By Anon Sirisaengtaksin Deputy President, PTT Gas

1
By Anon SirisaengtaksinDeputy President, PTT Gas
2
PTT PRIVATIZATON SEPARATION PROCESS OF NG
TRANSMISSION FROM SUPPLY AND MARKETING

• Reform of Gas Supply Industry and Privatization
  of PTT
• Third Party Access
• Concerns for Thailand

3
REFORM OF GAS SUPPLY INDUSTRYAND PRIVATIZATION
OF PTT
4
CABINET RESOLUTIONFebruary 16, 1999

• Separate gas transmission from trading
• Establish PTT Pipeline Company
• Introduce TPA on the transmission pipelines
• Excess capacity of existing pipelines and future
  pipelines
• Establish an Independent Regulatory Agency

5
DEFINITION OF EXISTING GAS

• Existing Gas Supply
• all domestic concessions which have contracted
  with PTT
• Existing Gas Demand existing gas purchase
  agreements between PTT and
• EGAT
• IPPs for the first solicitation
• SPPs for the current solicitation, and
• consumers in the industrial sector

6
Current Structure of Thai Gas Business

• Currently an integrated supply, transmission and
  distribution system

Producers
PTT GAS BU
Users
PTTEP
Marketing
EGAT
UCL

• Supply
• Gas Separation

IPP/SPP
Transmission
TOT
Industrial
Others
7
Long-Term Structure of Thai Gas Business

• Establishment of a legally-separated transmission
  company wholly-owned by PTT

PTT GAS BU
Separate Legal Entity
GasSeparation
Supply Marketing
100
Transmission Company

• Operation
• Marketing

• Supply
• Marketing

• Operation
• Maintenance
• Third Party Access

8
Long-Term Structure of Thai Gas Industry
9
Privatization of PTT
10
THIRD PARTY ACCESS
11
CORE PRINCIPLES

• Sanctity of Contract
• Right of Access
• Transparency
• Protection of Confidential Information
• Light-Handed Regulation
• Independent Dispute Resolution
• Cost Reflective Tariffs
• Non-Discrimination

12
THE REGIME - OVERVIEW
MONITORING AND REVIEW MECHANISM
OBJECTIVES
COVERAGE OF THE REGIME
TPA REGIME FOR NATURAL GAS TRANSMISSION
PIPELINES
ACCESS TARIFFS
ACCESS PACKAGE
MECHANISM TO GUIDE EFFECT TO TPA REGIME
TERMS AND CONDITIONS
RINGFENCING
INFORMATION DISCLOSURE
TRANSITIONAL ARRANGEMENTS
DISPUTE RESOLUTION
13
The Regime - Overview
Owners/operators of Regulated Transmission P/L

• Access Package
• Tariffs
• Terms and Conditions

Independent Regulator

• Approval Process
• Assessed against principles in TPA
• Public process
• Protect confidential information

Approved Access Package
Customers/Prospective Customers
14
CONCERNS FOR THAILAND
15
TASKS FOR PTT

• Legal separation of PTT Pipeline
• Computer systems and databases
• Development of new business processes
• Organizational structures and personnel
• Development of new contracts
• Financial restructuring
• TPA Transitional Arrangements
• Long-term Access Package

16
UPSTREAM COMPETITION

• Lack of competition upstream
• Downstream restructuring alone will not maximize
  benefits for the consumer

17
NETWORK REGULATION

• Incentives for the network owner to efficiently
  invest in the growth of the network
• asset valuation methodology
• depreciation schedule
• cost of capital

18
ACCESS ARRANGEMENTS AND RETAIL COMPETITION

• Sufficient time and resources
• agreement by all industry players
• Long-term investment for growth and maintenance
  of the network

19
COMPETITION IN TRANSMISSION PIPELINES

• Commercial, technical, and regulatory framework
  to be agreed in advance

20
RETAIL PRICES

• Contestable versus non-contestable customers
• High volatility of spot prices

21
COSTS OF REGULATION

• Balance between benefits and costs of regulation,
  to be born ultimately by the customers
• Costs of developing access arrangements
• Costs of facilitating competition in gas supply
• Costs of increasing costs of capital for
  increased business risk
• Cost of operating regulatory body

22
DIFFERENT APPROACHES TO GAS REFORM
23
CHINA

• Encourage and protect the establishment of
  capital-intensive gas distribution and
  utilization projects.
• Establish a differentiated pricing system for gas
  applications.
• Organize integrated gas business complex.

24
SOUTH KOREA

• Privatization in stages in tandem with growth of
  appropriate competitive environment.
• Introduce competition and build up the base for
  privatization through Open Access of supply
  networks during 1998-2000.
• Complete the privatization process by 2002 when
  the nationwide gas infrastructure is completed.

25
JAPAN
26
Thank you
Petroleum Authority of Thailand
APEC IFAT Workshop Karon Villa, Phuket August 17,
2000