Import Laws required: PTT to be hit with high costs if consumption continues to increase

Under present law, all distributors import the gas, and the law requires them all to reserve 5 per cent of the sales volume, as in the case of fuel products, said Surong Bulakul, senior executive vice president for international trading at PTT. Given its 50percent market share, PTT expects to spend Bt1.5 billion to Bt2 billion next year on two new LPG storage tanks to meet the reserve requirement.

"For 15 years, we've been a net exporter, but if we must import up to 1.1 million tonnes next year as expected, Thailand will become the fourthlargest importer in Asia, following China, Japan, South Korea and India. They import 37 million tonnes, 11.3 million tonnes, 6.2 million tonnes and 1 million tonnes, respectively," he said.

He said if the price remained unchanged or was raised slightly, demand would not slow down and PTT could not absorb the financial burden.

He said PTT this year alone was responsible for importing 450,000 tonnes and shoulders a difference of US$600 (Bt20,100) per tonne between the local and the global price. The burden will only rise as import volume climbs.

"This will affect PTT's cash flow this year, and we'll soon report this to the board of directors and inform them of the increasing burden," Surong said.

He called the LPG price "highly volatile". Now it costs $927 a tonne, up from $905 last month. To ship it to Thailand, the importer must shoulder a premium of $50 a tonne plus other expenses, mostly for large carrier vessels costing $35,000 to $45,000 a day. In all, the cost comes to about $1,000 a tonne.

If Thailand fails to raise the domestic price to match the global level, or Bt38 a kilogram, demand will rise 14 per cent per year, as has happened in the past two years, mainly on higher demand from vehicles, he said.

He said due to the domestic price cap, industrial plants also use LPG rather than bunker oil, which is sold at the market price of $600 a tonne. The domestic price must at least be higher than bunker oil, he said.

The Energy Ministry has not yet revealed how much the LPG price for vehicle and industrial use will be raised. It plans to announce the new price next month.