Bidding process for petroleum concessions set for postponement

In other words, most of the benefits have gone to giant oil and gas companies as well as their shareholders. In Thailand, PTT is the pre-dominant player in this sector. PTT’s shares are listed on the Stock Exchange.

Academics had urged the government to review the outdated petroleum act, with Prasart Mee-taem and Ittabul On-wongsa arguing that the public benefits are minimal because Thailand’s royalty-fee rate on petroleum concessions is only 5-15 per cent.

According to the most recent data, the maximum effective rate on record was just 13 per cent of the revenue derived from these concessions.

As a result, it is the private sector and shareholders of oil companies that have gained the most during the several decades that Thailand has been granting concessions to the private sector to explore for offshore and onshore oil and gas deposits.

To redress this situation, the government should suspend the new round of bidding and amend the outdated law to ensure that the public gets a more reasonable cut of the benefits from these scarce natural resources.

The Petroleum Act has never been amended despite being on the statute books for many years ago. Today, technology in exploration and production has advanced significantly, resulting in lower costs and higher profits for oil and gas companies around the world.

Over the 29 years from 1981 to 2010, petroleum concessions in Thailand generated a combined revenue of nearly Bt3 trillion, but the government collected royalty fees totalling only Bt370 billion plus a bonus payment of Bt31.5 billion, and income taxes totalling Bt480 billion. Altogether, that makes about Bt890 billion, or about 29 per cent of the total revenues from these concessions.

One way to combat this unfair share of the benefits derived from natural resources which belong to the general public is to file a petition with the Administrative Court to suspend the bidding indefinitely until the current petroleum law is amended for greater public benefits.

In the past, non-government organisations have campaigned to get PTT de-listed, claiming it was unwise to put public assets like those vested in the national oil and gas company directly on the stock market.

According to Songpop Pol-chan, director-general of the Department of Mineral Fuels, the current round of bidding could be postponed to next year.

He noted that there is a misunderstanding of the rules and regulations governing the bidding for petroleum concessions, arguing that royalty fees and taxes currently amount to as much as 55-59 per cent of the profits.

In the current round of bidding, there are a total of 22 concession tracts, in the Northeast, Gulf of Thailand and other locations. The total investment in exploration work is estimated to be Bt4 billion in the first three-four years.