Thailand's PTT ships LNG to Japan for first time amid winter squeeze

By Jessica Jaganathan

 

FILE PHOTO: The logo of PTT is pictured at the 38th Bangkok International Motor Show in Bangkok, Thailand March 28, 2017. REUTERS/Athit Perawongmetha

 

SINGAPORE (Reuters) - Thailand's state-owned company PTT shipped a liquefied natural gas (LNG) reload cargo to Japan for the first time as a freezing winter and global supply shortages of the fuel caused spot prices to spike and sent buyers scrambling to find gas.

 

LNG tanker Symphonic Breeze loaded an LNG cargo from Thailand's Map Ta Phut regasification terminal on Jan. 27 and discharged the cargo at Tokyo Gas' Ohgishima terminal on Feb. 3, data from intelligence firm Kpler showed on Friday.

 

This was the first LNG reload cargo from the 11.5 million tonnes per annum (mtpa) Thai terminal, Kpler's LNG analyst Rebecca Chia said.

 

Japan's electricity prices had hit a record high last month as colder temperatures drove demand for heating, coinciding with increased demand from China and South Korea and production outages in several plants globally.

 

Spot LNG prices in Asia surged by more than 1,000% as a result, putting a squeeze on buyers who scrambled to find supply.

 

PTT has long-term LNG purchase contracts with Qatargas, oil majors Royal Dutch Shell and BP and Malaysia's Petronas to import a total of just over 5 mtpa of LNG. It also has a Singapore-based trading unit set up in early 2019.

 

It was likely leveraging on the price difference between term contracts which are oil-linked and spot prices, making a profit from the wide price gap by re-exporting the cargo, two sources told Reuters.

 

The shipment from Thailand follows the first re-export LNG cargo out of Indonesia's Arun regasification terminal in mid-January.

 

"Re-export cargoes from South-East Asia seem to have now emerged as a (viable) emergency response to the gas supply shortage in North Asia," Kpler's Chia said.

 

-- © Copyright Reuters 2021-02-05

 

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So, they bought it at a long term contract price and resold it to Japan at the spot price and made a profit...

 

Happens hundreds of times a day, all over the world.  Welcome to the fast lane.

 

Now let's see if Thailand has any brownouts.

 

'long-term purchase contract with Petronas'

 

Didn't PTT abrogated that contract last year so that it could at that time buy LNG cheaper at spot market prices? 

But now that spot prices are higher that the original Petronas purchase contract, PTT can revert back to Petronas' fixed price?

 

Doesn't seem from Petronas' viewpoint of having any binding LNG purchase contract with PTT. And maybe it doesn't really have such a contract if PTT breached that contract.

 

Thailand is not historically a net energy exporter but a net energy importer - electrical energy aside. If PTT is exporting purchased LNG, it will need to replace that fuel for its own eventual use. So it's questionable that it can do so at lower than current spot market price and still retain its short-term profit margin to Japan in the long-term. But remember, PTT is a state-owned enterprise that may have access to the state treasury for any financial shortfall, ie., like THAI Airways.