PTT chief slams politicisation of petroleum bids, cites energy security

[webfact]

PTT chief slams politicisation of petroleum bids, cites energy security
WATCHARAPONG THONGRUNG
THE NATION



BANGKOK: -- PTT chief executive officer Pailin Chuchottaworn yesterday expressed his support for the 21st petroleum concession bidding round, pointing to the need for continuity of gas production in the Gulf of Thailand.

At a news conference, he said he regretted that the petroleum-concession issue had become politicised, which could jeopardise energy-policy reforms aimed at security and sustainability.

The PTT chief said that even though there is little chance of finding new petroleum deposits as rich as in the past, the 21st round was essential to allow production continuity. This is because proven reserves of Thai natural gas, if usage remains at its current level, will last for no more than seven years if no new reserves are discovered.

Furthermore, domestic natural gas is cheaper than imported gas, so it makes economic sense to explore for new gas fields, Pailin said.

"We should not make the opening of [new] petroleum concessions, which is a technical subject that requires knowledge and expertise, to become a political issue or something that must be won by words, or by using patronage to distract from the true topic, taking it far away from the facts.

"There has been [an attempt to] discredit the information provided by the state, creating confusion among the people, despite the fact that the government, the Energy Ministry and involved agencies have jointly considered national energy policy based on correct data and international standards. They have emphasised the creation of energy security and increasing the efficiency of energy usage in the country, allowing every citizen to use energy thoroughly, in a fair and sustainable manner," he said.

If the 21st round cannot proceed, PTT will have to import liquefied natural gas, which is more expensive than gas from the Gulf of Thailand, in addition to the 15 million tonnes it has already prepared for. PTT has signed a 20-year contract to buy a total of 2 million tonnes of LNG from Qatar, accounting for just 6 per cent of total demand. Thus finding more domestic reserves is important, he said.

On the issue of whether to keep the existing concession system or switch to a production-sharing model, Pailin said the debate over this issue was largely one of semantics. In fact, if the state wants to get more benefits, any system allows for negotiation of its details. The government uses the concession system because it does not want to bear risks during the exploration stage, while in a production-sharing system, the state has to set up budget to share these risks with the private sector.

He said the government had to support the use of gasohol. The cost of ethanol is not dependent on world oil prices because it is a by-product that helps the nation to reduce crude-oil imports by 1.4 billion litres a year, worth at least Bt20 billion per annum.

On the allegation that the Energy Ministry had approved using the Oil Fund to subsidise the cost of PTT's imports of liquefied petroleum gas since 2011, he said the ministry had opened the chance for every private company to import LPG liberally. However, since such imports are not worthwhile, no private firm has imported LPG except PTT, which is a state enterprise with a duty to secure energy for the country.

LPG is a limited resource. Using natural gas from the Gulf of Thailand to produce LPG has been laid down in the national development plan since the Eastern Seaboard project, which dictated the building of a petrochemical industry in parallel with gas-separation plants to maximise the value of gas, and to drive the economy, instead of just burning it as a fuel.

Under the latest LPG price restructuring, every user group including petrochemical companies are subject to the same cost, which is adjusted according to its price in the world markets.

In a separate matter, a source close to Prime Minister Prayut Chan-o-cha said the general would not take part in a government forum tomorrow on the pros and cons of opening the 21st round of bidding on petroleum exploration and production concessions.

The source said the prime minister did not want to be regarded as taking sides on this issue. The government has assigned PM's Office Minister ML Panadda Diskul to represent it at the forum.

Meanwhile, a group led by ex-prime minister Abhisit Vejjajiva, former finance minister Thirachai Phuvanatnaranubala, and energy activists Panthep Puapongpan and ML Kornsiwat Kasemsri have suggested that instead of tomorrow's public forum, the bidding round should be discussed in a small group. This would allow opposing sides to find common ground for the country's policy to ensure an adequate energy supply to meet future needs.

Thirachai said this discussion should be chaired by Prayut himself, not Panadda. Representatives of the public should also specify who should represent their stand on this issue, instead of allowing the government to assign people who have no previous experience with the matter.

Source: http://www.nationmultimedia.com/business/PTT-chief-slams-politicisation-of-petroleum-bids-c-30254402.html


-- The Nation 2015-02-19

[Srikcir]

"On the issue of whether to keep the existing concession system or switch to a production-sharing model, Pailin said the debate over this issue was largely one of semantics."

Since both are legal contracts, of course it's a matter of semantics! The production sharing agreement is much more complex and riskier than a concession agreement as the government takes its revenue largely in the form of natural gas instead of cash. If the value for natural gas remains near or less than cost of production, the government loses money. If too many dry holes are found, the government loses money.

"The government uses the concession system because it does not want to bear risks during the exploration stage, while in a production-sharing system, the state has to set up budget to share these risks with the private sector."

Completely true but the government announced it will use the production sharing system! Apparently Pailin thought the government would use the less risky concession system given a history of dry holes and missed that the government wasn't. This mistake is onerous as the PTT chief no doubt will be involved in the negotiations.

The differences in these two systems at a time when the value of natural gas and oil is so low, and when Thailand is a net importer of fossil fuels, cannot be dismissed as mere semantics. There is a very real danger to the Thailand's energy sustainability should either system be poorly negotiated.

[razer]

Come on now ... the bureaucrats have to get their finger in the pie. Same Same everywhere.

[Ricardo]

"he said he regretted that the petroleum-concession issue had become politicised,"

One such example of this being way back in 2002, IIRC.

http://www.ogj.com/articles/2002/03/thai-cabinet-extends-harrods-exploration-concession-in-gulf-of-thailand.html

Of course, one could always leave exploration to the military ...

http://library.cmu.ac.th/ntic/en_picturelanna/detail_picturelanna.php?picture_id=269

... but this doesn't seem to go anywhere fast

https://www.google.co.th/search?q=niko+resources+fang+thailand&ie=utf-8&oe=utf-8&gws_rd=cr&ei=AYDmVK2_JtLauQT0x4KQAg

Edited February 20, 2015 by Ricardo

[Tep]

So the disharmony on the yellow side continues to prevent the government from issuing any coherent energy policy. The nationalisers continue to hate PTT because of the existence of private shareholders and the liberalisers are hobbled by interfering religious figures. All meaning higher prices for power when Gulf Gas runs dry and LNG has to be used. At least the CEO set the scene for a possible 4th LNG terminal with him comment of needing to import more than the currently planned 15 million tons. Interesting though. They control current capacity of 5 million tons in the existing terminal with 2 more terminals planned to expand this to 15. Yet their only long term contract is 2 million tons? From Qatar. What about all that cheap shale gas we hear off in the US and Australia? Why is Singapore, a location with no natural energy resources able to develop a gas trading hub having liberalised its power sector more than 10 years ago? While Thailand is stuck with state companies dominating the sector and policies that facilitate that dominance to the detriment of the consumer. Singapore will have cheaper power because of its ability to implement markets. When will Thailand sort itself out? Wasn't that the rationale behind the coup yet this government has not been able to issue a coherent, integrated energy policy since it took over.

On the 21st Concession. I think that is focussed mainly on gas in the North East, most of which would need to be developed in a JDA type arrangement with Cambodia. This JDA would probably be a whole lot more complicated to arrange than the Thai Malaysia JDA. Plus Mr. Hun Sen is apparently great mates with a certain former Thai PM. So I don't really know what the chances of the 21st Concession resulting in new finds even if it is successfully tendered.