Over the last decade, oil prices have risen substantially and, in response, the Thai government has been employing a number of policies and initiatives to promote the switch amongst car owners from gasoline to natural gas powered vehicles (NGVs). The motivation behind this shift has been twofold. Firstly, with around 70% of the country’s domestic energy supply coming from natural gas, the measure is aimed at stimulating further demand for a locally generated and less costly resource. Secondly, the move decreases the country’s reliance on highly volatile global petroleum prices and supply dependencies.

Measures Taken

In addition to offering discounts to certain classes of drivers who converted their gasoline engines to compressed natural gas (CNG), the authorities fixed the retail price at state-owned oil and gas company PTT – the sole licensed retailer of CNG – to around $0.28/kg from 2005 to 2011, increasing to $0.34/kg in 2012. PTT, in addition to being required to absorb most of the cost of the subsidy, was also tasked with expanding a network of natural gas fuelling stations across the country.

The economic rationale and justification provided by the government to PTT at the time was that so long as the retail price for CNG remained substantially below that of gasoline, this would create a larger market for CNG that in turn would generate the scale to eventually make it profitable for PTT to supply the alternative fuel. In a market like Thailand, where proportional to income petrol constitutes a significant portion of daily cash outlays, the financial incentive for motorists to make the switch is significant. This is especially the case for operators of taxis, tuk-tuks and trucks, for whom fuelling one’s vehicle is a primary business expense. CNG’s lower fuel economy is less of a hindrance to these drivers, as they are accustomed to refuelling frequently and strategically, factoring this into their daily routine.

Alternative Fuel

Initially, the uptake to convert vehicles to CNG was less than anticipated, while switching to propane – also known as liquefied petroleum gas (LPG) – became more common place. In addition to LPG also being heavily subsidised, overall vehicle conversion costs were much lower than for their CNG equivalents. LPG vehicles at the time also offered better mileage, and there was a higher availability of LPG filling stations, especially upcountry. An additional inconvenience associated with CNG conversion was that most new tanks needed to be placed in the boot of the car, decreasing the space available for storing other cargo.

In general, the trend tended to be that the switch to LPG was more common within the aftermarket conversion segment, while, for newly purchased vehicles, those with CNG engines already factory installed held greater appeal. This has been especially true in recent years following a reduction in the subsidisation of LPG prices in 2007, along with signals that the government may cease subsidising LPG prices entirely. The Department of Land Transport has also expressed an aim to be more stringent in granting the extension of license registrations for LPG vehicles moving forward.

Changing Trends

Sanjay Mishra, the CEO of Tata Motors (Thailand), told OBG. “We decided to concentrate on rolling out CNG-compatible trucks in Thailand, taking advantage of incentives offered by the Board of Investment. We needed to design the trucks with extra fuel capacity, however, to make them more suitable for the Thai market, as the pump network for CNG is not yet that extensive.”

According to Somchai Siriwatanachoke, the director-general of the Department of Land Transport, as of January 2013 there were over 1m LPG vehicles registered in Thailand. These collectively consume an estimated 72,000 tonnes of LPG per month and, although the number of CNG vehicles stood at less than half of this (380,000), the ratio of LPG to CNG vehicles is expected to close over the coming decade, with Blue Corridor, an international NGV advocacy consortium, tipping Thailand’s NGV market to grow 18% between 2013 and 2020.

Natural Gas Supply

While further growth in the proportion of NGVs on the roads bodes well for Thailand’s reduced dependency on gasoline imports, any change should also bring about environmental and safety benefits, as NGVs contribute to lower pollution levels and their tanks are considered more secure and less flammable than petroleum. There is, however, emerging concern as to whether demand for gas in the future could rise in excess of a projected dwindling supply of future reserves.

Aside from NGVs, which made up 5% of demand for natural gas in 2011, according to the Energy Policy and Planning Office at the Ministry of Energy, other non-power sector end-users of natural gas, such as gas separation facilities (21%) and the industrial sector (14%), are also expected to see their demand for natural gas as a feedstock rise as they attempt to migrate away from LPG. According to the Oil and Gas Journal, as of January 2013, Thailand possessed 10.1trn cu feet of proven natural gas reserves, with supply of natural gas of 3.4bn cu feet per day making up for around 28% of the total energy mix. PTT Exploration and Production (PTTEP) forecasts gas production to peak in 2017 and decline thereafter.

The energy firm, in order to mitigate the impact of rising demand in the face of depleting local supply, is not only seeking ways to boost domestic production, but is also working to secure new supply sources through investing in upstream projects abroad. PTTEP is also simultaneously constructing import infrastructure in the form of pipelines to its neighbours, with a main connecting source being offshore fields in Myanmar, as well as building LNG receiving terminals to handle additional shipments from the likes of Qatar, which at present constitutes the country’s largest overseas LNG supplier.


While PTT is doing its part to procure additional volumes to meet Thailand’s growing gas requirements, it is also advocating for the floating of retail prices. The company has made the claim that capped prices result in income loss, which in turn lowers the available capital to invest in upgrading their retail network. PTT, which reported NGV sales of 8660 tonnes a day for the third quarter of 2013, in November 2013 indicated that it expected its NGV operations to incur losses of nearly BT24bn ($784.8m) in 2013 due to retail price caps.

CNG fuelling stations, especially those not located in proximity to natural gas lines, require costly distribution and storage infrastructure. Furthermore, with CNG tanks already smaller and less fuel efficient than gasoline and LPG alternatives, ensuring a national network of stations is crucial to encouraging consumers to migrate to CNG vehicles.

In November 2013, PTTEP’s senior vice-president for exploration and new ventures, Waranon Laprapang, commented that “Thailand’s regulatory environment makes it too complicated for LNG to be distributed efficiently if PTT is the only operator.”

Expectations are that the Ministry of Energy will grant a new LNG retail license at some point, with global energy giant Royal Dutch Shell and local outfit Siam Gas having both expressed interest on the condition of assurances over pricing details.


Government subsidies are prevalent in many spheres of Thai life and, during tense political times, subsidy removals or even the threat of their removals is an action the ruling party is reluctant to take. As such, although the National Energy Policy Committee has indicated that retail prices will be gradually floated – a move that will likely benefit PTT and encourage the firm to bolster its distribution system and fleet of NGV filling stations – there is still little to suggest when and how this will take place.

In 2012, the Ministry of Energy indicated that it would be increasing the price for CNG by BT0.50 ($0.016) each month from BT8.50 ($0.28) per kg until it reaches a price of BT14.50 ($0.47). However, once the price reached BT10.50 ($0.34), the ministry suspended any further increases. For LPG, the subsidies have been gradually reduced since September 2013, with the retail price reaching BT21.38 ($0.70) per kg by February 2014. Meanwhile, diesel prices have remain unchanged at BT30 ($0.98) per litre as a measure that the government considers as critical to controlling inflation.

Fuel subsidy reductions have been encouraged by analysts who suggest that the outlays encourage irresponsible consumption and tie up funds that could be used to stimulate the economy elsewhere. However, given the political unrest since November 2013, the passing and implementation of many anticipated legislation revisions and policies has been placed on hold, including those related to the reallocation of various fuel subsidies. Eventually, this is an issue that will need to be resolved, and therefore various stakeholders including petrol retailers, automotive manufacturers and vehicle owners need to plan ahead in order to ensure minimal disruption.