Energy challenges remain, as oil prices 'bottomed out'

Sukrit Surabotsophon, chairman of the Petroleum Refining Industry Club of the Federation of Thai Industries (FTI), told a seminar yesterday that every research house was predicting world oil prices would start to pick up from next year by US$3-$5 per barrel annually.

Areepong Bhoocha-oom, permanent secretary of the Energy Ministry, said that if oil prices really went up, they would pose a challenge to the country, which has abolished its subsidy on oil products. The state-managed Oil Fund, nevertheless, currently has about Bt40 billion in its coffers.

Chen Namchaisiri, vice chairman of the FTI, said that after Sunday’s election in Myanmar, foreign direct investment was likely to flood into that country, which would fuel rapid growth of its economy. This would definitely affect Thailand since Myanmar would use more energy domestically and cut its exports to the Kingdom. Sukrit said that after the huge drop in oil prices from more than $100 a barrel to around $50 at present, about 1,000 of the 1,600 shale-production rigs in the United States had been shut down, but could be turned on quickly once oil prices recover. 

“Shale [producers] have almost replaced Opec [the Organisation of the Petroleum Exporting Countries] as the swing producers that helped buffer oil prices in the past. They have proved their ability to pump a million barrels per day of additional output each year when oil prices were at $100 a barrel,” he said.

Chen said the volatility of oil prices was what concerned the private sector the most, not the level of oil prices, since it made it hard to make predictions so as to manage risks and production costs.

“A rising oil price rise is instead a good thing because we can sell our goods at a higher price. But when oil prices are on a downward trend, we’re dying, because we bought our raw materials at high cost,” he said.

Areepong said that despite the oil-price slump, the Energy Ministry would continue to support renewable energy. It is considering phasing out the current gasohol products that use 10 per cent ethanol (E10) within seven years, while increasing the use of E20 and E85 gasohol and biodiesel.

The Ministry of Agriculture and Cooperatives has asked the Energy Ministry to increase the country’s demand for biofuels, since it plans to increase the plantation area of oil palm by 2 million to 3 million rai (320,000-480,000 hectares) and of sugar cane by about 1 million rai. 

Areepong said the Energy Ministry was supportive of that policy but it would need to make sure the costs would not be too high and the productivity of oil palm and sugar cane should be raised. Petroleum is currently cheaper than ethanol, but this could change when the oil price goes up.

Chen said Thailand should consider whether it should cease exporting sugar cane at low prices and use all of its output of this crop for producing energy.

He said oil prices did not have as much effect on the industrial sector as electricity costs. If the power sector fails to reduce its reliance on natural gas, currently consumed by nearly 70 per cent of the power plants in the country, Thailand would have to import more liquefied natural |gas in the future, negatively affecting the competitiveness of Thai industries.