The Renewable Energy Transition in Thailand
Thailand has a thriving oil and gas industry, with 396 million barrels of known crude oil reserves as of December 2016. The country has become increasingly reliant on the sector in recent years, as it provides an important energy source for its economic development. From exploration and production activities to refining and services related to these industries, Thailand’s oil and gas sector plays a vital role in its economy. Nevertheless, with an eye towards sustainability, people are actively embracing renewable energy in Thailand.
This blog post will provide you with an overview of the current oil and gas sector in Thailand, including information on the market overview, the industry challenges, and Thais’ actions to protect their living environment in front of the increasing oil & gas consumption.
With this knowledge in hand, you will be well-positioned to make strategic decisions about how best to grow your business in this rapidly changing sector.
Overview of the Oil and Gas Market in Thailand
Thailand’s energy usage and consumption mainly rely on oil and gas, with petroleum and other liquids (40%) accounting for the vast majority of the country’s annual primary energy consumption in 2014, followed closely by natural gas (28%).
However, domestic crude oil reserves in the country are depleting, forcing it to depend significantly on imported energy sources. In fact, according to Thailand’s Department of Energy Business, the country’s crude oil production capacity was 125,889 barrels per day in 2019, which was a 2.6% year-on-year decline in the average growth rate.
Furthermore, 57% of its crude oil imports (28,480 million liters) in 2019 came from the Middle East, 15% from Fast East nations like Malaysia, Indonesia, and Brunei (7,337 million liters), and 28% from other regions such as Russia and Australia (13,870 million liters).
On the other hand, even though Thailand’s natural gas production has expanded significantly over the previous two decades, rapid demand growth and access to imports have resulted in the country being a net importer of natural gas in 2000.
According to a report from the Energy Policy and Planning Office (EPPO), Thailand produced 5,017 million standard cubic feet (MMSCFD) of natural gas daily in 2019. It comprised 3,623 MMSCFD in domestic output (72% of the total production) and 1,394 MMSCFD in imports from Myanmar (which accounted for 28% of the total production).
Thailand as an Attractive Destination for Oil & Gas Investors
The oil and gas sector in Thailand is an important economic driver. Oil production has increased drastically in the last decade, with many oilfields being discovered across the country. The government is taking a proactive approach to ensure that the oil and gas reserves are managed responsibly and sustainably.
Significant investment is being made into exploration, extraction, and distribution activities to increase the available oil and gas production resources by 2030. In addition to this optimistic growth, state-owned enterprises have been assigned to manage large-scale oil infrastructure projects around the nation. These organizations are instrumental in providing employment opportunities in this vital industry.
Thailand Oil & Gas Upstream Market Top Players
The Thai oil and gas sector is moderately consolidated, boasting several multinationals among the top players. Among them are Chevron Bangchak Corporation Public Company Limited, Exxon Mobil Corporation, PTT Public Company Limited, Chevron Corporation, and TotalEnergies SE.
Companies such as Chevron and PTT Exploration & Production Public Company Ltd. are some of the world’s largest oil and gas firms, with a long-standing presence in Thailand’s oil fields and other parts of East Asia.
What is the Future of Thailand’s Oil and Gas Industry?
Thailand is well known for being an oil and gas-producing country, but the sector has faced many challenges over the past decade. Major oil price fluctuations, a shortage of oil reserves, and fierce competition from neighboring countries in oil and gas exploration adversely impact the industry.
Additionally, the aging oil and gas infrastructure adds to the complexity of existing problems and impedes efficient production. High labor costs and environmental regulations amplify these challenges and impede productivity and profitability.
Moreover, the industry’s future may be impacted by conflicts in the global geopolitical arena between foreign parties and between Thailand and its neighbors. These can hurt the market, which causes oil prices to skyrocket.
Listed below are descriptions of 2 of the many reasons behind the oil price hike in the country.
What is Behind the Oil Price Hike in Thailand?
1. Increased Demand
Fuel prices in Thailand have been soaring due to the accelerated demand and values of crude oil and refined oil across the global market.
