White elephant country

Press, 22 October 1984, Page 12

White elephant country

From

“The Economist,”

London

Thailand’s $lO billion scheme to start a petrochemicals and fertiliser industry owes much to the personal support of the Prime Minister, retired-General Prem Tinsulanond. Soon after he came to power in March, 1980, he created the slogan Chotchuang Chatchaval — a bright future illuminated by gas. Now the Prime Minister may have to put his taxpayers’ money where his mouth has been. The Government hopes that the proposed chemicals complex near Rayong and light-industry zone at Laem Chabang (see map) will grow into an alternative city to

Bangkok, which is sinking under the weight of 6 million people. Unfortunately, petrochemical industries are capital, not labour intensive. That is giving the Government problems. It has already promised to take a 51 per cent stake in the ethylene cracker which will form the heart of the project’s $1720 million petrochemical complex. The downstream operations which this cracker will feed were to have been 100 per cent privately owned. But the four firms which the Government cajoled into investing downstream, and which will also

finance a further 40 per cent of the cracker, require generous Government incentives to stay in now that the whole scheme looks less profitable than it once did. In spite of assurances from the Petroleum Authority of Thailand, the State oil and gas monopoly, that feedstock prices for the complex will be internationally competitive, the firms are already complaining that Thai gas is expensive. To protect their domestic market, the deputy industry minister, Mr Chirayu Issarangkul, has promised to put a tariff of up to 40 per cent on. chemical imports. Bankers are making the Government’s life still more difficult. They want Government guarantees for the rest of the money that they will have to lend the firms to finance the project. But under Thai law the Government could not give such guarantees unless it has a 70 per cent stake in the project. The industry minister, Mr Ob Vasuratna, is opposing any move to increase the Government’s equity participation. He has an ally in the central bank, which was excluded from the committee overseeing the development. Even if the money problems are solved, others abound. On current projections, the project could exhaust the 3 trillion cubic feet of proven gas reserves in the Gulf of Thailand in barely 20 years; and the main gas supplier, Unocal of America, has cut its estimates of gas reserves in its largest Thai field by 60 per cent to 628 billion cubic feet.

Texas Pacific’s “B” field contains 45 per cent of the gas. found in the Gulf of Thailand, but, after seven years of wrangling, the Government still cannot strike a price with the company for the gas. Exxon, which has found gas in north-east Thailand, has suspended further exploration while it haggles over prices with the Government.

Copyright, “The Economist.”