Despite local and global headwinds, Thailand's energy demand, driven by economic activities, continues to grow. Such seemingly insatiable energy demand has been met primarily via natural gas, which, according to Thailand's Electricity Generation Authority (EGAT), is used to generate 60.85% of Thailand's electricity.
This dependence on natural gas isn't new. For decades, Thailand has relied on natural gas for its power needs. However, the difference in recent years is that Thailand can no longer satiate most of its natural gas appetite from more traditional sources such as the Gulf of Thailand, the Malaysia-Thailand Joint Development Area, and the Yadana pipeline from Myanmar.
As natural gas is depleting in those sources, Thailand has been reinforcing its energy security by increasing its liquefied natural gas (LNG) imports -- even garnering the distinction of being Southeast Asia's first LNG importer in 2011.
Fast forward to 2025, and Thailand is fashioning itself to be Asia's regional LNG hub. This is to take advantage of its strategic location in Asia, particularly its proximity to Southeast Asia, which is seeing a growing LNG appetite.
But what does this mean for Thailand's energy transition plan?
No longer just an interim fuel
Under Thailand's Power Development Plan (PDP), the government is committed to reducing its fossil fuel usage and ensuring that by 2037, 51% of its energy mix is from renewables.
Thailand -- like many oil & gas exporting nations -- has been advocating for natural gas as a feasible energy option as it facilitates its transition towards cleaner energy. This is largely based on natural gas emitting significantly lower CO2 emissions during power generation as compared to coal, making it a somewhat "acceptable" interim fuel that allows countries to reduce carbon emissions while keeping power and energy prices affordable.
However, Thailand's ambitions of becoming a regional LNG hub appear to run counter to its long-term energy transition efforts.
Even now, the PDP isn't going far enough in facilitating this transition, as gas power plants will still constitute 41% of the energy mix generation by 2037. The plan to import LNG for both meeting domestic energy needs and having enough to export to neighbouring countries raises the question of whether Thailand can truly meet its transition targets as per the PDP.
Amid this regional LNG hub push, Thailand must be cautious of:
1. Potential oversupply issues
Thailand currently operates two LNG import terminals at Map Pha Tut, which the Thailand Development Research Institute (TDRI) notes are already sufficient to meet Thailand's LNG needs. A third one is being built in the same location, positioned to serve as the hub for exporting LNG to the country's regional neighbours.
It's crucial to conduct a thorough assessment of Thailand's needs and competitiveness as a regional LNG hub, beyond the country's strategic location and existing LNG infrastructure. For instance, why would neighbouring countries purchase LNG from Thailand instead of buying directly from sources such as the US, especially given the current global tariff climate, which may push countries, just like Thailand itself, to consider purchasing LNG from the US to offset unfavourable trading terms.
Should the LNG imports increase to the point of oversupply, it could also create a "stranded effect", which refers to investments suffering from unanticipated or premature write-downs, devaluations, or conversion to liabilities. The report by Climate Finance Network Thailand (CFNT) titled "Thailand's Fossil Lock-In: Stranded Risk of Midstream Oil & Gas Infrastructure" states that nearly half of Thailand's operating and proposed LNG terminal capacities could become economically unfeasible, thereby creating a financial burden on the government and, by extension, the people living in Thailand.
2. Electricity price affordability & volatility
If Thailand were to seriously undertake its regional LNG hub ambitions, the country mustn't lose sight of the needs of the general public, who indeed are the main electricity consumers. As such, the process of appointing LNG import licensees -- whether state-owned enterprises or private ones -- should be transparent and ensure that there is price competition, so that consumers in Thailand aren't overpaying for electricity on their bills.
To note, Thailand's Energy Regulatory Commission (ERC) has only set a price ceiling (meaning that each licensee can import LNG at any price, so long as it does not exceed the specified ceiling). However, agreeing to import LNG, especially if it is from specific sources like the US, may make electricity prices more expensive than before. So, even before the government negotiates any LNG purchases from abroad, the ERC should allow for more price competition, in addition to requiring an explanation about the origin of the import quota by each licensee to be more transparent.
LNG prices are also very sensitive to geopolitical events, as evident amid the Russia-Ukraine conflict and the recent Iran-Israel and the US attacks in the Middle East. Such volatility is even raising questions about whether LNG can still be considered an interim fuel, as we can't predict when such troubles would subside (or worsen). Increasing LNG imports would only bring Thailand in much closer proximity to this volatility.
3. Risks of an LNG lock-in
The importance of LNG cannot be denied in terms of safeguarding Thailand's current energy security needs. However, the jury is still out on whether importing LNG -- especially to the levels required to export it -- is the best approach for securing the sort of energy future Thailand envisions.
By furthering its regional LNG ambitions, Thailand risks this future by entering a "carbon lock-in", whereby the country's doubling down on LNG infrastructure would mean committing to its use until the end of its economic life. This could then erode the competitiveness of renewable alternatives.
But today, there are already many types of renewable energy sources that don't carry the sort of environmental costs that LNG have. They're getting cheaper too.
Rationalising Thailand's energy future
Renewable energy prices have decreased in line with more advanced global warming-fighting technologies to the point they can compete with prices from fossil fuel sources, according to a recent report by BloombergNEF titled Thailand: Turning Point for a Net-Zero Power Grid. It states that solar-plus-battery projects in Thailand are now cheaper than coal and natural gas power plants, eliminating the need for Thailand to rely on expensive LNG imported from overseas sources.
Rapeepat Ingkasit, my colleague from CFNT, who spoke with BloombergNEF's Head of South and Southeast Asia Research, aptly noted in his article in the Bangkok Post titled "Thailand's cleaner grid is within reach", that "Thailand no longer needs to wait for future breakthroughs. The cheapest form of new electricity is already here."
While LNG may be crucial in meeting short-term needs, the plan to phase out its use -- in addition to other fossil fuels -- must continue for a more secure and sustainable energy future. However, the considerable efforts being made to underline Thailand's regional LNG ambitions may suggest otherwise.
Imran Arif is Communications Strategy Consultant, Climate Finance Network Thailand.