Limitations of Thai energy security highlighted

Thailand is currently facing threats of impending wars on multiple fronts. Besides the borders with neighbouring countries, there are also tensions in the "Indo-Pacific Strategy" region, which is heating up because of the military buildups by various nations. 

This could potentially lead to industrial supply-chain crises, since the region is a major global semiconductor production hub, as well as impacting energy security.

This assessment of Thailand's threat landscape over the next three to five years by Gen Songwit Noonpakdee, supreme commander of the Royal Thai Armed Forces, was presented to the House Budget Committee during a briefing on the draft budget bill for fiscal year 2025. 

The evaluation highlighted the significance of Thailand's sole energy-security source, the Fang Oilfield, or the Northern Petroleum Development Centre, located in Fang district, Chiang Mai province, under the Department of Military Energy.

Currently, the Fang Oilfield is listed under the Military Welfare Transfer Committee, as it is perceived as a military asset and not within the military's primary mission of oil exploration and extraction. This has drawn criticism from the public, who argue that while Fang district has an oilfield, Thais do not benefit directly from it and have to buy petroleum products at high prices.

The Fang Oilfield is a small-scale operation at the subdistrict level with limited potential, consisting of thin layers of oil-bearing sandstone spread across 900 square kilometres. The oil reservoirs are small and scattered, with each site ranging in size from a football field to a school, while some areas are as large as Kwan Phayao (Phayao Lake).

Moreover, the sandstone layers in the Fang Oilfield are shallow, containing only 3 metres of petroleum at most, with a production rate of 600 barrels per day. The crude oil is refined into about 30% diesel, around 30,000 litres, with the rest being 7-8 litres of naphtha, used for paint blending, and nearly 60,000 litres of heavy fuel oil, which is sold to private companies for further refining due to the need for advanced technology.

Maj Gen Montree Jeennakhon, director of the Northern Petroleum Development Centre, Department of Military Energy, explained that some people have claimed that Fang district is like the Middle East, producing its own oil while Thais still pay high prices. He emphasised that the actual production is minimal in comparison.

"We have been producing oil for 70 years, yielding 16 million barrels, which would be exhausted if all Thais used it freely for 16 days. With the Thai population needing more than a million barrels daily, our contribution is negligible, like trying to help a whale with a fly. Yet some see us as an OPEC with abundant oil, but in reality, we produce only 30,000 litres daily."

Montree highlighted that even though the Fang Field produces only 30,000 litres of oil per day, it is valuable to the military. In case of war, if tankers cannot enter the Gulf of Thailand and refineries lack oil, the military can still provide the Ministry of Defence with 30,000 litres per day, which is better than having nothing at all.

Currently, it is unclear how much oil private companies have in reserve under the Oil Act to prepare for future situations. Although oil is a finite resource, the aim is to extend its availability as long as possible, with a minimum estimate of 50 years. Production may decrease from 600 barrels per day to 300 or 250 barrels, eventually leading to closure if costs exceed production value.

In the meantime, there are plans to upgrade the refinery to produce aviation fuel and gasoline. However, this is a future consideration, since the current oil has high sulphur content and does not meet the Department of Energy Business standards. Discussions are ongoing with Energy Minister Peeraphan Saleeratthavipak, through the chain of command, with an estimated upgrade cost of 300 million baht.

Montree acknowledged that the centre's profits are enough to sustain its 600 employees. The fund's highest accumulation reached 3 billion baht at one point, while the lowest was 400 million baht. 

The current strategy aims to maintain a reserve of at least 550 million baht as severance pay for employees in case of layoffs or economic downturns, possibly starting with the reduction of non-essential departments. Ultimately, if necessary, the centre may have to close.

The Fang Oilfield's clients are the 33rd and 310th Military Districts, responsible for border defence. 

"After receiving the information, the Military Welfare Transfer Committee members understood and acknowledged the situation better," Montree said. “However, I am unsure if anything remains unclear. They pointed out that the military's role is not to sell oil, which I explained has been the case since 1956. Any changes could involve transferring the operation across ministries. 

"I emphasised that developing the expertise we have today is challenging, and retaining personnel is difficult as they often move to oil companies for higher salaries. We train about 10 employees annually, half of whom resign to join private firms. In contrast, we offer civil service-level salaries.

“The perception of off-budget revenue needing to go to the Ministry of Finance is a policy decision. Military personnel and employees here are also government servants. However, any mistakes should be accounted for, and the public must be informed if the impacts are more negative than positive," Montree said.