Energy Sector Management in Thailand

           The energy sector in Thailand is managed by the National Energy Policy Council (NEPC), the central authoritative body for the establishment of the national energy policies.  It has been established under the National Energy Policy Council Act, B.E. 2535 (1992), with the Energy Policy and Planning Office (EPPO) acting as the Secretariat.  To enhance efficient energy sector management, the Committee on Energy Policy Administration (CEPA) has been established to assist with the work of the NEPC.  Additionally, the NEPC is responsible for the promotion of energy conservation and the management of the Energy Conservation Promotion Fund as per the Energy Conservation Promotion Act, B.E. 2535 (1992).

 The Organizational Structure of Thailand’s Energy Sector

          In October 2002, pursuant to the Act on Organization of Ministries, Sub-Ministries and Departments (2002), the Ministry of Energy was established.  Various energy-related agencies that used to be scattered under the auspices of different ministries have been transferred to be under the Ministry of Energy so that the energy management and the planning and development of national energy programs, including regulation, will be more streamlined.

The Departments under the Ministry of Energy and their responsibilities are as follows:

 1.  Office of the Minister

     Responsible for and support the Minister of Energy’s political missions in coordination with the cabinet, the Parliament and the general public; and coordinate the responses to queries, clarification on motions, bills and other political-related issues.

 2.  Office of the Permanent Secretary

     Establish strategies and translate policies of the Ministry into action plans; allocate the resources and manage the manpower to achieve the targets and missions of the Ministry; and coordinate international energy cooperation.

 3.  Department of Mineral Fuels (DMF)

    Promote and accelerate energy procurement via facilitating energy resource exploration and development both in Thailand and abroad.  Regulate energy business via concession granting for exploration and production of mineral fuels.

 4.  Department of Energy Business (DOEB)

    Regulate the energy quality and safety standards, including impacts on the environment and security, and improve the standards to protect consumers’ benefit.

 5.  Department of Alternative Energy Development and Efficiency (DEDP)

    Promote efficient use of energy, monitor energy conservation activities and explore alternative energy sources, as well as disseminate energy-related technologies.

 6.  Energy Policy and Planning Office (EPPO)

     Recommend national energy policies and planning; establish energy conservation measures and framework for budget allocation for energy conservation promotion; establish preventive and solution measures against oil shortage; and coordinate and assess the outcome of policy implementation.

  The State Enterprise under the Ministry of Energy comprises:

 - Electricity Generating Authority of Thailand (EGAT)

    Note: The Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) under the Ministry of Interior will be transferred to the Ministry of Energy in two years (as from October 2002).

           In addition, there are two Autonomous Public Companies under the Ministry of Energy, namely:

1.  PTT Public Company Limited (PTT)

2.  Bangchak Petroleum Public Company Limited (BCP)

          The implementation of energy policies, however, intensively involves both directly and indirectly other government agencies and the private sector.  Such agencies include:

 ·      Ministry of Industry: the Department of Mineral Resources and the Thai Industrial Standards Institute.

 ·      Ministry of Commerce: the Department of Commercial Registration, the Department of Internal Trade, the Department of Foreign Trade and the Department of Business Development.

 ·      Ministry of Defence: the Defence Energy Department and the Royal Thai Navy.

 ·      Ministry of Finance: the Customs Department, the Excise Department, the Revenue Department, the Comptroller-General’s Department and the Fiscal Policy Office.

 ·      Office of the Prime Minister: the Office of the National Economic and Social Development Board (NESDB), the Office of the Consumer Protection Board, the Office of the Council of State and the Royal Thai Police.

 ·      Ministry of Transport: the Department of Land Transport and the Department of Highways

 ·      Ministry of Foreign Affairs: the Department of Treaties and Legal Affairs.

 ·      Private Sector Organizations and Institutions: These will include academic and research institutions, oil corporations, electricity and energy producers, energy importers and exporters, and private enterprises related to energy and energy consumption.

