The Thailand Development Research Institute yesterday urged a cut in PTT’s profits on natural-gas pipeline transmission and breaking up its monopoly in the lucrative pipeline and gas-separation businesses.
Natural gas accounts for the largest chunk of PTT’s business. The company is the largest state enterprise, and the biggest company listed on the Stock Exchange of Thailand, with sales revenue of more than Bt2.8 trillion and net profit of nearly Bt10 billion last year.
Nevertheless, TDRI economists say domestic fuel prices are near the appropriate rates, brushing off allegations from some non-government organisations that have campaigned for “taking back” PTT from the stock market.
TDRI distinguished scholar Ammar Siamwalla also argued that local oil refineries should be allowed to export their finished products at higher prices than domestic rates.
Duenden said the TDRI had found many issues in the country’s energy sector but the problems with PTT’s natural-gas pipelines were quite clear because the existing pricing formula has provided it with excessive returns – 12.5 per cent per annum for old pipelines and 18 per cent for new pipeline systems.
“These IRR [internal rate of return] rates were set when the interbank rate was 13 per cent, but now the rate is much lower. It does not seem right that the IRR has not been reduced. Why have the regulatory agencies have not taken it down?” she said.
TDRI researchers also suggested that the military’s ruling National Council for Peace and Order float the prices of liquefied petroleum gas and natural gas for vehicles (NGV) and equalise the LPG prices for all four users groups – households, the petrochemical industry, other industries, and motorists – to reflect their real costs, and provide a direct subsidy to lower-income earners who might be affected by the move.
Duenden said gas-separation plants were very important because they produced raw materials for numerous downstream industries such as plastics, synthetic fibres and automobiles, but currently most of their output was sent to PTT’s subsidiaries and a small portion to Siam Cement Group, with nothing left for the outside markets.
Ammar said: “Although by law, PTT is the owner of gas, we must take it as a public asset and not allow PTT to use its monopoly power to pursue marketing measures principally for its own interest. This is an important principle, but we have seen many cases of PTT seemingly not following it.”
TDRI president Somkiat Tangkitvanich said the current price-setting method had made the cost of natural gas appear to be US$11.90 per million British thermal units, while the actual cost of gas for new power stations would have be $18/MMBtu since there is no additional domestic gas supply and they will have to use imported gas. The distorted price-setting method has misguided Thailand’s energy policy, making the country over-dependent on natural gas for electricity generation, and partially discouraging the use of alternative energy.
TDRI researchers also presented their study on LPG prices, which showed that PTT has been selling gas to its own subsidiary, PTT Global Chemical, at Bt20 per kilogram, cheaper than what it charges SCG Chemical (Bt28), other industries (Bt30.13), the transport sector (Bt21.38), and cooking-gas consumers (Bt22.63).
The academics also accused the energy regulatory agencies of negligence in pursuing their designated tasks, such as issuing third-party access, reviewing the gas-pipeline tariff, and separating the accounts of PTT’s monopolised businesses.
“PTT listed on the stock market 13 years ago. Why does nobody do anything, despite the fact it was put in the IPO [initial public offering] prospectus and in the Cabinet’s resolution that PTT must spin off its natural-gas pipelines?” Somkiat said.
First published: The Nation, July 4, 2014