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.