Malay-Thai JDA gas infrastructure project poised for launch

Sept. 27, 1999
The $1.03 billion Malay-Thai gas infrastructure project that includes a binational pipeline network and a world-class natural gas processing complex appears poised to launch.

The $1.03 billion Malay-Thai gas infrastructure project that includes a binational pipeline network and a world-class natural gas processing complex appears poised to launch.

The Thai cabinet on Sept. 14 formally flashed a green light for the Petroleum Authority of Thailand (PTT) to move ahead with its 50-50 joint venture with Malaysian state oil firm Petronas to undertake the ambitious scheme to tap the abundant gas resources lying in the Joint Development Area (JDA) on the two countries' continental shelves.

At the same time, Thai ministers approved a draft heads of agreement for the PTT-Petronas joint venture to purchase natural gas from the operators of the three gas-bearing blocks lying in the once-disputed 7,250 sq km area in the southern Gulf of Thailand.

Project details

The first phase of the Trans-Thailand-Malaysia Pipeline (TTM) project calls for laying a 34-in. offshore-onshore pipeline that would extend 352 km from Block A-18 to the province of Kedah in northern Malaysia via the town of Songkhla in southern Thailand. It is slated for completion in late 2001.

The second phase of TTM involves laying a 30-in. offshore line 50 km from Block A-18 to Block B-17 and connecting it with PTT's grid in the Gulf of Thailand in anticipation of rising gas demand in central Thailand during 2005-07.

The other key element of the project involves installation of a gas processing plant at Songkhla, with inlet capacity of 425 MMcfd of JDA gas, that would also recover natural gas liquids. A second unit of similar capacity will be added after the first unit comes on stream in mid-2002. The second unit is planned to be operational in 2006-07.

The PTT-Petronas joint venture is scheduled to finalize gas supply accords next month in Malaysia with JDA contractors, which include Petronas Cariga* (JDA) of Malaysia; Triton Energy Inc., Dallas; and PTT Exploration & Production plc.

Out of the total investment required, 30% or $274 million will be provided from PTT's and Petronas's own funds and the balance, $760 million, from loans. Thai Industry Minister Suwat Liptapallop said the two partners will first invest $137 million each to set up a joint-venture firm to implement the project.

Local opposition

The Thai cabinet's approval of the project was quickly denounced by environmentalist lobby groups in southern Thailand. They are mobilizing support from nongovernmental organizations (NGOs) in Bangkok to mount a campaign against the scheme.

Despite the Thai government's claims of huge benefits from the venture, the southern opponents charged the project puts Thailand in a disadvantageous position.

"The villagers now are forced to accept the project, since the cabinet approval has already been granted before public hearings can be organized," said Damai Anantiyo, leader of the Songkhla People's Group. The group, which comprises local academics, community leaders, doctors, legal specialists, and fishermen, has contacted Bangkok-based NGOs to solicit their support in a campaign against the project. Among them are the Campaign for Popular Democracy, the Forum of the Poor, and activist movements that have opposed the Thailand-Myanmar Yadana gas pipeline.

"We are very disappointed with the Chuan Leekpai government to approve the project without first being put through the public hearing process," said Damai, who warned the project could turn into "the second Bor Nok" power plant project. (The 700-MW coal-fired Bor Nok power plant project in Prachuab Khiri Khan, owned 40% by U.S.-based Edison Mission Energy, has been delayed because of opposition by local residents.)

Government support

In order to expedite the gas pipeline project, the cabinet has authorized related agencies, including the Electricity Generating Authority of Thailand, the Highways Department, and the Mineral Resource Department, to support the projects, while the Board of Investment (BOI) is required to offer top promotional privileges to the joint-venture company.

Cabinet spokesmen said the development of natural gas from the JDA will strengthen prospects for Thai energy security (see related story, p. 41). Currently, Thai demand for natural gas is estimated at 1,789 MMcfd and expected to increase to 2,177 MMcfd in 2001 and to 3,326 MMcfd in 2011. Reserves of natural gas in the Gulf of Thailand and nearby hydrocarbon provinces in neighboring countries are pegged at 25.2 tcf. Of this total, 15 tcf is proven domestic reserves, and the rest is proven reserves in Myanmar and the JDA.

In terms of investment, according a study by PTT, the project will offer a return of 1.4%. The government will get revenues from taxes on the project profit of around $1.279 billion, in exchange for BOI privileges worth about $525 milion.

Industry Minister Suwat said the cabinet has also asked PTT to take the environmental impact assessment seriously so as to avoid the problems faced by the operators of the Prachuan Khiri Khan power plant and Yadana gas pipeline projects. The Prince of Songkhla University is expected to complete its environmental impact assessment of the JDA project in September.