 Regulation of the Energy Industry

           The implementation of the liberalization and privatization plan of the energy sector in Thailand is underway.  Simultaneously, the regulatory framework for the energy sector is being reformed to clearly distinguish the role of the National Energy Policy Council (NEPC), the energy policy-making authority, from the regulatory duties.  The National Energy Regulatory Commission (NERC), an independent regulatory agency under the Ministry of Energy, and a transparent regulatory framework for the energy sector will be established under the new Energy Industry Act.  The regulatory duties currently under the responsibilities of various departments of the Ministry of Energy will be transferred to the NERC.  Currently, the Energy Industry Bill is under review by the Office of the Council of State; it is expected to be in force by the end of 2003.

           The NERC is to regulate the electricity and gas supply industry, including other energy-related activities as designated by relevant royal decrees.  To this effect, the Commission shall be responsible for, among others, license issuance for energy industry operation, regulation of tariff, standards and service quality, promotion of competition and prevention of abusive use of monopoly power, and protection of energy consumers, including addressing consumers’ complaints.

 Coal

 Coal Reserves

          With participation of the private sector in coal mining since early 1980s, coal has played significant role as an alternative source of energy for decades in Thailand.  Through the Mineral Act, mining practices are regulated and supervised by the Department of Mineral Resources (DMR), Ministry of Industry.

           The majority of coal found in Thailand has low calorific value and is ranked as either lignite or sub-bituminous.  The output is all used domestically mainly as fuel in electricity generation.  As at the end of 2001, Thailand’s coal reserve was estimated at 1,354 million tons.  The largest reserve of 1,211 million tons is located at the Mae Moh basin belonging to the Electricity Generating Authority of Thailand (EGAT), a state enterprise under the Ministry of Energy.  The cumulative coal production at the end of 2001 was 264.8 million tons.

 Mining Leases

          Coal mining leases in Thailand has been applied according to the Mineral Act.  As at the end of 2001, there are altogether 25 coal concessionaires, holding 146 tracts throughout Thailand.  A minimal block of 300 rais (120 acres) will be awarded per mining tract.  Of these, more than half located in northern Thailand, such as, Lampang, Lamphun, Chiang Mai, Phayao and Tak provinces.  Most of coal acreage belong to EGAT.  Currently, 12 coal mines are operational; 10 of which are in northern Thailand and one each in the central and southern regions.

 Coal Production

          History of coal production in Thailand dated back to 1955, when the open-pit coal mine in Mae Moh basin started producing at an initial rate of 22,118 tons per year.  Coal output steadily increased every year, with the highest record of 22.13 million tons in 1997.

           The output of coal depends upon the market demand.  Following the1997 economic crisis, coal production in 2000 dropped to 17.78 million tons.  However, the production in 2001 increased by approximately 10.2% to 19.60 million tons.  Apart from EGAT, there are 12 private coal operators in Thailand.  However, only three operators – EGAT and two private coal operators, i.e. Ban Pu and Lanna Lignite -- are major coal producers, altogether representing over 90% of the total production for years.  In 2001, EGAT excavated 78.8% of the whole output from Mae Moh basin.  Ban Pu and Lanna Lignite are major private coal companies, holding shares of 13.4% and 5% respectively.

 Imported Coal

          Since domestic coal has low calorific value, Thailand has to import coal every year to fulfill industry needs, particularly bituminous coal for cement industry.  In 2001, the volume of imported coal was about 4.9 million tons (18.2% higher than that in 2000).  Thailand imported coal from Indonesia, Vietnam, Myanmar, Laos, China and Australia.

 Thailand’s Lignite/Coal Supply and Demand in 2001

 Coal Utilization

          Utilization of domestic coal decreased in 1999 and 2000 due to the impact of the 1997 economic crisis.  However, in 2001, the consumption increased by 13.6%, i.e. from 17.55 million tons in 2000 to 19.9 million tons.  The largest portion, 79%, was used for power generation at EGAT’s Mae Moh power plant.  Next to it was for cement manufacturing (14%); the rest was used as fuels in other industries, such as paper mill, fiber factory, and tobacco curing.

