Thailand could well become an oil-pricing centre in Asia but for the country's political instability and weak rule of law, as well as the apparent monopoly in the domestic oil industry, an expert analysis recently showed.
Platts, a leading global energy and commodities information provider, said to become such a centre, Thailand would also need many billions of baht invested by both the government and private firms in infrastructure and energy-related businesses.
David Ernsberger, senior editorial director for Asia, yesterday said the company had analysed Thailand's weakness for becoming Asia's oil-benchmarking centre. The analysis showed uncertainties arose because of the country's political condition and weak law enforcement.
As well, there are about 10 traders in Thailand, against more than 100 in Singapore, Asia's current oil-pricing centre.
Ernsberger was participating in a discussion organised by the Petroleum Institute of Thailand.
He said foreign investors believed the Thai government would likely interfere with oil prices, whereas Platts had never seen such interference from the Singaporean government.
The government holds a major stake in Thailand's biggest energy firm, PTT, through the Finance Ministry, and PTT has so far subsidised liquefied-petroleum-gas prices. The company sometimes becomes the government's mechanism to shoulder the country's energy prices, Ernsberger said.
"Overseas investors want to put huge money into Thailand, but they don't know who will be in charge of the energy industry and draw up the policy over the next four or five years. So this is an obstacle for the country becoming Asia's oil-pricing centre," he said.
Meanwhile, the environmental dispute in Rayong's Map Ta Phut area, which has become a hot issue for Thai petroleum and petrochemical industries over the past two or three months, is a good example of the country's instability in the rule of law, he said. Although the construction of many petrochemical projects is nearly completed, everything has been halted.
Ernsberger said the Petroleum Trading Centre (PTC), inaugurated by the Thaksin Shinawatra government in 2004 as a move to make Thailand a regional energy centre, could not operate as planned, because of the difficulty of building a land bridge.
However, Platts believes the PTC remained the best beginning from which Thailand could become Asia's oil-price benchmarking centre.
"Thailand has many strengths and opportunities to become the centre for oil benchmarking in the future," Ernsberger said.
Platts' analysis found Thailand's strengths, compared with Singapore's, were refining capacity, international norms of trading and competitive tax rates. Thailand has a combined oil-refining capacity of 1 million barrels per day, while that of Singapore is 1.2 million bpd.
While Singapore's location is excellent as a centre of oil trading, Platts believes Thailand only needs a good location, because Chon Buri's Sri Racha district is too far from shipping lanes.
However, it says Thailand has an opportunity to develop this issue.