Gas-fired power plants in Myanmar and Thailand will find operations increasingly challenging, following Total and Chevron’s plans of withdrawal from the Yadana natural gas project. On January 21 2022, Total announced that it has started the legal process for withdrawal from the Yadana natural gas project in Myanmar. Total’s withdrawal will be effective come July 2022, at the expiry of its six-month contract with project partners (Unocal-Chevron, PTTEP and the Myanmar Oil and Gas Enterprise). We highlight that this is despite Total’s statement in April 2021 that it will not abandon the project, as it would negatively impact the Yangon population. Additionally, Chevron is reviewing plans for exiting the market. Yadana gas field is the largest in Myanmar, and accounts for about half of domestic gas demand and power generation, and close to half of Myanmar’s gas exports. According to Chevron, the gas field is also estimated to account for 8% of Thailand's electricity generation. This means that affected plant operators in both Myanmar and Thailand will have to turn to other domestic gas fields or gas imports for fuel. This could put strain on the domestic fuel supply and increase prices for operations. We highlight that this is amid the plant operator’s revenue crunch arising from electricity companies struggling to pay power generators from unpaid electricity bills. Evidently, prominent gas power plant operator, VPower Group, announced in 2021, that it will reduce operations of gas power plants and withdraw from two power projects in Myanmar, as profitability of operations in Myanmar was increasingly difficult.
Myanmar’s gas power generation growth will remain weak for the coming decade, in line with our existing views and forecasts. We expect the gas power sector outlook to worsen with Total and Chevron’s unfavourable stance on continuing operations in Myanmar. This will lead to increased power shortages across Myanmar, as gas power generation contributed 34% to the market’s 2021 generation mix (second only to hydropower, which was at 56%). As Total and Chevron are the largest shareholders of the Yadana natural gas project, with 31.24% and 28.26% stake respectively, we expect the gas power sector to be heavily impacted by the companies’ decision. PTTEP, the third largest stakeholder in the project, will be stretched to take over Total and Chevron’s operations as taking over means additional resources required on top of managing Thailand’s oil and gas operations. Additionally, finding international investors to take over Total and Chevron’s share will be challenging, as Myanmar is facing increased isolation from the international community. In the short-term, the scaling back of Total’s operations in Yadana will weigh down on gas supply to gas-fired power plants and worsen the deteriorating power sector situation in the market. This is largely in line with our view that Myanmar’s gas power generation power sector will experience weak performance, at a contraction of 9% y-o-y in 2022 and 1% growth in 2023. We also expect Myanmar’s gas power generation to only reach back to 2020’s level of 11.4TWh by 2031.
There are downside risks to our long-term outlook of Myanmar’s overall power generation and consumption, if underlying short-term problems are not resolved. Alongside our Country Risk team’s view that the civil conflict in Myanmar will last for the coming years, the power market will face surmounting challenges for growth. These challenges are deteriorating investor interests for power projects and the government’s inability to resolve the market’s worsening electricity supply. One crucial issue that has yet to be resolved is rampant electricity bill boycotts, which we highlighted in our previous article. We remain apprehensive on any strong growth, given how the military government is handling the situation in the power sector. Businesses in Myanmar have also been reporting power disruptions affecting industry operations, which we expect will continue and weaken power consumption growth. Overall, both power generation and consumption will only recover to both their 2019’s level after 2024.