Veerasak Pungrassamee, Director-General, Department of Mineral Fuels: Interview

Interview: Veerasak Pungrassamee

What role will mineral fuels continue to play in Thailand’s energy mix moving forward, given its drive toward diversification?

VEERASAK PUNGRASSAMEE: Mineral fuels will definitely continue to play an important role in Thailand’s energy mix for the next 20 years at the very least. In the power sector, natural gas and coal-fired power plants will achieve an almost 75% share of power generation by the year 2025. Natural gas remains the main fuel for power generation even though the government has outlined a strong policy to diversify the nation’s fuel mix, as reflected in the current Power Development Plan. To take a long-term view of natural gas demand and supply, Thailand will gradually increase its dependence on imported gas due to the limited domestic resources available. Liquefied natural gas (LNG) is going to play an important role as the country develops sufficient infrastructure for imports such as LNG terminals and onshore distribution pipelines. While gas imports are necessary, domestic resources are not to be ignored. Since domestic gas supplies feedstock for the petrochemicals industry and generates other benefits to the country, petroleum exploration and production activities still need to be supported to maintain the gas production rate as long as possible.

What progress has been made with the 21st round of bidding for petroleum concessions?

PUNGRASSAMEE: The 21st bidding round is a key responsibility that the Department of Mineral Fuels would like to undertake as soon as possible. In recent years there have been doubts, especially those raised by civil society groups, about whether bidding for concessions is the most suitable measure in terms of the overall benefit to the nation. In response, the department has raised efforts and resources to educate the public and civil society groups and leaders.

Another significant step taken has been the work done with the Council of State to amend the Petroleum Act to include production sharing contracts (PSCs) and service contracts, in addition to the existing royalty concession regime. As soon as the government and the National Legislative Assembly approve the amended act, the department will re-commence the bidding round.

The PSCs that may be applied for in the new bidding round have been developed based on the PSC model from the Malaysia-Thailand joint development area in the Gulf of Thailand, therefore we are already relatively familiar with the proposed model. However, not all staff have experience with the model, and the major challenge will be the service contracts proposed, as this model is adopted by only a few countries. While we are attempting to foresee all the potential issues that might occur, it will take some time and learning before service contracts can smoothly be applied to the bidding round.

How has the recent fall in oil prices impacted the various actors in Thailand’s energy sector?

PUNGRASSAMEE: The current oil price has had an enormous effect on the Thai exploration and production industry. The concessionaires have cut their budgets and delayed development projects, which has caused contractors to lay off employees. If the oil price continues to drop below $30 per barrel, some concessionaires may be forced to shut down their remaining fields and start decommissioning.

The department remains hopeful that oil prices have bottomed out, but we are all aware that we will not see prices at $100 per barrel in the near future. We believe that the oil producers will attempt to control oil supply moving forward to keep the price above $40 per barrel, but in reality we will likely see the price swing between $30 and $40 per barrel in the short term. Prices may rise more substantially in the next two years if the global economy recovers, and we experience a sustained increase in demand for oil.