           Combined with the imported coal, the country’s total coal consumption in 2001 was about 24 million tons.

 Coal Pricing

          In general, coal pricing in Thailand is restricted mainly to heating value.  The most acceptable heating value is at 5,000 kcal/kg.  At present domestic coal is purchased at 500 baht/ton at mine mouth.  Coal buyers will pay bonus for additional heating value.  On the contrary, coal sellers must pay penalty in case of excessive emission of ash and sulphur content.  Transportation cost of domestic coal is estimated about 340 baht/ton.

           For coal import, both long-term contracts and spot-lot are applicable.  Long-term contracts provide quality reliability and supply security.  Referring to JBP (Japanese benchmark price), the cost can be as high as 28.75 US$/ton for 6,700 Kcal/kg coal at loading point.  Mostly used for Thailand, the spot-lot is advantageous in demand fluctuation but weakly versus JBP.  High calorific coal (6400-6600 kcal/kg) costs about 30 US$/ton and 22 US$/ton for medium calorific one (6000 Kcal/kg) at discharge port.

 Oil: Overview

           The first-ever oil field in Thailand was found in Fang, Chiang Mai province in the north of the country.  The Defence Energy Department, Ministry of Defence, has been operating Fang oil field since 1963.  On 26 March 1971 the first Petroleum Act was promulgated, and the first round of petroleum concession bidding was announced on 13 September 1971, resulting in the awarding of 9 concessions, altogether 22 blocks.  Up to 2001, 57 concessions with 92 blocks were already issued, but only 25 concessions with 32 blocks were still held.

           Crude oil production by concessionaires started up in 1982.  The aggregate sale volume at the end of 2001 was 177 million barrels (MMbbl).  Domestic oil development has greatly reduced Thailand’s dependency on energy imports, from 98% of the country demand in 1980 to 63% in 2001.  As of 31 December 2001, crude oil reserves were estimated at 806 MMbbl, of which 325 MMbbl are proven reserves.  Of the total reserves, 219 MMbbl are onshore reserves, mainly at Sirikit Oil Field in Kamphaeng Phet province, and 587 MMbbl are offshore reserves in the Gulf of Thailand in such fields as Benchamas and Tantawan.

           The oil industry in Thailand is dominated by PTT, formerly the Petroleum Authority of Thailand.  PTT Exploration and Production (PTTEP) is the main upstream subsidiary of PTT.  Thai Oil, the country’s largest refiner, is also managed by PTT.  In October 2001, PTT underwent a partial privatization, with about 30% of its equity sold in the Stock Exchange of Thailand (SET).

 Oil: Exploration

           For oil exploration, the Defence Energy Department’s Fang Oil Field has been in operation since 1963.  Its current production is about 1.2 thousand barrels per day (KBD).  With the discovery of crude oil at Sirikit Field in the central plain in early 1980’s, Thai Shell Exploration and Production Co., Ltd. has been producing crude oil at a rate of 21 KBD.

           As of September 2001, the number of petroleum concessions in Thailand has reached 25 concessions and 32 blocks, locating onshore (7 concessions/7blocks), in the Gulf of Thailand (17 concessions/24 blocks), and Andaman Sea (1 concession/1 block).  This involves overall concession areas of exploration, production and reserves of 76,639.9 km², 5,264.8 km², and 11,763.5 km² respectively.  Among the private companies, Thai Shell Exploration and Production Co., Ltd. has the biggest share of oil exploration and production.  The Department of Mineral Resources (DMR) of the Ministry of Industry is in charge of petroleum exploration by granting concession rights in petroleum exploration and production to private companies.

           In 2001, the total crude oil production rate was 62 KBD, of which 29 KBD came from Benchamas Oil Field in the Gulf of Thailand (47% of the domestic production) and 21 KBD from Sirikit Oil Field (34% of the domestic production).

 Crude Oil Production in 2001 (by Resource)