Thailand's long-delayed decontrol of domestic LPG trade is likely to take place in March or April next year, when the government is expected to complete the process of deregulating the kingdom's entire fuel trade.
Metta Bantherngsuk, deputy secretary general of National Energy Policy Office (NEPO), Thailand's energy regulator, said the office chose this timing in order to coincide with the period of soft world LPG prices that usually takes place at that time of year.
Such timing is essential to avoid public discontent if the decontrolled prices were higher than existing levels. Such a situation would have a significant effect on the success or failure of the LPG deregulation scheme.
LPG is widely used for household cooking in Thailand, and its prices are a publicly sensitive issue with political implications. That is the main reason for the repeated delays in plans to deregulate the fuel during the past several years, even though the prices of other fuels have been deregulated since 1991.
According to the Petroleum Authority of Thailand, Thailand's LPG consumption in the first 7 months of this year dropped 3.3% to the equivalent of 54,330 b/d, due largely to the country's economic crisis.
Decontrol methods
Under the current structure, the wholesale and retail LPG prices are stabilized by a mechanism of the long-established "oil fund," which sees capital inflow when world LPG prices are below Thailand's controlled price and outflow, in the form of subsidy, when world LPG prices are higher than locally controlled prices. Thailand has used the contract prices quoted by Saudi Arabia's Petromin as reference prices.In September, the Petromin contract price was about $120/metric ton, resulting in the inflow of 30 satang/kg to the Thai oil fund. But the contract price in October was estimated at $150/ton. This higher price would mean an outflow, or subsidy, of 61 satang/kg, required to maintain the current retail prices.
The outstanding balance in the oil fund is 3.6 billion baht. According to Metta, two approaches to deregulating the LPG market are under consideration.
The first is to decontrol the ex-refinery price initially and the retail prices later. The method is similar to that used for other oil products years ago.
The second method is to first lift retail price controls in selected provinces, gradually introduce the decontrol scheme in other areas, then subsequently dismantle ex-refinery prices.
NEPO meetings
NEPO reportedly held a seminar in Bangkok in October for the purpose of allowing several parties to air their views on how the deregulation should be undertaken. Also discussed was how to deal with related problems, such as cheating in the reporting of the content of LPG cylinders.About 200 representatives of various sectors, including government agencies, oil refiners, oil traders, LPG bottlers, LPG retailers, LPG transporters, academics, major consumers, and mass media, were invited to attend the event.
Another seminar of this nature is scheduled for January in order to reach a conclusion before submitting a final recommendation to the Energy Policy Committee and the cabinet for approval. If approval were given in January, the deregulation could begin as early as March or April, Metta said.
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