Regional LNG: EGAT to focus on LNG, coal imports
Wednesday, March 24 2004 - 01:52 PM WIB
This is because the flawed privatization plan doesn't cut its heavy reliance on the country's largest energy company for oil and natural gas supplies.
EGAT can't afford to build a parallel system of oil and gas pipelines, and its LNG options are hamstrung by a lack of a receiving terminal, high costs and at least five years of development time needed.
Also, domestic coal reserves are insufficient to meet future demand, which is why EGAT will likely need to buy into coal mines in neighboring countries.
The Thai Energy Ministry is now seeking the Cabinet's approval for EGAT to secure its own fuel feedstocks for power generation after completion of EGAT's privatization, possibly in the middle of this year.
PTT PCL and EGAT officials said that the plan would bring full benefits in the long run only if the ownership of the local oil and gas pipeline grid is transferred to a third party.
However, no such arrangement is likely in the foreseeable future unless the government forces this on PTT.
PTT PCL, which is the largest oil and gas company in Thailand, controls the local oil and gas pipeline grids as well as port facilities.
PTT doesn't allow third party access to its pipelines and port. EGAT currently buys all the gas it needs from PTT, and most of its oil.
"For that (pipeline sales) to happen, it would take a long time...PTT and EGAT share the same board of directors," which presents a conflict of interest, an EGAT official said.
Also, PTT major shareholders may not want to lose control of the cash cow, he said.
Instead of banking on an eventual transfer of domestic pipeline ownership to a third party, EGAT plans to diversify its feedstock mix in the future, reducing the heavy reliance on piped gas, the EGAT official said.
PTT's gas supply makes up 65%-70% of EGAT's feedstock requirements, he said.
EGAT is focusing more on the liquefied natural gas and coal imports in the medium term, instead of oil and gas imports, the official said.
"We don't want to put all our eggs in one basket, especially when we have one main offtake point for the piped gas...We can't afford to have a gas supply disruption," he said.
EGAT is conducting a pre-feasibility study to build an LNG receiving terminal with Japan's Itochu Corp., Australia's North West Shelf Australia LNG Pty. Ltd. and Indonesia's Pertamina has already approached EGAT to market their LNG supplies, the official said.
However, progress on this study is very slow because of continued protests by unionized state workers against EGAT's privatization, the official said.
LNG imports are only possible after 2010 because of the need to conduct a feasibility study and the long construction time needed for an LNG terminal, he said.
Also, the official conceded that EGAT would face a problem delivering regassified gas to customers who are located far away from the terminal, without access of the domestic pipeline grid.
Apart from LNG, EGAT is also exploring business opportunities to buy stakes in some coal mines in Myanmar and Laos, aiming to secure coal supplies for future use, the EGAT official said.
EGAT currently operates a 2,600 MW coal-fired plant in the northern part of the country, using domestic coal, he said.
However, EGAT may build new coal-fired plants in the future, in line with its plan to diversify its feedstock mix, the official said.
"To build new coal-fired plants, we've to present to the government a plan, which includes the source of the coal supply," he said, adding that the domestic coal supply wouldn't meet its future requirements.
Besides its fuel diversification plan, EGAT is also forced to look for alternative fuel sources because of the limited domestic gas supply, a PTT official said.
PTT is currently supplying the maximum 1.74 billion cubic feet of gas a day via two pipelines to domestic buyers. A a third pipeline to deliver another 700 million standard cubic feet a day from the Gulf of Thailand is due in 2006, a PTT official said.
"The gas supply out of the Gulf of Thailand is limited in the long run because there has been no substantial new gas discovery," he said.
"It only makes sense for EGAT to look to import LNG," the official said.
From now until the fruition of EGAT's LNG and coal import plan, the power generator will have to continue to rely on PTT for its gas and oil supplies.(*)