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    Thai gas output to remain on a downward trend: Fitch Solutions


The country will have to increase its reliance on imported LNG.

by: Shardul Sharma

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Thai gas output to remain on a downward trend: Fitch Solutions

Thailand’s natural gas production is forecast to remain on a downtrend over the next decade owing to continuous output declines at the Erawan gas field, in the Gulf of Thailand, Fitch Solutions said in a report on August 8. This will leave little choice but for the country to become more dependent on costlier imports.

Erawan, despite having been in production for more than four decades, continues to be Thailand’s largest gas producing asset accounting for more than a third of total domestic gas production, both an indication of the field’s prominence but also the lack of significant new discoveries made since to complement it.


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State-owned PTTEP officially took over as operator for the flagship Erawan field from Chevron in April, after winning the rights to the fields’ concession in an auction held in 2018. The field has been embroiled in a drawn-out legal dispute between outgoing operator Chevron and the department of mineral fuels over the payment of decommissioning fees. PTTEP has thus not been able to access the field early to begin preparatory works and also to drill new wells to stem declines before its takeover, while Chevron has largely curtailed making new investments, further compounding the field’s decline, Fitch Solutions said.

From a peak of 1,400mn ft3/day, output fell to about 860mn ft3/day in 2021 and averaged a 380mn ft3/day through the first five months of 2022. PTTEP expects output to further decline to 250-300mn ft3/day for the remainder of the year.

PTTEP had earlier alluded to an ambitious plan to boost the field’s output to as much as 800mn ft3/day by 2023-2024, a level of output it has to achieve as per the contractual minimum production rate that it has agreed with the government. According to Fitch Solutions, meeting this target could prove challenging as the field has been in decline for some time, and as PTTEP diverts capital investments elsewhere as part of energy transition goals.

Limited upside risk to declining output

Fitch Solutions said that lukewarm response to the country’s recent licensing rounds and recent drawn-out contract dispute between Chevron and the Thai government is not likely to have been viewed kindly by already wary investors, at a time when high projects cost structure and growing signs of resource nationalism risk seeing Thailand lag behind regional peers as a potential upstream oil and gas investment destination.

The long delayed 24th licensing round was finally launched in April, however, the content of it proved rather mediocre as only three blocks in the offshore were opened up for potential bids, Fitch Solutions said. The 22nd and 23rd, each held several years apart, also failed to provide more than two blocks each.

Little choice but to rely on LNG imports

The portion of total domestic gas demand met through LNG imports has risen accordingly from 11% in 2017 to 21% in the first five months of 2022, while that for imports overall (including pipeline gas imports) has also risen from 29% to 37%, Fitch Solutions said citing government statistics.

“This trend looks set to remain in play for longer as demand continues to recover from the low bases set during the height of the global Covid-19 pandemic. In particular, the more pronounced easing of restrictions means activities are bound to rebound at an accelerated pace across several key sectors such as autos (natural gas vehicles), manufacturing and tourism, in turn boosting gas demand,” Fitch Solutions said.

A sector that is defying this trend currently is the power sector, as utilities try to swerve away from gas due to it being expensive. Though with global LNG prices expected to remain higher for longer, and prices of alternatives such as coal also climbing higher, further government intervention including extension of current price caps and subsidies regime for lower-income households, will be crucial to protect consumption.