The military takeover in Bangkok is likely to lead to Thailand competing with Myanmar for foreign investment in oil and gas development.
Within a week of the military takeover, the permanent secretary to the Ministry of Energy, Norkun Sitthiphong, said his office was working on a set of reform and development proposals for presentation to the national council.
“Items in the new energy work plan include initiating a bid round for upstream blocks, LPG price adjustments to reduce the gap between the transport sector and households, as well as approval of a power development plan, all of which are to be achieved within the next six months,” a Platts energy analysis report said.
A source in the ministry, speaking off the record, told The Irrawaddy the military-run National Council for Peace and Order will likely be presented with a set of reform proposals in the next few weeks, especially to reduce national debt from oil and gas imports and attract new investment in domestic exploration.
Thailand’s plans to open up five offshore and 17 onshore blocks for exploration have been postponed several times since 2012. The blocks have combined estimated reserves of between 85 billion cubic meters and 141 billion cubic meters of gas and between 5 and 10 million barrels of oil, according to the Department of Mineral Fuels.
A new bidding round has been postponed for several reasons, including public opposition on environmental grounds. The last postponement in middle 2013 was following a leak from an oil pipeline operated by the state-owned oil monopoly PTT that polluted beaches on Koh Samet, a holiday island in the Gulf of Thailand.
In April, PTT said it was cutting its previously announced capital expenditure budget for 2014 by 30 percent, down to US$1.86 billion, because political chaos in Bangkok had delayed state approval for projects.
The postponed projects included a 300-kilometer onshore oil pipeline to link Rayong on the Gulf of Thailand with the impoverished northeast. Thailand has a limited pipeline distribution system which is mainly confined to the greater Bangkok region.
Coup leader army chief of staff General Prayuth Chan-ocha has said the military does not expect to hand back power to an elected civilian government for one year at least.
An opening up of more exploration blocks to search for gas and oil in Thailand might divert some foreign investment from new developments expected to be offered soon by Myanmar’s Ministry of Energy and MOGE, the Myanmar Oil and Gas Enterprise.
On the other hand, Myanmar could benefit from the uncertainty in the wake of the military takeover in Thailand. Criticism of the coup by some Western governments, including a downgrading of diplomatic relations by Australia, may make potential investors reluctant to commit to high-value projects, observers have warned.
The current political turmoil has affected [Thailand’s] regional competitiveness and ability to function as an efficient and effective place to do business, said Strategic Risk, a London-based investment guidance publication in a June 2 post-coup assessment.
This could pose long-term problems for a country already wrestling with slowing growth and outflows of global capital from its fragile financial markets, it said, quoting international business law firm DLA Piper.
“Even prior to the current political unrest, there was a need for Thailand to take action to stay competitive in the Asian market, given the increasing emergence of other countries such as Myanmar, Indonesia and the Philippines as attractive alternative places to invest,” DLA Piper’s Jonathan Goacher told Strategic Risk.
“The current episode of unrest has served to place even greater pressure on Thailand to remain attractive to foreign investment.”
More than 65 percent of Thailand’s energy consumption is from oil and natural gas, and increasing volumes are imported as domestic production declines. The most recent official figures show crude oil imports averaging more than 620,000 barrels per day.
The Thai Ministry of Energy’s Department of Energy Business has said the import bill for oil and gas in 2012, the latest year for published statistics, was $34.3 billion.
The International Energy Agency forecast last October that Thailand’s energy consumption—already the second highest in Southeast Asia behind Indonesia, which has more than three times the Thai population—will grow by 75 percent by 2035 and that without reforms the annual energy import bill could climb to $70 billion.
PTT’s subsidiary PTT Exploration & Production, or PTTEP, has invested hundreds of millions of dollars in Myanmar’s offshore oil and gas sector, but mainly in opaque agreements which were reached with the former Burmese military regime, ensuring most production was shipped to Thailand.
“There is a groundswell of opinion in governing and energy industry circles [in Bangkok] that is concerned about Thailand’s dependence on imported gas and crude oil and this is something the coup leaders and their advisers are likely to want to try to deal with,” Bangkok independent analyst Collin Reynolds told The Irrawaddy.
“One answer is to try to produce more oil and gas at home. Existing domestic oil and gas fields which are mostly in the Gulf of Thailand are or will soon be peaking, so the need for new discoveries is becoming urgent. Foreign investor interest is there, however, it may be muted by the army’s takeover of the country which is already being frowned on by some friendly governments, not least the United States.”
Source: The Irrawaddy Myanmar