Thailand’s military government will delay finalising details of closely watched energy reform, a military official said on Friday, which could compound uncertainty about the country’s oil and gas sector. The reform, which was due to be finalised by the end of July, is expected to include plans to improve the position of the State Oil Fund and restructure domestic fuel prices from a highly regulated system to a market-based one.
The plan was submitted to General Prayuth Chan-Ocha, the army chief who seized power in a May 22 coup, for consideration, but was sent back for another review, Air Chief Marshal Prajin Juntong, deputy head of the military council, told reporters. Prajin said the junta’s economic team would hold a public hearing on the reform in August before resubmitting the plan to the junta leader for approval.
“There’s some unclear information about production and supply from domestic and foreign sources,” Prajin said adding that the priorities of the reform were how to restructure cooking gas and oil prices, the Oil Fund and fuel subsidies.
Domestic energy prices in Thailand have been distorted by various populist policies introduced by previous governments through the Oil Fund. Previous attempts to restructure energy prices failed because of strong public opposition and the need for politicians to maintain their voting bases. Since it seized power, the military has discussed with several energy-related officials how to reform the sector and all parties have agreed that fuel prices should be restructured in the interest of fairness, officials have said.
Analysts say Thai oil and gas companies are facing uncertainty because the reforms may hurt their earnings. State-controlled PTT Pcl, the country’s sole gas supplier, has to import liquefied petroleum gas (LPG) at the global price and sell it at a fixed price of $333 a tonne, while the Oil Fund has to levy tax on gasoline users to compensate PTT.
Prices of LPG for cooking have been raised to 22.63 baht per kg to reduce the huge subsidy burden carried by the Oil Fund, but the junta decided to scrap a plan to float LPG prices until the reform plan is finished. PTT’s gas operations, which accounted for one-fifth of its 2013 operating profit, have suffered from the impact of subsidies for several years as drivers shifted from costlier oil to gas.
Separately, Piyasvasti Amranand, chairman of PTT, said on Friday its board had approved plans to spin off its gas pipeline business and sell its stakes in two refineries, Star Petroleum Refining Co (SPRC) and Bangchak Petroleum. PTT, which has a monopoly in the gas-pipeline business and has interests in five of six oil refineries in Thailand, wants to sell the stakes to reduce public criticism of its monopoly position.
The company has long planned to dilute its 36 percent holding in SPRC via a public offering, but the listing has been delayed for several years as negotiations with oil giant Chevron Corp, which owns 64 percent of SPRC, foundered over details.
PTT, which owns 27.22 percent of Bangchak, expected the stake sales and the spinoff to be completed before Thailand holds a general election in late 2015, Piyasvasti said.