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Cutting fuel prices would be bad move, warns ex-energy minister

Bringing down fuel prices to win the public's short-term favour would be a short-sighted policy, former energy minister Piyasvasti Amranand warned yesterday.

"Reducing fuel prices is easy. You can just cut taxes or Oil Fund levies. But the impacts will belong to the next generation. Doing that would be irresponsible and unsustainable," he said.

The energy expert made the comment at a seminar held by CIMB Bank after the National Council for Peace and Order recently ordered a temporary freeze of the country's fuel prices, as it expects to finalise ways to "reform" the country's oil and gas price structure by the end of this month.

Piyasvasti said the public has been deceived over the past four years with information that the country is as rich as Saudi Arabia in terms of petroleum reserves and because of that it should be able to bring down fuel prices. In fact, he said, the country's gas reserves have been on a decline and will be depleted in seven years, provided there is no new discovery.

"What is very frightening is that we are importing more and more gas, and the price of liquefied natural gas is double that of our gas in the Gulf of Thailand," he said.

"This will affect the electricity tariff, because about 70 per cent of our power plants run on gas. We have already seen this effect on the Ft [adjustment tariff].

"Eventually, our power tariff will be as expensive as Japan's, which has to import LNG. And if technologies [of our industries] are inferior to Japan's, our fiscal position and economy will fall into bad shape. This [issue] must be tackled fast," he said.

Thailand should move as quickly as possible to revise its fuel-price policy, which has increasingly been used as a tool for serving governments' "populist" policies over the past four years, he said.

The excise tax on diesel, for example, was cut from Bt5 a litre to nearly zero, causing the country to lose more than Bt100,000 a year that otherwise could have been used to build mass transit and double-track the railways, without having to borrow Bt2 trillion as planned by the now-ousted democratic government.

Piyasvasti said he supported fuel price liberalisation and an end to the diesel subsidy, though aborting the Oil Fund would bankrupt the domestic ethanol industry and hit local sugar and cassava farmers, provided no alternative support measure is forthcoming.

Tevin Vongvanich, president and chief executive officer of PTT Exploration and Production, told reporters on the sidelines of the conference that because domestic gas reserves would be depleted in seven years provided there is no new discovery, PTTEP had to explore for more petroleum fields in Thailand and abroad.

The current petroleum concession scheme or "Thailand 3" is appropriate, considering the country's modest petroleum potential, Tevin said. It provides a flexible scheme that allows the government to levy a lower share on smaller petroleum fields and higher share on larger fields.

The concession system that Thailand had used in its latest 20th auction issued seven years ago is more transparent than the production-sharing system that allows case-by-case negotiations that could be favoured by politicians, he added.


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