To put this into perspective, since 2020, the value spent importing Thai crude oils has increased by an average of 63% each month —from 37.2 billion baht per month to 60 billion today. Similarly, imports of refined oils rose by an impressive 20%.
2. Russia & Ukraine Conflict
Another factor leading to the fuel price hike is the ongoing conflict between Russia and Ukraine. As the world’s second-largest oil producer, Russia is a critical player in the fuel price hike story. The conflict between them and Ukraine should be viewed not only as an issue of political stability but also for its potential effect on global economics.
If the US, UK, and EU decide to impose sanctions in response to Russian aggression into Ukrainian territory, a potential threat is created for global markets that would have dire consequences not only in Thailand but across continents worldwide.
Thailand’s Risk of Fuel Shortage Due to the High Cost of Imported Gas
According to an article by Bloomberg, Thailand may be at risk of a fuel crisis as a result of rising import gas costs and limited supply. The country’s state-run importers might have to resort to curbing imports and cutting purchases of liquefied natural gas (LNG), potentially putting it at risk of shortages.
While Thailand intends to increase imports of less expensive alternatives such as diesel and fuel oil, the gap created by the loss of LNG may be too huge to be covered by other sources.
Some of Thailand’s poorer Asian neighbors, such as Pakistan and Sri Lanka, are experiencing major energy crises as a result of soaring oil and gas prices. Thailand is not currently in this situation, but the prevalence of gas in its power mix raises the possibility of rationing or blackouts.
Government data shows that about 80% of the nation’s electricity was generated from natural gas in the first four months of 2022. The risk is also worsened by climbing demand due to the Thai industry and tourism recovering after the virus.
In addressing this issue, Thailand’s government has cut excise taxes on fuels, making them more affordable to import. This measure is already affecting, as the amount of electricity produced from these fuel sources has increased. In fact, the country’s diesel use in power generation in the first four months of 2022 was 14 times higher than in the same period last year, according to the country’s energy ministry.
Thailand and the Switch to Renewables
Thailand has historically promoted and supported energy development, particularly in renewable energy and energy efficiency. Indeed, the government has pushed for renewable energy in Thailand to minimize the consumption of fossil fuels, particularly natural gas, and the environmental effects of traditional energy sources.
In fact, the Thai government is aiming to build additional renewable energy power plants over the next 20 years under the Alternative Energy Development Plan (AEDP) 2018, which is integrated into the Power Development Plan (PDP) 2018 Rev.1. The government’s objective is to boost the amount of renewable energy in Thailand in overall energy consumption to 30% (including imported hydropower) by 2037.
In a study carried out by Standard Insights in November 2022, which surveyed over 500 Thai locals about consumer behaviors regarding the transition to renewable energy in Thailand, an overwhelming 80.48% of Thais agree to some degree that renewable fuel sources should be used more by consumers for environmental purposes.
In the same study, most vehicle owners in Thailand would be willing to switch to or use renewable fuels if the option was available for their vehicles. In particular, close to 8 out of every 10 sampled Thai respondents (79.95%) are very willing (54.88%) or somewhat willing (25.07%) to make the change.
Interestingly, while the majority of Thais (79.95%) are willing to make the switch to renewable energy, slightly fewer vehicle owners (53.56%) are willing to pay for it if it were to be at a higher price. Meanwhile, 39.58% are neutral or unsure if they are willing or unwilling to pay for more.
On the other hand, the level of interest in availing of e-vehicles among Thai vehicle owners is high with 86.27% of all respondents signifying an interest in e-vehicles. Specifically, more than half (51.18%) are definitely or somewhat intending to purchase an e-vehicle as their next vehicle, while 35.09% are interested but not for their next vehicle. This indicates a possible high demand for e-vehicles in Thailand once they are already widespread in the market.
Key Takeaways
Despite the challenges, Thailand’s oil and gas sector presents opportunities for investors. The major players in the industry are moving forward with exploration and production activities, and there is potential for new entrants.
Staying updated about industry trends is crucial for businesses operating in or considering entering the Thai market. If your business is facing difficulty conducting Market Research in Thailand, our team of experts can help you obtain the information you need to make informed decisions about your next steps.
