Thai LNG delay raises question on Mideast gas

Thai LNG delay raises question on Mideast gas

BANGKOK (Reuter): Thailand has started to raise questions
about the need to buy liquefied natural gas (LNG) from the Middle
East while companies in Asia are increasingly finding more gas
reserves, analysts said yesterday.

However, they were split over whether a decision by Thailand
to delay the purchase of LNG from Oman was a good move.

Thailand said on Monday it had decided to delay plans to buy
1.7-2.2 million tons of LNG per year over 25 years from Oman, a
move analysts attributed to a glut in the world market which is
giving buyers more sway.

With a huge natural gas project like Indonesia's Natuna field
coming onstream early in the next decade, Thailand could afford
to wait and weigh the pros and cons of each purchase in order to
come up with the best choice, they told Reuters.

Industry Minister Korn Dabbaransi has notified Oman about
Thailand's recent decision to delay the purchase because he
wanted to first examine LNG operations in other Asian countries.

Korn said he will go to Japan by the end of this month to look
at the country's LNG projects before making a decision. Japan is
the world's largest buyer of LNG and has contracts with Asian and
Middle East suppliers.

Thailand was scheduled to sign a purchase contract with Oman
in March as a follow up to a memorandum of understanding in
August 1996.

One million tons of LNG is equivalent to about 140 million
cubic feet of natural gas.

Industry ministry sources told Reuters that Thailand wanted to
compare the cost and advantages of buying LNG from the Middle
East with supplies from Asia.

Thailand has expressed an interest in importing natural gas
from, and investing in, Natuna, one of the world biggest
projects.

The South China Sea field is believed to have 222 trillion
cubic feet of natural gas in reserve, 46 trillion of which is
expected to be commercially recoverable. The project will cost
some US$40 billion to develop.

Besides Natuna, Thailand has already committed to buy from
Burma's Yadana and Yetagun fields and is negotiating for supplies
from the Joint Development Area in Thai-Malaysian waters.

Analysts and industry sources were divided on whether Thailand
made the right decision in delaying plans to buy Omani LNG.
Gordon Kwan of Daiwa Securities said Thailand could buy natural
gas from the region at a lower cost and transport it via
pipeline.

Analysts said buying LNG would commit Thailand to build costly
facilities, like storage tanks.

"It is more feasible for Thailand to buy from pipeline and it
is cheaper. Unit transportation cost of natural gas decreased by
10-20 percent per year," Kwan said.

Moreover, some analysts also believe government demand
forecasts are too high and will lead to an LNG glut.

"Thailand is not under pressure to buy from Oman now. The
economy in the region, especially in Thailand, is slowing,
changing the picture of supply-demand," said a Bangkok-based
analyst.

But other analysts said LNG was not so costly.

One local industry expert, who asked not to be named, said LNG
facilities would cost around $600 million, but building a
pipeline from the Natuna gas field to Thailand would cost $2.0
billion.