More Thai energy reforms required

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More energy reforms required
ACHARA DEBOONME,
WATCHARAPONG THONGRUNG
THE NATION



BANGKOK: -- MANY THAIS welcomed last week's moves to restructure petrol and diesel prices, but long-term solutions will be achieved only when policy-makers and consumers agree on the true energy challenges that the Kingdom is facing.

After pricing, the mission should involve supply sufficiency, energy efficiency, and clean energy.

Under last week's decision, excise and municipal taxes are to be amended as well as the Oil Fund's levy to bring down petrol prices and raise diesel prices. More will be done under the authorities' aim to levy a single excise-tax rate on all types of fuel. Under this plan, the diesel price will rise more as it is subject to the lowest excise tax, at Bt0.75 per litre, against the peak of Bt5.60 imposed on 95-octane petrol.

The prices of natural gas for vehicles (NGV) and liquefied petroleum gas (LPG) for transport and household use will also be increased, to reflect actual cost.

Soon after the Cabinet is formed, the Energy Ministry plans to ask for permission to raise the LPG price for transport use by 62 satang per kilogram from Bt21.38 at present. The price of LPG for household use is now Bt22.63 per kilo.

A source at the ministry said the actual cost of LPG is Bt24.82 per kilo.

Likewise, the source said the NGV price would definitely be raised from the current Bt10.50 per kilogram versus the actual cost of Bt16 per kilo.

Tasked with overseeing energy-policy reforms, Air Chief Marshal Prajin Juntong, deputy chief of the military's ruling National Council for Peace and Order, apparently supported the fuel-price adjustments. He was the one who proposed the new structure to the NCPO, whose subsequent approval allowed the moves last week, with more to come in the near future if all goes well.

By demonstrating its intention to attain sustainable energy policies, the NCPO has shown that it understands the true challenges faced by the country's energy sector. Thailand is a net importer of energy but is a spendthrift on fuel subsidies, which in turn encourages irresponsible consumption.

Another issue at hand is finding new energy supplies.

Tevin Vongvanich, PTT Exploration and Production chief executive officer, said in a recent interview that the biggest long-term challenge for Thailand was depleting resources. This can be addressed only by more exploration, energy efficiency and increased use of clean energy.

Tevin said the NCPO should act quickly on three things - the renewal of Chevron Thailand Exploration and Production's concession for the Platong Block, the awarding of new exploration licences, and negotiation for the joint development in the overlapping petroleum field on the Thailand-Cambodia maritime boundary.

He noted that a deal with Cambodia, which could be based on a production-sharing contract (PSC), would pave the way for more gas supplies. Notably, it took 10 years to pump gas out of the Joint Development Area, after that agreement was signed with Malaysia.

On the proposal that all exploration concessions be switched to PSCs, Tevin said legislation was needed to support this. Without it, how will Thailand finance costly exploration if foreign players pull out? At best, the Thai petroleum fiscal regime, so-called Thailand III, can be applied to all existing concessions to ensure the best returns to the country.

"Praised for its good intentions, the NCPO should seize the opportunity to move things forward," he said.

The NCPO is now under huge pressure from those who believe that PTT's operations benefited cronies of the previous government. But Thailand as a whole can suffer from actions based on unfounded fears. The worst of these would be delisting PTT and making it a state enterprise subject to bureaucracy.

As PTT's executives were fretting about their fate, Malaysia's Petronas last week signed a deal to develop shale oil in Argentina though sitting on bigger reserves at home than Thailand.

The next issue to grapple with is subsidies.

Contrary to the fallacy that Thailand has abundant reserves, data from the Energy Policy and Planning Office showed that in 2013 Thailand produced only 240,639 barrels of crude oil per day but had to import 868,040 barrels. Exports averaged 25,284bpd. In the first six months of this year, daily production averaged 232,735 barrels. Imports totalled 803,007 barrels while exports dropped to 12,424 barrels.

Despite this reality, Thailand still offers fuel subsidies. Because of the excise-tax waiver for diesel effective since mid-2011, the government lost more than Bt7 billion in revenue per month. The bills will only rise further while several countries, including Indonesia, plan to cut fuel subsidies.

Subsidies encourage excessive energy consumption, which accelerates the depletion of natural resources. They also reduce the incentive for investment in other forms of cleaner energy - something Thailand needs in order to help the world combat climate change.

Source: http://www.nationmultimedia.com/business/More-energy-reforms-required-30242192.html


-- The Nation 2014-09-01

[retell]

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