REFORM BUT NO BIG CHANGES: THAILAND'S NEW

UNCLAS SECTION 01 OF 02 BANGKOK 007422

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET TH
SUBJECT: REFORM BUT NO BIG CHANGES: THAILAND'S NEW
MINISTER OF ENERGY SPEAKS



1. SUMMARY. On December 4, the Ambassador, accompanied by
the Commercial Counselor and a group of industry
representatives met with Thailand's new Minister of Energy,
Dr. Piyasvasti Amranand. In his remarks and responses to
industry concerns the Minister outlined a generally welcome
program of reform, but no major policy changes. He indicated
that Thailand's plans for solicitation of independent power
producers are on track and will go ahead with no EGAT
setaside. He also said that studies will proceed for the
proposed hydro project on Burma's Salween river. End summary.


2. On December 4, Ambassador Boyce led a delegation
including the Commercial Counselor and a group of U.S. energy
industry representatives to meet with Dr. Piyasvasti
Amranand, Thailand's new Minister of Energy. The Ambassador
congratulated Dr. Piyasvasti on assuming his position, after
which the Minister gave some brief remarks and then heard
comments from the industry representatives.

REGULATORY REFORM


3. The Minister outlined a series of government objectives
for the energy sector. These included an effort to reform
the regulatory regime for the sector, involving amendments to
both laws and regulations. He cited the laws regarding oil
trading, oil storage, and petrol stations specifically as
needing amendment, and discussed plans for a new
all-encompasing Petrol Act. He also discussed his intent to
set up an independent regulator for the oil and gas industry.

FULL SPEED AHEAD FOR IPPs


4. Dr. Piyasvasti provided an update on the progress of the
planned second round of bidding for Independent Power
Production concessions. He noted that preparations for the
bidding were nearly complete, with the IPP solicitation
expected in March or April of 2007; having been postponed
from May 2006. In response to an industry question, the
Minister clarified that the Electricity Generating Authority
of Thailand (EGAT) would not/not be participating in the next
round of IPP bidding. EGAT affiliates including Electricity
Generating Company (EGCO) and Ratchburi Electricity
Generating Company (RATCH),however, would be allowed to
participate.

TOWARDS A LEVEL PLAYING FIELD


5. The Minister noted that state enterprises have been
moving increasingly into sectors previously dominated by the
private sector, and acknowledged that this represented unfair
competition. He said that the RTG would be working to level
the playing field, and that state companies will be brought
under the Competition Act. (Comment: It will be interesting
to watch what effect, if any, this will have in the retail
fuel sector, where PTT is widely believed to maintain
artificially low prices to please the government. Although
the RTG formally privatized PTT in 2001, a the Ministry of
Finance still holds 52% of its shares, and a Ministry of
Finance mutual fund holds another 15.5%. End comment.)

SUPPORT FOR RENEWABLE, BUT NOT ZONING


6. The Minister welcomed investment in renewable energy
projects (the Ministry has a target of 8% renewable energy in
Thailand by 2011),indicating that the Ministry planned to
increase the 'adders' applied to the purchase price of
renewable energy as incentives. Nevertheless, the Minister
cautioned that the first projects should not be overly
ambitious, suggesting that a proposed 300 megawatt generating
plant was too large. He also expressed his disapproval for
zoning (to protect biomass fuel sources from subsequent
competitors),saying "you make the project, you take the
risk."

THE ENVIRONMENT SLOWS DEVELOPMENT


7. Responding to concerns over the environmental hurdles
concessionaires must pass before proceeding with project
construction, the Minister acknowledged that the current
process makes rapid expansion difficult. At the same time he
remarked that reform of the environmental regulations, to
make the process less cumbersome, would be the most difficult
issue to tackle in the sector. It is not clear that he
expects any change to the current regime in the near future.

DIVIDING THE GULF: CAMBODIA'S BALL


8. Projections for Thailand's future energy supplies rely
significantly on new gas fields in the Gulf of Thailand.
Many of the potential sites, however, lie in the area of
territorial overlap between Thailand and Cambodia, with

BANGKOK 00007422 002 OF 002


negotiations for dividing the area ongoing. Dr. Piyasvasti
told the meeting that he was not sure that an agreement could
be concluded under the current government, but noted that the
government did want to make progress during its term. He
noted that the Thai position was very clear and that it was
now up to Cambodia to respond to the latest Thai
counter-proposal.

BUYING TIME ON BURMA


9. The Ambassador asked about the Minister's plans for the
controversial dam project proposed for the Salween River in
Burma, which would have EGAT buy much of the power produced
by the dams. In responding Dr. Piyasvasti avoided taking a
clear position on the project. He noted Thailand's need to
diversify energy sources, which would need to include buying
energy from neighboring countries. Yet he said that it would
not be good to become over reliant on one country and noted
that with natural gas Burma was already a major supplier of
energy to Thailand. He expected that currently planned
hydroelectric expansion in Laos would be sufficient to supply
Thailand's energy needs for the next ten years. Nevertheless
he noted that two MOUs had been signed with Burma for
feasibility studies relating to the Salween river dams, and
that these would proceed as planned. He indicated that once
the studies were completed the project would be evaluated
again.

COMMENT


10. Dr. Piyasvasti was articulate, well informed and
engaged, and seemed receptive to comments from industry. He
appears committed to using his limited time in office to
making real improvements in Thailand's energy sector. He did
not address the issue of diversification of Thailand's energy
supplies and the RTG's target of increased use of coal. With
considerable popular opposition to coal power in Thailand, it
remains to be seen to what extend he will attempt to make
progress in this area. The U.S. corporate representatives
were generally pleased with the presentation. End comment.

BIOGRAPHY


11. Dr. Piyasvasti Amranand was born 11 July 1953 and is
married with two children. He speaks fluent English.
Educated in England, Dr. Piyasvasti received a BA (1st Class
Honours) in Mathematics from Oxford, an MSc (Distinction) in
Econometrics and Mathematical Economics from the London
School of Economics, and a PhD in Economics, also from LSE.
From 1994 to June 2000 he served as Secretary General of the
National Energy Policy Council, with the National Energy
Policy Office (NEPO) of the Office of the Prime Minister.
From June to September 2000 he was Inspector General, Office
of the Prime Minister, before becoming Director General of
the Public Relations Department from October 2000 to April

2001. He again served as Secretary General of the National
Energy Policy Council from May 2001 to June 2002, before
becoming Deputy Permanent Secretary, Office of the Prime
Minister, from June 2002 to January 2003. In April 2003 Dr.
Piyasvasti left government service, taking the position of
Chairman of Kasikorn Asset Management Co., Ltd. (KAsset,
Thailand's largest investment fund, with assets under its
management of about USD 6.4 billion),where he remained until
he was named Minister of Energy in October.


12. Dr. Piyasvasti has been closely involved with all major
policy changes in Thailand's energy sector since 1986. These
include oil pricing policy and deregulation of oil prices,
reform of the electricity tariff structure, deregulation and
privatization of the energy sector, as well as purchase of
electricity and natural gas from projects in neighboring
countries, gas pricing policy, long term power and natural
gas development plans, fuel specification and vehicle
emissions, demand side management, energy conservation policy
and promotion of renewable energy. He has been a member of
the State Enterprises Performance Evaluation Committee since
1997, serving as chairman of the working groups responsible
for evaluation of the Telephone Organization of Thailand
(TOT),Provincial Water Authority, Metropolitan Mass Transit
Authority, Express Way and Rapid Transit Authority of
Thailand, Krung Thai Bank, Small Industrial Finance
Corporation and the Small Industrial Finance Credit Guarantee
Corporation.

ARVIZU