Thailand delays gas purchase from Natuna

Thailand delays gas purchase from Natuna

BANGKOK (Reuters): Thailand's economic crisis has taken its toll on the energy sector, forcing the country to delay two major natural gas procurement projects, a senior government minister said yesterday.

Industry Minister Korn Dabbaransi told reporters that Thailand had decided to delay plans to purchase liquefied natural gas (LNG) from Oman by four years to 2007 from 2003. The planned purchase of natural gas from Indonesia's Natuna field would also be delayed.

The move was caused by lower-than-expected demand for energy caused by the severe economic downturn, he said.

"We will need to delay buying gas from Oman for another five years as our demand for energy drops in line with the slower economy. I have already informed the Omani government on that," he said.

"As for Natuna, we already made up our mind to delay a purchase plan. But we have yet to inform the Indonesian authorities on that," he said.

Although Korn declined to elaborate on Natuna, industry sources said there had been talk that the purchase could be delayed for two years to 2005 from 2003.

Oman LNG said in a statement on Wednesday that both sides had agreed to suspend an unsigned LNG agreement due to the economic slump in Thailand.

"In the light of uncertainty about how quickly the Thai economy will recover and when LNG imports should commence, the two companies have agreed to suspend the LNG agreement," the statement said.

The Petroleum Authority of Thailand forecast that the demand for natural gas, used mostly for electricity generation, would drop by 15 percent from earlier predictions to three billion cubic feet (88 million cubic meters) per day in 2003-2004.

Thai authorities see the country's gross domestic product for 1997 easing well below the 2.5 percent forecast earlier.

Thailand originally planned to buy up to 2.2 million tons of LNG per year over 25 years from Oman. Under the original plan, Oman was to supply one million tons a year of LNG starting in 2003, with the volume increasing to two million tons in 2005.

To buy the LNG Thailand needs to spend at least $600 million in building facilities to handle it.

Analysts said massive budget cuts, a sharp downturn in the economy, uncertainties over the prospect of a quick recovery, domestic political uncertainties and a sinking baht meant the project was economically unviable.

As for Natuna, Thailand earlier intended to start buying from this mega-project in 2003, the year the gasfield expected to start its commercial production.

Thailand was also given an option of taking an 11 percent equity stake in the Natuna project as a part of the agreement.

"Investment in the $40 billion Natuna project will cost Thailand a lot of money. But with an ongoing liquidity problem and uncertainties over the medium-term economic outlook, it would only make sense to delay the plan," said another industry source.