Page 44 - Oil&Gas-AustralAsia-2015-Issue-1

T HAILAND
Profit sharing deemed bad
for exploration and industry
growth in Thailand
Thailand government legislators have
come under fire from academics from
the nation’s Chulalongkorn University
for what it describes as a rigid ben-
efit sharing scheme that discourages
explorers from searching for oil and gas The university lecturer said produc-
deposits in the country.
The criticism comes after the govern-
ment postponed the opening of a new
round of petroleum exploration and
production bidding for three months
while amendments to the contentious
petroleum fiscal system are considered
with representatives from the state and
an energy activists’ group.
It has been reported the head of the
mining and petroleum department of
Chula Engineering, Thitisak Boon-
pramote said the government can
amend whatever it chooses in a bid to
create more interest from oil and gas
companies.
“But because the oil price has fallen so Professor Bundhit Eua-arporn, com-
much, adding a strict taxation regime
will have a double negative effect,” Mr
Boonpramote said.
“Petroleum exploration is a special type institution has chosen to grant con-
of business, it requires a high invest-
ment budget and an interpretation of
the unseen”, he said.
“There is no way to know the results of
petroleum exploration for two or three
years. It comes with high risk and high
uncertainty. Therefore, a good system
should have some certain degree of
A A42 OIL & GAS ustral SIA MARCH/APRIL 2015 www.oilandgasaustralasia.com
flexibility that will allow the develop-
ment of marginal fields, and in the case
of large discoveries, be one in which the act and if Chula did not negotiate well,
government is able to collect a higher
share.”
tion-sharing or concessionary regimes
amount to much the same thing, since
both systems can be designed to give
the same benefits to the state. “It will
be a challenge for Thailand to adopt
the production-sharing system (PSC)
considering the issue of governance and
transparency,” he said.
“PSC is interesting because all of our
neighbouring countries have used it.
The problem is who will be appointed
as the body to take care of our resourc-
es. Will we face the same problem as
we faced with PTT, which was later
privatised?”
The dean of Chula Engineering,
pared petroleum fiscal regimes to other
business operations, including those at
Chulalongkorn University, where the
cessions to private companies like the
MBK centre to develop properties on its
land, instead of applying a profit-shar-
ing system.
“If we were using PSC, MBK would
have to share its income while not
having to pay a concessionaire fee. And
Chula would have to set up an agency
to check the sales and profits of MBK.
By Marie RYAN
Hence [under such a scenario] the
transparency of this agency must be ex-
it might receive less income,” he said.
Thitisak said the average return of
60-70 per cent that Thailand had taken
from petroleum exploration and pro-
duction companies’ profits during the
past decades under the concessionary
system was “not a bad” rate.
“We have already delayed [the petrole-
um bidding] for seven years. How long
will it be postponed further? In the
future we will face an [energy] crisis,
which might not be so obvious at pres-
ent,” he said.
The government could amend the
petroleum laws to tax oil and gas firms
on their profits, rather than on their
production volumes, which is what
the current petroleum royalty fees are
levied on and should also consider
benefit-sharing with local communities
in exploration areas, Mr Thitisak said,
he suggested.
Jirawat Chewaroungroaj, lecturer in pe-
troleum engineering at Chula Engineer-
ing, said that in regard to a proposal
from the energy activists’ group that
the government should take a role as an
oil and gas explorer was flawed as the
government had no expertise, resources
or administrative flexibility to pursue
petroleum exploration activities, which
were high-risk, high-investment busi-
nesses. §