February 16, 2016 / 11:10 AM / 4 years ago

UPDATE 1-Thai PTT to delay LNG purchase from Shell, BP due to weak demand

* Aims to import 2.7 million tonnes LNG in 2016

* Plans to buy LNG from spot markets as prices decline

* Plans to invest 210 billion baht in gas business over 5 years (Adds details on PTT investment in gas business)

By Khettiya Jittapong

BANGKOK, Feb 16 (Reuters) - Top Thai energy firm PTT Pcl is looking to delay its plans for long-term liquefied natural gas (LNG) purchases from Royal Dutch Shell and BP given the availability of cheaper spot supplies, a senior company executive said.

Energy prices have tumbled in the past year due to a global oil glut. Spot gas prices have as a result dropped below prices for cargoes on long-term deals, prompting buyers, such as India’s Petronet, to renegotiate contract terms or take more gas from the spot market.

Thailand’s PTT wants to buy LNG in the spot market, where prices of $6-7 per million British thermal unit are cheaper than long-term contracts, Noppadol Pinsupa, senior executive vice president for PTT’s gas business unit, told reporters.

PTT is now in talks with BP and Shell to delay the official signing of LNG supply deals, which are being reviewed by the Thai authorities, Noppadol said on Tuesday.

BP and Shell did not immediately respond to emails seeking comments on the news.

Last year, PTT won approval from the Thai energy regulator to buy a total 2 million tonnes of LNG annually from Shell Eastern Trading (PTE) and BP Singapore PTE under long-term contracts. The deals, if finalised, would have come into effect from April 2016 with imports of 0.5 million tonnes from Shell Eastern and 0.317 million tonnes from BP.

Weaker-than-expected domestic demand, however, means Thailand will now need only 2.7 million tonnes of LNG imports this year, Noppadol said, versus a prior estimate for 5 million tonnes and up slightly from 2.6 million tonnes in 2015.

PTT already has a 20-year contract to buy 2 million tonnes LNG annually from Qatar that came into effect last year.

Thailand’s gas demand is expected to fall slightly to 4.7 billion cubic feet per day (cfd) in 2016 from 4.8 billion cfd last year, Noppadol said.

FIVE-YEAR PLAN

But given demand is expected to see an average growth of 2 percent in the next five years, PTT plans to invest 210 billion baht ($5.9 billion) to expand its core gas business over 2016-2020, he said.

That would allow the state-controlled firm to build a 430-km gas pipeline and expand the capacity of its existing LNG terminal, Noppadol added.

PTT plans to double the capacity of its LNG receiving terminal to 10 million tonnes a year in 2017. It also plans to build a second terminal with an annual capacity of 7.5 million tonnes with estimated costs of over 30 billion baht, he said.

Thailand uses natural gas for almost 70 percent of its power generation and has become increasingly reliant on imports as demand rises and its own domestic gas fields deplete. ($1 = 35.6200 baht) (Additional reporting by Jacob Gronholt-Pederson in SINGAPORE; Editing by Simon Webb and Himani Sarkar)

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