Short-term production sharing proposed to ensure continued investment

Economy May 15, 2015 01:00

By Watcharapong Thongrung


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A member of the National Reform Council specialising in energy issues has pressed her case for abandoning the concession system for petroleum exploration and production, advocating short-term production sharing instead.

Rosana Tositrakul proposed a production-sharing contract of about five years with private petroleum companies facing the expiration of their concessions.

This would allow Chevron and PTT Exploration and Production to continue their investment to maintain the current production levels until the government can take over administration of petroleum fields under a long-term production-sharing system via a state-owned national energy corporation.

She also urged the government to inspect the assets and their value in all of the petroleum fields as those companies that have received concessions will have to transfer them back to the government.

"The people still have confidence in the public sector, which is capable of good administration. We need to see professional management. The proposed national energy corporation will close loopholes, preventing politicians from intervening," she said.

However, Banyong Pongpanich, a leader of the Energy Reform for Sustainability Group, disagreed with the plan to set up a national energy corporation, noting that Thailand no longer has much petroleum in its reserves. The corporation’s work could overlap with that of the Department of Mineral Fuels or PTT.

He said two conditions for the energy-corporation plan would be difficult to accomplish. One is that the organisation’s staff would need high expertise to supervise or negotiate with petroleum exploration and production companies. The other is the need for a transparent working mechanism.

"Production sharing is a system whereby the government has to supervise and approve all procedures of exploration and production. When there is an issue, negotiation will be used. There also remains a tendency for leakage. Many countries using production sharing have confronted corruption problems," Banyong said.

A source from the Department of Mineral Fuels said it planned three types of petroleum contracts: concessions, production sharing and subcontracting. The concession being focused on would earn more bonuses and royalties for the government than the "Thailand 3 plus" arrangement. Conditions for transfer of assets to the government are also included.

At a meeting yesterday, the National Energy Policy Council (NEPC) agreed on administration of natural-gas fields whose concessions expire as proposed by the Energy Ministry, with regard to continuity of gas fields’ development to maintain production.

The meeting also agreed on the power development plan (PDP 2015), which extends from 2015 to 2036. Also agreed was reducing the fuel reserve period, by law, to 25 days from 43 days in light of the global crude-oil oversupply. This could reduce retail fuel prices.

Prime Minister Prayut Chan-o-cha, who chaired the NEPC meeting, said the energy administration plan, investment in renewable and alternative energy and people’s participation and others would give special benefit to no one.