Thailand's government has given a green light for more active participation by foreign companies in its downstream petroleum industry.
The Thai National Energy Policy Committee (NEPC) approved removing conditions hindering major refinery projects planned by Royal Dutch/Shell Group and Caltex Petroleum Corp. in Thailand (OGJ, May 21, 1990 p. 20).
That opens the door for other foreign investors to pursue refinery projects in Thailand.
The moves relate to Thailand's efforts to pare imports of refined products by hiking refining capacity to more than 600,000 b/d by the mid-1990s.
Along with that push, the government will focus on changing fuel specifications to reflect environmental concerns.
Meantime, the Persian Gulf crisis sparked by Iraq's invasion and takeover of Kuwait will not change downstream investment plans by state owned Kuwait Petroleum Corp. (KPC) in Thailand.
In other downstream action, Thailand plans to develop a third large petrochemical complex, fed by gas and naphtha, on its southern peninsula.
In addition, Thailand is proceeding with efforts to build its third gas processing complex.
CONSUMPTION, FUEL QUALITY
Thai refined products consumption totals about 400,000 b/d now and is expected to rise to 900,000 b/d by the end of the decade, said H.E. Korn Dabbaransi, minister to the office of the Thai prime minister at the Asia-Pacific Petroleum Conference in Singapore in September.
Capacity at three existing Thai refineries will jump to a combined 370,000 b/d by 1993 from 230,000 b/d. A fourth, 134,000 b/d refinery is scheduled to be on stream in 1994 at Map Ta Phut, Rayong Province.
Korn said the government soon will issue tenders for a fifth refinery with a capacity of at least 100,000 b/d to be on stream by 1995. It will be located "where the investors desire."
New Thai refining capacity will have to produce fuels to stricter environmental specifications.
The maximum allowable lead content in gasoline was cut last year to 0.4 g/l. from 0.45 g/l. and will be trimmed further to 0.15 g/l. by September 1993.
To speed up the lead reduction, however, Korn expects imports of low lead gasoline to begin as soon as possible.
Still, it is unlikely unleaded gasoline will dominate the local market within the next decade, he said.
Plans also call for sulfur content in diesel fuel to be cut to 0.5 wt % in 1993 from 1 wt % currently. State owned Petroleum Authority of Thailand (PTT) has begun importing low sulfur diesel.
REFINERY CONTROVERSIES RESOLVED
Approval by NEPC, the chief energy policymaking body chaired by Thai Prime Minister Chatichai Choonhavan, allows Caltex to proceed with plans to build a $520 million refinery in the eastern seaboard province of Rayong rather than on the southern peninsula under an earlier government plan.
It also means Shell can go ahead with its proposed $760 million refinery based on a shareholding structure contained in a draft agreement. That draft agreement has been completed officially and is no longer subject to changes sought by critics of the proposal.
The NEPC resolution further allows new investors to apply for licenses to build new refineries with few prerequisites imposed by the government.
The resolution is a reversal of the government's previously rigid policy regarding establishment of new refineries in Thailand and is thought to be partly influenced by pressures on the Thai government exerted by U.S. and U.K. governments.
Acting on requests from Caltex, the U.S. ambassador in Thailand has twice asked Chatichai to ensure fairness in dealing with Caltex concerning its rights to build the 120,000 b/d refinery.
The controversy centered on Caltex's resistance to a resolution of the Subcommittee on Petroleum Policy, an NEPC branch chaired by Korn Dabbarangsi, to relocate its project in the south to support the Southern Seaboard Development Program (SSDP), a multibillion dollar project to turn the southern peninsula into an international transshipping complex for petroleum products and industrial/trading center.
Caltex opposed the southern site as uneconomic compared with its preferred site at Rayong, citing the lack of infrastructure and supporting facilities in the south and distance from the bulk of Thailand's petroleum market in the north.
The U.K. ambassador to Thailand protested the government's recent attempts to dilute Shell's initial interest in its proposed 145,000 b/d refinery to 51% from 64% to 51% while boosting PTT's stake to 49% from 36%.
The draft agreement to proceed with the Shell refinery was to have been signed last July, but it was mired in the Thai cabinet secretariat. The delay apparently stemmed from government indecisiveness and lack of clear policy at a time when Korn sought to block the Caltex project.
Korn threatened to revoke Caltex's right to build the refinery and had called for a new tender for investors.
NEW POLICY DETAILS
Endorsing the new policy last month, NEPC cited Thailand's need to boost refining capacity to meet expected domestic demand for petroleum products.
Korn noted Thailand imports as much as 40% of its refined products.
The minister said no restrictions are to be imposed on the number of refineries to be built, capacities, process configurations, or locations.
"It will be left on their own discretion and risk," Korn said, adding that the government will have little to do with the matter.
There are only three prerequisites to be imposed on investors in new Thai refinery projects as well as on Caltex, according to Chatichai:
- "Special benefits," including a cash bonus to the state, will not be less than what the government has agreed to with Shell for construction of the nation's fourth oil refinery. In that case, the cash bonus was 350 million baht ($14 million).
- The shareholding structure in the projects would be similar to the Shell arrangement, with the foreign investor's share in the period before a public offering to be 64% and 36% for PTT. After going public, the interests would change to 45% for the foreign investor, 25% for PTT, and 30% for the public.
- Refiners will be required to market output domestically.
