Tuesday, February 5, 2008

Thailand's PTT in Talks to Sell Thai LNG Stake to Investors

by Dinakar Sethuraman

Feb. 5 (Bloomberg) -- PTT Pcl, Thailand's biggest energy company, is in talks with local investors to sell a stake in a $900 million liquefied natural gas project, a company official said.

PTT will retain a majority share in the proposed LNG import terminal, a PTT official said, without giving details and asking not to be identified because of company rules. The terminal, in Rayong province in eastern Thailand, will start in 2011, increasing imports to a maximum 5 million metric tons a year.

Southeast Asia's second-biggest economy has increased the use of natural gas in automobiles, power generation and manufacturing amid rising oil prices. PTT signed a deal this month with Qatar to import 1 million tons of LNG a year starting in 2011 and is in talks with other suppliers for additional fuel. Asia's benchmark LNG prices have tripled in the last five years.

``The main concern about Thailand was their ability to pay international prices for LNG supplies,'' Cecile Jovene, head of the gas team at U.S. consultant FACTS Inc., said by telephone from Singapore. ``The preliminary agreement with Qatar indicates that they are willing to go ahead.''

Thailand consumed about 3 billion cubic feet a day of gas in 2006, according to BP's Statistical Review of World Energy 2007. Demand will increase to 7 billion cubic feet a day within 15 years, Prasert Bunsumpun, president of PTT, said in June, of which LNG would account for about 10 percent. More than two- thirds of power plants in the country use natural gas as their main fuel to generate electricity.

Pricey Imports

Thailand may pool expensive LNG with cheaper domestic gas to lower the price of clean fuel for consumers, Jovene said. Consumers paid about $4.6 a million British thermal units for natural gas last year, according to the Web site of Thailand's ministry of energy. By contrast Japan, the world's biggest LNG buyer, paid about $10.2 a million British thermal units during the same period, according to the country's Ministry of Finance.

PTT signed an agreement on Feb. 3 with Qatargas Operating Co. in Doha to purchase 1 million tons of LNG a year starting early 2011, Qatargas said in a statement. The terminal will be designed to receive the world's biggest LNG tankers, on order for Qatar. The company may conclude pricing talks and sign a final contract by the end of this year, the PTT official said.

PTT is negotiating with other suppliers in Australia and the Middle East for additional LNG, the official said. The proposed LNG import terminal, in the Mattaput industrial area in eastern Thailand, may double its capacity in the second phase.

Switch to Gas

Demand for natural gas has risen faster than projected as high oil prices prompt manufacturers to shift to natural gas from bunker oil and diesel, Thailand's Energy Minister Piyasvasti Amranand said on Jan. 28. Thailand imports 25 percent of its natural gas supplies via pipeline from neighboring Myanmar, according to PTT's Web site.

The contract to buy natural gas from suppliers in Qatar will last about 10 years, Chitrapongse Kwangsukstith, PTT's executive vice president, told reporters on Jan. 28.

PTT in July 2006 signed a contract with the operator of the Pars LNG project in Iran to buy 3 million tons of LNG a year for 20 years. The talks with Iran have stalled because the Pars project has not been approved, the official said.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net

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