Power play: Energy minister’s plan sparks potential for across-the-board cost cuts

Energy Minister Pirapan Salirathavibhaga unveiled a plan that could slash energy costs across the board.

Pirapan declared yesterday, January 3, that a paradigm shift is imminent in the gas supply sector, aiming to empower power producers and significantly cut down on electricity expenses. The key? A strategic merger of gas pools to unleash a domino effect that could alter the fortunes of power and petrochemical players.

“Under this new regime, we’re reshuffling the deck to make gas more accessible and affordable for power producers while rebalancing costs for petrochemical giants.”

Currently, the playing field favours petrochemical producers, enjoying the spoils of cheaper Gulf Gas, turning Thailand into a regional petrochemical powerhouse. On the flip side, power plants grapple with the burden of higher gas costs under the existing two-pool pricing system.

The two juggernauts that fuel Thailand’s energy sector are Gulf Gas and Pool Gas. The former represents the average price of natural gas from Gulf of Thailand fields, while the latter encompasses a weighted average wellhead price from the Gulf, Myanmar, and imported liquefied natural gas.

The 60% dominance of gas in power generation could soon see a revolutionary adjustment. Minister Pirapan believes that merging these pools will rebalance the scales, ensuring that power producers pay less, while petrochemical producers carry a slightly higher burden.

However, this seismic shift is not without its share of challenges. The tumultuous events of 2022, including the Russia-Ukraine conflict and Gulf production disruptions, led to a surge in pool gas prices. This resulted in soaring power bills that continue to pinch consumers even today.

Electricity subsidies

Adding fuel to the fire, the Covid-19 pandemic complicated matters, burdening energy policymakers with the task of subsidising electricity bills to alleviate economic fallout. The Electricity Generating Authority of Thailand (EGAT) found itself sinking into a financial quagmire with debts exceeding 150 billion baht.

But just as EGAT glimpsed a way out, political tides shifted. The Pheu Thai Party, in a populist push, advocated for continued subsidies without presenting any viable solution to alleviate EGAT’s financial woes, reported Bangkok Post.

However, Pirapan remains undeterred. With the promise of a new gas pool regime, he anticipates a fuel tariff drop of 0.11 baht per kilowatt-hour. This could translate to a significant reduction in electricity bills for consumers.

As the energy sector holds its breath for this potential game-changer, PTT Global Chemical seems unfazed by the impending gas feedstock price hike. A source from the company believes it will have minimal impact, echoing confidence that market dynamics will cushion any blow.