Interview: Thailand plans to set up duty-free export zone

Thailand plans to set up a duty-free oil export zone in six months, the first step to becoming an Asian oil hub tapping into the region's 13 million barrels a day of oil imports, the energy minister said yesterday.

Prommin Lertsuridej said Thailand, with excess refinery capacity and plans to more than double its oil and gas reserves in the next decade, was not aiming to replace Singapore as Asia's oil trading centre but could eventually provide an alternative.

Last month, Thailand pledged to spend billions of dollars on shipping facilities and pipelines and said it would amend laws to try to boost oil exports.

Asia consumes more than 21 million bpd of oil, most of which is imported. Millions of barrels are shipped through the Straits of Malacca, between Indonesia and Malaysia, and past Singapore, which acts as a swing refining centre for Asia's oil markets and where most major oil firms have trading operations.

In an interview with Reuters, Prommin said energy and tax authorities were working on a tax-incentive package to convert two storage areas on the east coast at Sri Racha and Sichang into a centre, or export processing zone, to provide shipping fuel.

The storage areas, about 100 km (60 miles) from Bangkok, have a combined capacity of 1.09 billion litres (173,000 barrels).

"In the next six months, the first export processing zone will be up and running," Prommin said. "We could start with trading of fuel oil or bunker oil for ships carrying goods to and from Thailand."

Thai energy officials say a third of Singapore's daily oil trading volume was in bunker oil and fuel oil and that Thailand should gear its refinery production to meet export demand.

Prommin said turning Thailand into a regional oil hub was part of an energy master plan to strengthen the country's energy security and to lower domestic oil prices currently hostage to international price movements.

"We intend to increase the value of our energy resources, not to replace any country as a regional trading hub. But we could become an alternative to Singapore," Prommin said.

Prommin said Thailand was ideally located for an oil hub since it was situated between the Middle East, which provides most of the world's oil exports, and the energy-hungry Far East. This had drawn interest from Japan, China, and Oman to be "strategic partners" of Thailand in energy, he said.

"Asia's major oil consumers like Japan and China and suppliers like Oman are interested in becoming strategic partners in Thailand's energy security plan," the minister said.

Thailand imported 767,600 barrels per day (bpd) of crude in the first six months of 2003, up 5.6 per cent from last year, but its seven refineries can produce more than one million bpd in petroleum products.

The government and private firms have proposed a $720 million trans-peninsula "strategic energy land bridge" in southern Thailand, and two oil pipelines in the north and northeast with a combined distance of 880 km that would replace trucks in transporting oil from central Thailand to neighbouring countries.

The land bridge — a 240-km six-lane highway with gas and oil pipelines and a railway in the middle with tank farms on both sides – would shorten the route for shipping crude from the Middle East to the Far East, bypassing the often-congested Straits of Malacca.

Prommin said feasibility studies on these projects would be done in the next six years.

"Many projects in the past were abandoned because of changes of governments. But under this government, these infrastructure plans will be approved in the second term," he said.