic feet per day in 2013, while petroleum production is 875,000 barrels per day. The Thai part of the MTJA will yield around 40 billion cubic metres over the next five years.
Oil
Thailand is a marginal oil producer as most petroleum activities are related to gas. According to the BP Statistical Review of World Energy, Thailand’s proven oil reserves were 428 million barrels in 2013. Despite limited oil production and reserves, oil is one of the dominant fuels in Thailand, accounting for an estimated 37 per cent of primary energy consumption. This has led to the country’s high dependence on oil imports.
Thailand has also been exploring shale oil reserves as an alternative fuel source to produce oil. Total reserves in Thailand are estimated at 18.668 billion tonnes, an amount which could produce around 810 million tonnes of shale oil (Sources: Department of Mineral fuel, 2007 | Thanomsap and Sitahiran, 1989). At present, there are not any oil shale exploitation activities in Thailand.
Liquefied Natural Gas (LNG)
The Thai government revised its energy mix target to rely more on gas imports at the expense of coal and nuclear. LNG was first imported into Thailand in June 2011 into the first regasification terminal at Map Ta Phut. The facility can handle five million tonnes per annum (tpa). PTT is looking at doubling the terminal capability over the next one - two years, to help cope with faster-than-expected growth in gas demand. As of April 2013, PTTLNG began the process of pre-qualification for Engineering, Procurement, Commissioning, and Management (EPCM) companies for the terminal expansion. Business Monitor International (BMI) forecasts that LNG import volumes could rise to 14 billion cubic metres (bcm) in 2016.
Pipelines
The onshore pipeline covers the eastern and the western sides of the country. The eastern pipeline runs from Rayong gas separation plants to power plants in eastern part of Thailand. The western pipeline is from the Thai-Myanmar border to Ratchaburi Power Plant. Both eastern and western pipelines are connected together by the Ratchaburi-Wangnoi transmission pipeline, which enhances substitute utilisation between natural gas from the Gulf of Thailand and from Myanmar.
The distribution pipeline covers a distance of 853km, and is a branch of transmission pipeline delivering natural gas to industrial users.
Key market activities
- Salamander Energy is planning at least six exploration wells in 2013 for its G4/50 licence in the Greater Bualuang Area
- Mitra Energy Limited conducted 2D and 3D seismic surveys on its Block L45/50 in the Thon Buri Sub-Basin and started drilling exploration wells in April 2012
- PTTEP will use part of its investment to maintain plateau production on the Arthit, Bongkot, S1, Contract 4 and MTJDA-B17 fields. It is expected that in the Greater Bongkot South field, most of the projects brought on stream will help boost PTTEP’s portfolio. The field comprises a central processing facility, a living-quarters platform and six wellhead platforms.
- Mubadala Petroleum is developing the offshore Manora oil field after reaching a final investment decision. The project will entail the drilling of 15 development wells, comprising 10 production wells and 5 injection wells. The field will have a single wellhead platform linked to a floating storage offtake unit. First production is scheduled to start in 2014.
Opportunities
Oil and gas companies in Thailand are interested in improving efficiency and optimising cost, focusing on safety and reliability, tackling emerging environmental issues, and addressing shortages of skilled personnel. They are particularly keen to explore technologies in the areas of:
- Enhanced oil recovery
- Marginal field development / innovative processes for small oil and gas fields including flare recovery systems
- Water treatment and sand management
- Sub-sea production systems
- Carbon reduction equipment
- Solutions for equipment fatigue, erosion, and corrosion to prolong equipment life
- Decommissioning of platforms, particularly fields with high mercury content
- Internationally accepted non-destructive testing
Competitive Environment
The oil and gas market in Thailand is dominated by the PTT Group. PTT’s natural gas business ranges from supply procurement, transportation, distribution, gas processing, and investment in NGV service stations, to investment in related businesses through Group companies.
Upstream gas has a fairly well-developed competitive landscape, through the bidding for concession. Major players are Chevron and other international players do participate in various activities, though no Australian oil and gas companies are active. At present, the Thai government is undergoing the 21st licensing round; however, it has postponed the results due to strong opposition against the licensing terms, and particularly, royalty fees.
Tariffs, Regulations and Customs
The natural gas industry is subject to the Energy Industry Act (2007) along with electricity, and oil is subject to the sixth and most recent version of the Petroleum Act (2007). Both Acts are administered by the Ministry of Energy. Thailand operates a concession system, through which companies are initially awarded a nine-year exploration licence. If a commercial discovery is made, companies then apply for production rights which are awarded for 20-30 years.
From a tax perspective, the oil exploration and production (E&P) business in Thailand is governed by the Petroleum Act and the Petroleum Income Tax Act which includes special rules for E&P companies. The income tax rate for E&P companies varies between 35 and 50 per cent of net profits, depending upon what year the concession was granted. The income tax rate does not include the royalty rate of 5-15 per cent to be paid on gross petroleum production. This rate also varies according to the year the concession was granted.
The import of goods for oil and gas projects in Thailand for E&P businesses are waived by the Thai Petroleum Act. Oil and gas businesses in Thailand are familiar with the import process, however, it is advantageous that products are produced locally rather than imported as this will allow for a shorter lead time delivery and better customer service.
As petroleum activities in Thailand are dominated by local, US, and European oil and gas companies, Australian suppliers also should certify to European and US standards to build credibility.
Marketing your products and services
Market entry
The oil and gas industry in Thailand has been established for more than 30 years, with international and local vendors actively marketing their products and services. For general products and services that are already available in the market, Australian companies must present a strong and unique selling proposition and competitive advantage to gain market access. Building long-term relationships with customers is critical to success in this market.
Thai national oil and gas companies prefer the product to be manufactured locally or with high local content, as they are aware that some of their imports are simply transshipped from Singapore to Thailand. Australian companies may need to consider joint ventures with Thai partners to manufacture its products in Thailand.
85 per cent of Thailand’s domestic petroleum reserves are located in the Gulf of Thailand, which is characterised by clusters of small wells in shallow water (30-80m). Because the process of extracting oil and gas at this depth is rather simple, sophisticated products for deep-water operations or turbulent environments are not necessarily in demand.
Businesses are interested in technologies that can help improve efficiency in the areas of sand management, energy efficiency, gas recovery, as well as cost effective structures.
Oil and gas companies attempt to lower the total project cost by reducing the cost of products that are proportionately high, sourcing supplies and services that are rare in the market, and finding alternative suppliers for unsolved problems.
The process of getting onto the global supply chain list of vendors may not be the absolute answer for some Australian engineering and oil and gas companies which are locally based. Some potential customers prefer to validate the benefit of the technology application prior to encouraging suppliers to enter into the pre-qualification process.
Some companies in Thailand prefer to deal with shortlisted suppliers they know and have worked with previously, rather than trying to expand its list of vendors. While this will be difficult to penetrate it should be noted that lead times seem to be the key element of their final decision.
Austrade activities in market
Austrade aims to promote trade activities to enable Australian companies’ access to the market, and to raise the profile of Australian capability (both as technology providers and energy suppliers) for long term benefit to Australia. Activities incorporate training services as well as research capabilities, and will be held in conjunction with Thai and Australian allies such as the Petroleum Institute of Thailand and the Industry Capability Network (ICN).
Links and Industry Contacts
Department of Mineral Fuels, Ministry of Energy (DMF) – www.dmf.go.th
Petroleum Institute of Thailand – www.ptit.org
Energy Policy and Planning Office (EPPO) – www.eppo.go.th/
Board of Investment (BOI) Thailand – www.boi.go.th/index.php?page=opp_alternative_energy
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.