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State Oil Fund Looks to Invest Overseas

Posted on: Thursday, 20 April 2006, 12:00 CDT

By Yuthana Praiwan, Bangkok Post, Thailand

Apr. 20--The State Oil Fund could initiate investments in foreign energy fields and new technologies to help strengthen the country's energy security in the future.

Soaring global oil prices has highlighted the importance for the country to secure future energy supplies to safeguard economic growth.

Metta Buntherngsuk, director-general of the Energy Policy and Planning Office, said the oil fund should take a greater role in cushioning the economic impact of future supply shocks and price volatility.

"In many countries, national oil funds don't just collect taxes on petrol sales, they also invest in energy businesses, such as petroleum exploration and production, and the development of alternative-energy technologies," he said.

Mr Metta said Thailand's dependence on imported oil was high, raising the risks from global market volatility in prices.

Global oil prices yesterday eased slightly from record highs on Tuesday, with June contracts for Brent North Sea crude falling 12 cents to $72.39 per barrel in London trade. In New York, May contracts for light sweet crude also fell slightly in electronic trade to $71 per barrel.

Oil prices have risen sharply recently over fears of a US military strike against Iran. This would have a huge impact on the market and disrupt oil supply chains throughout the world.

The State Oil Fund currently has revenues of five billion baht per month from tax collections, including a 2.5-baht-per-litre levy on petrol sales and a 1.55-baht-per-litre tariff on diesel.

The fund, however, currently has debt of 80 billion baht, the cost of a government subsidy programme run from 2004 to 2005 for retail petrol and diesel. The fund also incurs additional expenses for subsidies on cooking gas, tentatively planned to be terminated at the end of the year.

Mr Metta said the fund expected to restructure and clear its debt within two years, after which it could embark on a broad mandate to help secure future energy supplies for the country through overseas investments.

"Energy investment experts such as PTT Exploration and Production Plc could also be brought in to help manage the fund's investments," he said.

The oil fund could also take a leading role in promoting alternative-energy sources such as biodiesel and NGV.

Mr Metta said alternative energy would not only reduce the country's reliance on imported crude oil, but it would also help boost revenues for Thai farmers that grew agricultural commodities such as sugar cane that could be tapped as an energy source.

"We will propose the new role for the State Oil Fund to the new government for consideration. The fund should play a greater role in strengthening the country's energy security and reduce the country's dependence on imported oil," he said.

Caretaker energy minister Viset Choopiban said the public should make efforts to conserve energy to reduce costs and help the economy.

Retailers across the country have also been reporting diesel shortages due to supply constraints as a number of refineries in the region have shut down for routine maintenance. Diesel prices are at an all-time high at $83-84 per barrel.

Soaring energy prices have raised concerns about economic growth prospects for the year.

In Tehran yesterday, Iranian President Mahmoud Ahmadinejad called on oil producers to sell a part of their crude production to poor countries.

"Oil producing countries, in particular OPEC members, could determine quotas for poor consumers with better prices," the president was yesterday quoted by the ISNA news agency as saying.

"We propose... that producers put aside a part of their surplus production to compensate for the pressure on poor countries," Mr Ahmadinejad said.

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Copyright (c) 2006, Bangkok Post, Thailand

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Source: Bangkok Post

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