Oil and gas to Thailand
Trends and opportunities
Thailand’s oil and gas sector is well-established, dating back to extensive
exploration in the 1970s and commercial discoveries by international
companies in the 1980s. Thailand has already conducted 20 petroleum
concession bidding rounds, making this sector one of the most advanced,
relative to other nations in the region.
Thailand is in the process of diversifying and securing new supplies in the
realisation that current usage, forecast demand and current supply
challenges are unsustainable, and to an extent leaves Thailand vulnerable.
Current key challenges for the industry include a delayed 21st
domestic gas concession, uncertainty around future operations by existing
operators for two major fields, Erawan and Bongkot (which account for 76
per cent of total domestic gas production in the Gulf of Thailand), and
decreasing supply and interruptions from Myanmar.
Gas demand in 2016 is expected to increase slightly at 1 per cent up from
2015 with 4.8 billion cubic feet/day to five billion cubic feet/day. This
growth is primarily from the industrial sector and is expected to increase
on average 2 per cent per year over the next five years.
Plummeting oil and gas prices have made upstream activities quite stagnant.
To overcome gas supply challenges and enhance energy security in Thailand,
the government and PTT Public Company Limited (PTT) have diverted interest
to building gas infrastructure.
Infrastructure is a growth area with key projects including a major
east-west gas connection line plus LNG receiving terminals.
Investment in pipelines is gaining momentum given the effect a reduced cost in steel
has made to investment expenditures which are now much lower than originally planned. A
large scale west - east pipeline and other relevant connected transmission
lines projects are currently under Environmental Impact Assessment study
ahead of construction.
PTT is in the process of doubling its import terminal at Map Ta Phut to 10
MMtpy by 2017 and is set to increase that capacity to 11.5 million tonne by
2019. PTT also has approval to build a second five million tonne LNG
terminal in Rayong province and is exploring the possibility of increasing
this to 7.5 mt by 2022.
A number of potential investments in gas fields near Thailand are also
being explored by PTT to supply the domestic gas consumption and for future
regional LNG trading businesses.
Floating Storage and Regasification Units (FSRU) in the Gulf of Thailand,
Myanmar, and southern part of Thailand are also under consideration.
Decommissioning of low performing and nonviable platforms is an emerging
area of opportunity for Australian exporters, of which there is little
local capacity in Thailand to deliver. For example, Chevron who is the
largest upstream operator in Thailand, is expected to commence
decommissioning platforms early 2017.
In an attempt to maximise potential benefits of the currently low global
LNG prices and to secure gas supply, PTT plans to lock in more long-term
LNG purchase agreements and is currently in negotiation with a number of
Australian companies who are in LNG supply chains or supply innovative gas
pipeline technology, or have expertise in decommissioning (either as
consultancy or in establishing a presence in the market) will benefit from
the current market direction in Thailand.
Oil and gas in Thailand is found at shallow water depth of 30-80 metres.
The industry is focused on costs and economy of scale unless there are
innovative, proven alternative technologies ready to deploy.
Upstream oil and gas activities are dominated by PTT Exploration and
Production (PTTEP), a subsidiary of PTT Public Company Limited (PTT). The
PTT Group, whose business areas range from supply procurement,
transportation, distribution, gas processing, investment in natural gas
vehicle (NGV) service stations, and investments in related businesses
through the group’s subsidiaries.
Upstream gas has a well-developed competitive landscape through the bidding
for concessions. Chevron and other major international players are
participating in market activities. For downstream, Thailand has six major
refineries mostly located along the country’s heavy industrial Eastern
Seaboard and owned predominantly by PTT Group.
Tariffs, regulations and customs
The natural gas industry is subject to the Energy Industry Act (2007) along
with electricity, and oil falls under the sixth and most recent version of
the Petroleum Act (2007). Both Acts are administered by the Ministry of Energy.
Thailand operates on a concession system, through which companies are
initially awarded a nine year exploration license. If a commercial
discovery is made, companies may then apply for production rights, which
are awarded for 20 to 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 five to 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 for delivery.
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 in the market.
Marketing your products and services
All companies that work with oil and gas companies in Thailand must be
included in their approved vendor lists. The process is transparent but
requires preparation in order to get listed.
Thai national oil and gas companies prefer products manufactured locally or
with high local content. Australian companies may need to consider joint
ventures with Thai partners to manufacture products in Thailand.
For general products and services that are already available in the market,
Australian companies must present a strong and unique selling proposition
plus competitive advantage to gain market access. Building long-term
relationships with customers is critical to success in this market.
The process of getting onto the global supply chain list of vendors may not
be the absolute answer for some locally-based Australian engineering and
oil and gas companies. Some potential customers prefer to validate the
benefit of the technology application prior to encouraging suppliers to
enter into the pre-qualification process.
In general, companies in Thailand prefer to deal with shortlisted suppliers
they already know and have worked with previously, rather than trying to
expand their list of vendors. While this may seem difficult to penetrate it
should be noted that lead times are the key element of most companies final
Links and Industry Contacts
Board of Investment (BOI) Thailand
Energy Policy and Planning Office (EPPO)
Department of Mineral Fuels, Ministry of Energy (DMF)
Petroleum Institute of Thailand
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