As gas supplies dwindle, debate over extraction drags on
October 31, 2014 01:00 By Sasithorn Ongdee The Nation 2,743 Viewed
Prime Minister General Prayut Chan-o-cha seems to have put a brake on a move by energy network civic groups opposing the government's new round of bidding for petroleum concessions.
On Monday the anti-petroleum concession groups filed a petition with the Central Administrative Court asking for an injunction on any activity involving the new bidding round. Prayut the next day ordered the National Reform Council (NRC) to discuss this issue.
He gave it only two months to find a solution.
In the meantime, the process of inviting prospective investors to participate in the bidding for petroleum concessions is moving forward in parallel. According to the process, the bidding date will be slated within four months of their announcement.
Prayut and his government cannot afford to overlook the seriousness of this matter.
Opening opportunities for others to tap the Kingdom’s energy resources beneath the ground is not the point. The real issue is what is the most appropriate system here to apply for the country.
Whether it should be a concessionary system or production sharing contract (PSC) is now the focus of a dispute between the government and the anti-concession groups. The two are among three that are the most popular systems in the world, the other being services contract.
Thailand has applied the concessionary system for more than 40 years. During the first 20 rounds from 1971 to 2007, about 7,800 million barrels of oil were extracted, most during the first round. Currently, there are 53 blocks still operating under the concessions.
The energy network groups, including that of NRC member Rosana Tositrakul, are refusing to budge on demands that energy concessions be deferred until the sector is reformed.
What they want is to apply the “PSC” regime for the government’s energy acquirement, as they believe it can bring more financial benefits than the concessionary system. Other Asian countries such as China, Malaysia, Indonesia and Myanmar apply the PSC regime.
The groups are also ideologically in favour of nationalising petroleum production, promoting this as a reform proposal when they joined the anti-government protests that toppled the previous, Pheu Thai-led, administration. But the current government eventually followed its predecessor’s policy on petroleum concessions.
The Prayut government – which includes many key people who served with previous administrations – still clings on to the concessionary system.
The government believes this is the most appropriate system for a country where energy extraction is limited by geographical factors. It is also faced with a threat of natural gas potentially running out within the next six to seven years if the new round of drilling does not proceed.
Were that to happen, electricity bills around that time would rise sharply, as natural gas accounts for 70 per cent of total energy used for electricity generation.
Meanwhile, using coal as fuel in generating power is being hindered by groups concerned by the impact of environmental pollution.
To understand this problem, we must face the fact that Thailand is an importer of energy, not an exporter, consuming more energy than it produces. Domestically produced natural gas produced only meets 80 per cent of our domestic demand. Also, the country lacks the budget to invest in a petroleum business that is risky and needs intensive capital.
Talks are needed between the government and public sector.
Moreover, the government needs to do more public relations over opening the 21st round of bidding for petroleum concessions in all dimensions to get people to understand how what it’s doing will benefit the country.
Otherwise, the government might see the current drip of opposition become a tidal wave of people opposed to any activities related to the petroleum concessions – and that could push its energy acquirement plan into trouble.