Thai officials eye rejig of gas supply business model

Thai officials eye rejig of gas supply business model

The Energy Ministry plans to lower electricity generation costs by restructuring the gas supply business model for power generation over the long term, which alters the power tariff.

Prasert Sinsukprasert, the permanent energy secretary, said the ministry tasked the Energy Policy and Planning Office (Eppo) with studying the viability of a business model put forward in January by energy policymakers, intended to revamp the way gas is distributed across various sectors to reduce electricity expenses.

The proposed change entails enhancing power producers' access to more economical gas sources through improved management of supplies from the two existing gas pools.

Some of the supply from the two pools would be merged, resulting in a slight reduction in gas costs for power producers, while petrochemical producers may experience a marginal increase in costs.

Gas constitutes around 60% of the fuel used for power generation. In the two-pool pricing system, power plants typically incur higher gas costs than petrochemical plants.

The two pools are defined as Gulf Gas and Pool Gas. Gulf Gas represents the weighted average price of natural gas sourced from fields in the Gulf of Thailand, while Pool Gas refers to the weighted average wellhead price of gas from Myanmar and imported liquefied natural gas (LNG).

For years, local petrochemical producers have enjoyed an advantage by accessing more affordable Gulf Gas, contributing to Thailand's status as a prominent regional petrochemical hub.

In contrast, electricity generation has been dependent on the more expensive Pool Gas, chosen for its greater reliability, which is a crucial factor for power producers.

However, the Russia-Ukraine war triggered a surge in costs for imported LNG in 2022. At the same time, delays in transferring an exploration block led to disruptions in Gulf Gas production.

This combination resulted in a drastic increase in Pool Gas prices, leading to high power bills.

Mr Prasert said two potential options can address this issue. First, he proposed allocating the net profit from petrochemical producers to Pool Gas in order to reduce the cost of power generation.

A second option is to reacquire the gas separation plant assets owned and operated by PTT, a national energy conglomerate, making them a state asset.

According to an Energy Ministry report, gas supply problems might have been more effectively addressed if not for complications arising from the pandemic.

Energy policymakers continue to grapple with the financial strain of subsidising electricity bills to alleviate the economic impact on individuals affected by the pandemic.

The state-run Electricity Generating Authority of Thailand (Egat) accumulated debts exceeding 150 billion baht from subsidising power in January.

As a facet of the Pheu Thai Party's populist campaign, subsidies have continued for fuel and electricity costs, without any solutions to assist Egat in managing its finances.

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