NOC needs to be resurrected
The National Legislative Assembly (NLA) has placed a risky bet on the production and sale of one of the nation’s most valuable assets, natural gas, by rushing to approve on Thursday two bills amending the 1971 Petroleum Act and the 1971 Petroleum Income Tax Act amid much controversy. In its bid to facilitate a new round of auctions of petroleum exploration and production rights for the Erawan and Bongkot gas fields, which account for a combined 76% of natural gas output in the Gulf of Thailand, the NLA approved the bills that were opposed by pressure groups, including the People’s Alliance for Energy Reform (PAER), led by former senator and activist Rosana Tositrakul.
The new round of auctions is required because the Erawan gas concession, operated by Chevron Corp, and the Bongkot concession, operated by state-controlled PTTEP Exploration and Production Pcl, will expire in 2022 and 2023, respectively.
When they expire, the state will be able to take over all exploration and production facilities from the operators and set new directives for further operations in the two blocks for the first time in four decades.
The controversies centre on how the state will manage the handover of the facilities and new contracts, and who should lead the mission.
The Ministry of Energy and its Department of Mineral Fuels are likely to take on the job. But PAER views them as inexperienced and too bureaucratic, and has proposed a national oil corporation (NOC) as a more independent option.
But the NLA shot down the proposal and merely annexed it in the petroleum bill for “further consideration”. In fact, the chance of it materialising is now unlikely. The ministry seems to have its own plans. Energy Minister Gen Anantaporn Kanjanarat said yesterday that new auctions for both gas fields will take place in December.
As no specific directives were provided on how his ministry plans to take over the exploration and production facilities, or handle new contracts, domestic consumers are at risk of covering further higher costs.
The existing concession system, which allows operators to set their own prices for their products, has been criticised for giving operators exclusive rights over natural gas. It has also come under fire for forcing consumers in Thailand to pay the same international standard prices as they would for the imported commodity.
Admittedly, PAER’s proposal is not ideal as it supports the inclusion of the military in an NOC. This idea does not make any sense and unnecessarily invites much scepticism and hostility.
However, the state does need such an independent and efficient body to handle the takeover of petroleum resources. This is especially important as the petroleum bill provides more options in terms of awarding operators under new production-sharing agreements or service contracts. The state, in return, can own part of the produced oil and sell it domestically at its own prices.
Consumer groups, including PAER, hope this will help the state properly retain natural gas reserves and offer consumers fair and affordable prices.
The government must reconsider its concern that the ministry may get bogged down by its own bureaucracy if it is tasked with handling the production and sale of natural gas. It is possible that it may end up letting contracted firms run the entire show, which will hurt consumers.
The idea of setting up an NOC is similar to another proposal to have a new body take over the Revenue Department’s tasks for greater efficiency and transparency. This means the NOC should feature a qualified and independent executive board representing all sectors, as well as competent staff and a proper system of checks and balances.
The government must support the setting up of this new body to ensure Thailand starts taking proper care of such an important source of energy without prematurely exhausting it or forcing consumers to pay unreasonable prices.