'No threat' to Thailand's energy security

[webfact]

'No threat' to energy security
The Nation

Energy minister sees no impact from delay in concessions; production-sharing to be written into petroleum act

BANGKOK: -- Energy Minister Narongchai Akrasanee said yesterday that the decision to halt petroleum concession bidding has no significant impact on the industry and his government was ready to introduce a production-sharing scheme in the amendment of the Petroleum Act.

"The delay is not that long and it's pretty much clear when the concession bidding would open," Narongchai told reporters.

The amendment to the law would not dramatically change the petroleum resource arrangement but simply clarify on production-sharing, he said.

The decision to delay the 21st round of concession bidding for exploration and production of petroleum, made by the joint meeting of the Cabinet and the junta on Tuesday, has worried investors, notably those who had submitted bids.

Narongchai said the government would return the documents to investors who had submitted proposals earlier and expected they would not sue the government for compensation.

Surong Bulakul, PTT's chief operating officer, said there were only three petroleum exploration and production regimes in the world - the concession system that Thailand has used for more than 40 years, production sharing, and exploration contract.

"The production-sharing system is not that bad but there are many problems such as how to share and who will get the petroleum first. Timing is important because oil prices change fast," he said.

"Importantly, costs will be allowed to be deducted prior to the sharing and thus it demands high management efficiency and transparency. The question is whether Thailand has these attributes."

Exploration contract, meanwhile, is a method used in oil-rich countries like Saudi Arabia. Hence it is crucial that every party has to first agree if Thailand has plenty of petroleum resources or not.

The decision to delay was made after strong pressure from a civic group who wanted to amend the law to enable the production-sharing system in the petroleum deal.

The government has set up a joint government-civic group to brainstorm solutions for the law amendment.

Rosana Tositrakul, the former Bangkok senator now in the National Reform Council, who represented the civic group in the joint panel, said she had got an invitation to the first meeting on March 3 but did not know yet the scope of work of the panel.

The civic group and Democrat Party yesterday praised the prime minister's decision and said they would push for amendment of the law on fair competition, transparency and more public interest.

Panthep Phuaphongphan, a member of the joint government-people committee, said his group would push ahead the amendment of the law to have more alternatives for utilisation of petroleum resources. The law should allow more competition in the petroleum industry as well as to have more transparency in the process of investment deal, he said.

Former prime minister and Democrat leader Abhisit Vejjajiva yesterday said amendment of the Petroleum Act should eliminate the weak points of the current system by improving the government's bargaining power and maximising their benefit from managing the energy. Any earning benefit should be fairly allocated to the people, he said. The law should protect the rights of people, who were affected by petroleum exploration and manufacturing, he added. The law also should increase the choice for the government to be able to apply other systems in addition to the concession, he said.

Abhisit said the people who opposed the 21st round of petroleum concession bidding have good intentions. They don't need to take any responsibility for the delay in the concession bidding, he said. "Based on reasonable assumption, I'm confident that if the prime minister allows amendment of the Petroleum Act, there will not be any significant impact on energy stability. The government, however, needs to manage and govern such an amendment to really benefit the country. The general public should be informed about all the facts," said Abhisit.

Abhisit said that for the 21st round of bidding for oil and gas concessions, even state officers anticipated that the amount of petroleum from the drilling area would not be huge. Small amounts of petroleum had been earned from the 19th and 20th rounds of bidding concessions and the private sector had already explored the drilling area identified in the 21st round. They, however, had returned the plot as it was not worth the investment.

Source: http://www.nationmultimedia.com/business/No-threat-to-energy-security-30254883.html


-- The Nation 2015-02-26

[noitom]

Coverage of what Abhisit had to say on this got half the article in the Thai press.

[BSJ]

As I have said before "Does it really matter" . The end consumer just wants a reliable supply and the cheapest price.

[Srikcir]

I can appreciate providing a legal framework for the nation to have other options for development of its natural rsesources and that alone is worth any delay. Oil & gas appear to have hit rock bottom values and delay will only add to their value. Their delay in development does not threaten national security. Actually, I suggest a 2-3 year delay to allow these resources to gain further value. But that timeframe is beyond NCPO's direct intervention in government affairs and the NCPO needs the revenue.

Unfortunately, the time and effort spent by the Junta to provide for Production Sharing Agreement will virtually mandate its use with the next concession bidding. Part of this motivation may also come from an effort of the Junta to distinguish itself from previous elected governments that relied on concession agreements in a kind of "We can do better than democractic governments" mentality.

But given proven scaricity of oil & gas offshore, the current low price for those resources, and Thailand being a net energy importer, use of a PSA will be a disaster. Indoneasia used the PSA successfully until it became a net energy importer, then lost billions USD. On the other hand, energy exporter Russia used the PSA when oil value was still high and lost billions of USD - PSA was poorly written despite Russia's expertise in the oil industry. Use of a PSA is not for a nation that is struggling to regain economic stability and stretched thin for allocation of meager revenues.

PSAs are complex in legal language and formulas, and provide for a variety of loopholes for a licensee to minimize revenues to the nation licensor. While a PSA may bring greater financial rewards to a nation, it also brings substantially more risks that a nation may not afford.

Because PSAs are typically commercial contracts containing confidential company information, they are not subject to complete transparency and provide more opportunities for corruption than do concession agreements. Finally, PSAs require far more government expertise and resources to monitor, enforce, and litigate the terms of the PSA than Thailand is currently capable of providing.