Since the 2021 military coup in Myanmar, foreign governments -- in particular the European Union and the United States, have issued travel bans and frozen the financial assets of corporate entities and individuals involved with the military regime. The most recent US financial sanction on the Myanmar Oil and Gas Enterprise (Moge), a major source of foreign currency revenue for the military government, which took effect in November 2023, is a potential risk to Thailand as it is reliant on gas from Myanmar for electricity generation.
As of 2023, Myanmar gas accounts for 14% of Thailand's total gas supply or approximately 4.6 billion standard cubic feet per day. The remaining supply is divided between gas from the Gulf of Thailand (61%) and Liquefied Natural Gas (LNG) imported from abroad (25%). Myanmar gas is primarily used for electricity generation in power plants in Ratchaburi, while imported LNG is processed and stored in Map Ta Phut in Rayong and then used to generate electricity for eastern and central Thailand.
The gas supply market is closely linked to electricity production. Gas-based electricity accounts for 53% of Thailand's total electricity production, with 33% from Gulf of Thailand gas, 12% from imported LNG, and 8% from Myanmar gas.
The remaining electricity is generated from coal and renewable energy sources. Though Myanmar gas comprises a relatively small portion of Thai power production, it is significant as the primary source of electricity generation for western Thailand. Losing the entire volume of Myanmar gas could impact power generation in the region.
Analysing the potential impact of the Moge sanctions on Thailand, our geopolitics team at the Thailand Development Research Institute (TDRI) determined two possible scenarios. The first is an optimistic scenario, which estimates that gas imports from Myanmar will continue as usual. The second is a moderately worse but manageable scenario, which assumes gas imports cannot continue but that energy can be substituted from elsewhere.
We consider the first scenario highly probable. However, the main complication arises from the US sanctions. PTT Exploration and Production (PTTEP), the importer of Myanmar gas into Thailand, will need to find other methods beyond the SWIFT international payments networks to continue purchasing gas from Myanmar. If PTTEP manages this, it can continue providing Myanmar gas to the Ratchaburi Power Plant with minimal impact on the broader Thai economy.
There is a small probability that PTTEP will be unable to continue importing Myanmar gas into Thailand. In this case, there will be a moderate impact on the Thai economy. PTTEP will immediately need to substitute the missing 8% of gas for its electricity generation. While it is technically possible to transfer power from central and eastern Thailand to the west, PTTEP and the Electricity Generating Authority of Thailand (Egat) would need to import more LNG for Egat power plants. The additional volume of LNG would have to be purchased from spot markets at higher prices than PTTEP's long-term contract LNG supply, increasing operating costs for Egat.
While Myanmar gas is delivered to Thailand via a shared pipeline, any LNG purchased from spot markets would have to come through ships, meaning Thailand must also have the capacity to store extra volumes of imported LNG.
It is estimated that imports of spot LNG to compensate for the missing Myanmar gas (approximately 484.25 billion Btu of equivalent energy) will immediately cost Egat an additional 3.7 billion baht per month, based on spot LNG prices of US $16 million Btu. These additional energy production costs would increase the fuel adjustment charge (Ft) by 0.22 baht per unit. The higher costs would, in turn, increase inflation by 0.24% and shrink the Thai GDP by 0.04% per year.
Irrespective of which scenario takes effect, Thailand will need to carefully consider its current energy dependencies. In the short term, there is a pressing need to accelerate the development of additional LNG storage capacity to cope with increasing demand and to provide an emergency backup to maintain Thai energy security. In the long run, transitioning from the current gas-based energy framework to one with increased renewable sources is unavoidable. Continued dependence on imported LNG may increasingly become a liability.
Policymakers need to advance the implementation and adjustment of Thailand's power and energy development plans to accelerate the use of clean/renewable energy, reducing the use of imported gas and LNG, which currently constitute around 20% of electricity generation -- a significant proportion.
There is foreseeable risk in the event LNG cannot be imported due to supply chain disruption. It is imperative these risks are factored in and mitigated, especially since Thailand may increasingly require more imported LNG from foreign markets under its current energy framework, as domestic gas production in the Gulf of Thailand is likely to gradually reduce in the medium-term if there is no further exploration.
As the rapidly changing global geopolitical environment increases risk to Thailand, policymakers will need to follow global and regional situations such as the Myanmar sanctions very carefully. They must be ready to adjust various extant policies to mitigate potential impacts, especially within the Thai energy sector.
It is now necessary to quickly adjust or implement energy policies to reduce Thailand's current reliance on imported LNG and fossil fuels. New policies should further promote renewable energy as a key substitute, in line with Thailand's international agreements, internal trade practices, and commitments to reducing greenhouse gas emissions to achieve sustainable growth and development.
Supra-kasem Kashemsri Na Ayudhaya is a TDRI Researcher in geopolitics. Tippatrai Saelawong is a TDRI Senior Researcher. Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.