PTTEP urged to explore shale gas deal with US

The Mineral Fuels Department has urged PTT Exploration and Production to explore shale gas fields in the US so that in the future it can import liquefied natural gas from there to help ensure Thailand's long-term energy security.

Songpop Polachan, director-general of the department, said last week that the US is expected to become the world's largest exporter of condensate in two years by exploiting its shale oil fields. The fields also have sizeable shale gas reserves of at least 500 trillion cubic feet, far larger than the 10 trillion cubic feet of natural gas reserves in the Gulf of Thailand. The US will be able to export in the form of LNG.

The Energy Information Administration in the US forecasts average global oil prices to fall from US$112 a barrel in 2012 to $99 in 2014, thanks to the jump in US oil production. The agency predicts that thanks to the discovery of vast reserves of shale oil, production will rise by a quarter to its highest level in 26 years. Many countries are looking to buy gas from the US to reduce their dependence on supplies from the Middle East.

South Korea's second-biggest LPG importer, E1 Corp, said it would purchase 180 billion tonnes a year of LPG produced from US shale gas starting next year. E1 has signed a deal with Enterprise Products Operating, a subsidiary of US gas company Enterprise Products Partners. The agreed volume is equivalent to 11.3 per cent of E1's total sales of 1.58 trillion tonnes in 2011.

In Thailand, the Mineral Fuels Department has coordinated with the government to support PTTEP's search for petroleum in the US in the future and to import from the US 3 million tonnes of LNG per year, which should be an appropriate level. PTT now has only an LNG import contract with Qatar.

The government is seeking alternative sources to ensure national energy security.

Natural gas demand in Thailand reached 4.8 billion cubic feet per day last year, of which 2.9bcfd were locally procured and 750 million cubic feet per day were from the Thailand-Malaysia Joint Development Area (JDA). The rest was 130mcfd of imported LNG. Thailand can maintain production of 3.6bcfd of natural gas from the JDA and domestic fields for only five more years - or at best a maximum of 10 years.

If no new petroleum field is found in the near future, domestic supply will fall to 1bcfd in 20 years.

"One most likely alternative to boost natural gas supply is to buy more from Myanmar from the present 1.2bcfd. Next year the new supply will be from Myanmar's M9 field. After that the department will coordinate with PTTEP and the Myanmar government to increase the natural gas that Thailand has purchased from Myanmar to the full transmission capacity of the Thailand-Myanmar pipeline of 2,000 cubic feet per day," he said.

The other choice is to open bidding for the 21st round of petroleum exploration concessions, but Energy Minister Pongsak Ruktapongpisal has ordered the department to review the plan.

The planned 21st round covers fields that already have concessions in effect, so the department has to make this round much more attractive to potential bidders. It also has to create understanding with the communities near the fields before granting the concessions.

The 21st round encompasses 22 fields, of which 17 are onshore and five are offshore. Of the onshore fields, 11 are in the Northeast and six are in the Central region.

If all alternatives could not be materialised, Thailand would have to import 20 million tonnes per year of LNG. PTT is planning to import 5 million additional tonnes per year soon.