PTT Plc is in talks with the Energy Regulatory Commission (ERC) to restructure the price of natural gas sold to the industrial sector after the company suffered huge losses from current pricing, says a senior PTT official.
Noppadol Pinsupa, senior executive vice-president for gas business, said the oil and gas conglomerate suffered a loss of about 3 billion baht in 2015 from selling gas at a price below market level.
The price of gas sold to the industrial sector is pegged to the bunker oil price, which moves in line with the oil price, depressing the gas price 7% below the market price.
In contrast, the real cost of gas moves in line with the global gas price, which normally has a six- to nine-month lag behind oil price movement. The lag time kept the price of gas relatively high when the global oil price collapsed in 2015.
PTT is expected to record a loss of 2 billion baht this year, he said.
Gas sold to the industrial sector makes up 13% of total gas demand of 4.828 billion standard cubic feet per day, covering 400 binding purchasing contracts for PTT.
"Talks with ERC are expected to be finalised by the third quarter this year," said Mr Noppadol.
He said losses from selling gas to the industrial sector excludes losses from selling compressed natural gas (CNG) to the transport sector, which is estimated to be 5 billion baht last year. PTT is expected to have a cumulative loss of nearly 100 billion baht from 2008-15 for that sector because it was required to sell gas below market prices.
CNG's retail price was capped at eight baht per kilogramme in 2008 before rising to 13.5 baht in 2014. The huge losses forced the company to cut its production cost, operation and capital expenditures to avoid even heavier losses.
In another development, the Energy Policy and Planning Office (Eppo) reported electricity demand in the first quarter this year rose 6.6% year-on-year to 43.3 billion kilowatt hours.
Power demand hit a peak of 29,407 megawatts on April 28, when excessive heat raised air conditioner use. Twarath Sutabutr, director-general of Eppo, said April's heatwave led to power demand records six times in the month.