Caltex earlier announced that it could easily meet conditions imposed on Shell. Korn said the Office of National Energy Policy will draw up details of a tender for new refinery investment plans but offered no timeframe for the announcement.
NEPC has not yet dealt with Esso Standard Thailand Ltd.'s proposed $200 million refinery expansion project, also put on hold because of the refinery controversies.
However, Korn said NEPC considered the Shell agreement as final, suggesting the government could now proceed with concluding the Esso negotiations.
KPC PRESSES AHEAD
KPC reconfirmed its determination to proceed with its significant downstream petroleum investment plans in Thailand despite the Persian Gulf crisis.
Michael Bain, director of KPC unit Kuwait Oil (Thailand) Ltd. (KOTL), said his company's three main projects in Thailand remain intact. They involve developing a nationwide retail petroleum marketing network, a large refinery in the south, and participation in construction of a major refined products pipeline.
Bain noted that KPC remains "very healthy" financially, enabling it to continue its business as usual.
He said KPC has more than $400 million in disposable cash. The company posted a profit of about $470 million on revenues of about $10.5 billion for the year ended June 1990.
With its Thai partner Overseas Energy Supply, KOTL will open 5-10 retail service stations this year, calling for an investment of about $10 million. It plans to then expand the network to more than 100 yearend 1991. The first KPC Thai outlet opened Aug. 14.
The number of stations planned by KOTL appears to have been scaled down from that announced late last year by Kuwaiti Oil Minister Ali al-Khalifa al-Sabha, who said KPC would open 200 service stations in Thailand as its first retail outlets in the Far East.
KPC has reconfirmed to Thai authorities its interest in building an oil refinery with a capacity of not less than of 200,000 b/d plus related facilities in the south as part of the SSDP, Bain said.
Further, Kuwait soon will name an international consultant to conduct a feasibility study on KPC's participation in SSDP, Bain noted, adding that the refinery would start up within the decade. The study would be completed in 6 months.
KPC also intends to take a 10% equity interest in the proposed $120 million products pipeline from Sri Racha to Saraburi to support its planned retail networks (see story, p. 25).
Bain said crude oil supplies secured from Saudi Arabia and other Middle Eastern countries have helped offset the loss of oil supplies from Iraqi occupied oil fields in Kuwait, thus enabling KPC to maintain its marketing networks and refineries in Europe-where its overseas oil operations are concentrated.
PETROCHEMICAL COMPLEX
Thailand's proposed National Petrochemical Complex III (NPCIII) would form an integral part of the $16 billion SSDP.
NPCIII would receive feedstock from a large refinery and gas processing plant planned in Nakhon Si Thammarat and Surat Thani provinces, also proposed under SSDP, said Korn Tapparangsee, minister to the prime minister's office.
The southern Thailand petrochemical complex would be olefins and aromatics based, like that under construction on the eastern seaboard.
The olefins plant would take ethane and propane from the gas plant to produce feedstock for a string of intermediate and downstream petrochemical plants.
The aromatics plant would be fed by naphtha obtained from the 300,000 b/d refinery planned on the southern peninsula.
PTT is studying feasibility of the gas plant, which could start up after 1994 following completion of a natural gas pipeline from Gulf of Thailand fields to Khanom, Nakhon Si Thammarat (OGJ, Oct. 22, p. 21).
NPCII FIRST PRIORITY
Korn Tapparangsee said the government would not rush to develop the new petrochemical complex until the country's second such complex, the NPCII under development at Rayong a cost of about $1.2 billion, is ready. He cited concerns by investors in NPCII about the competing project.
The NPCII complex, including two upstream units and a dozen intermediate and downstream plants, is scheduled to be fully operational in 1994. Most NPCII production is intended for domestic consumption with some earmarked for export.
Local analysts forecast that combined output of NPCII and NPCI, a petrochemical complex that came on stream at yearend 1989, would be completely absorbed by the domestic market by 1996-97, which spurred plans for NPCIII.
There are about 34 petrochemical projects licensed by the government on the eastern seaboard.
As Thailand continues its rapid industrialization, the minister warns, it will suffer an increasingly acute shortage of skilled labor, notably technicians and engineers specializing in petrochemicals.
Local available manpower already lags well behind what the first and second petrochemical complexes require, Korn said.
GAS PROCESSING PLANT
The U.S. has given PTT a $100,000 grant to finance a feasibility study on PTT's third gas processing plant.
PTT let contract to Fluor Daniel for the study, to be complete within 20 weeks of contract signing in late September.
The fund was channeled through the U.S. International Development Cooperation Agency's trade and development program.
Details of the gas plant project including size, configuration, locations, and startup timetable are still undecided.
However, initial plans called for a capacity of 150 200 MMcfd of raw gas from Gulf of Thailand and a possible startup in 1994-95.
The most crucial question will be choice of location, either on the southern peninsula or the eastern seaboard, to determine economic feasibility.
If located at Khanom, then the plant could only process high methane content dry gas moved from the gulf's B structure gas field under development in the southeastern Gulf of Thailand by a European-Thai group led by Total CFP.
The composition of B structure gas is a big concern for economics of the Khanom plant because of the marginal yield of ethane and propane.
On the other hand, the alternative site at Mab Ta Pud in the eastern seaboard province of Rayong, where PTT's other two gas processing plants are, is tied into gas supplies from Unocal Thailand's gas fields in the central gulf.
Central Gulf of Thailand gas is rich in ethane, propane, and condensate.
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