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June 16, 2008
Thailand: LPG smuggling continues despite ban



November 14, 2008

Thailand to scrap LPG subsidy
Thailand is to raise the price of liquefied petroleum gas (LPG) used in cars and industry to bring it more into line with actual costs and reduce state subsidies, Reuters quoted Energy Minister Wannarat Charnnukul as saying Thursday.

The price will be increased gradually by a total of 6 baht ($0.17) per kg, or 33 percent, in increments of 2 baht per month.

"We agreed that the first increase should happen by the end of this year," Wannarat told reporters after attending a meeting of the National Energy Policy Council, adding that a committee chaired by him could meet next week to decide the timing.

The rise excludes LPG used in households and petrochemical plants, which will continues to enjoy the current price until Jan. 31, 2009 at least. The government will consider later whether to adjust prices for these users, Wannarat said.

The LPG price is currently fixed at 18.13 baht per kg, but the government began moving towards a floating price regime in July in order to reduce costly subsidies.

Demand in Thailand is rising by 10-15 percent a year because prices are low compared to gasoline and many vehicles are being converted to run on LPG. As a result, Thailand, once a net LPG exporter, became a net importer in April this year.

Subsidies have been in place for years and were originally intended to help households and vendors who used cooking gas. The subsidy bill has risen as motorists have switched to the fuel.

In 2009, Thailand is expected to import 45,000 tonnes of LPG a month.

Volume peaked at 130,000 tonnes in October and is expected to fall to 62,000 tonnes in December, the minister said. The fall in imports was due to lower demand from petrochemical plants, whose usage has fallen some 30 percent from normal levels as a result of the global financial crisis.

In the first nine months of 2008, demand for LPG averaged 390,000 tonnes a month, of which 350,000 tonnes came from domestic sources.

LPG is commonly used in households as a fuel for cooking and for heating water and is sold in kgs, while LPG for vehicles is sold in litres. Today's LPG pump price is over 11 baht per litre.

Households account for 46 percent of total consumption, petrochemical producers 20 percent, industrial users 15 percent and cars 19 percent.

The local LPG price is fixed at about $320 a tonne, while the global market price stands at nearly $800 a tonne, having peaked at $923 a tonne in July 2008.

State-owned PTT has to pay for the LPG imports in advance and sell the gas at a price that is two to three times cheaper than the global price. It expects LPG imports to rise to 500,000 tonnes this year.

In 2008, LPG demand is expected to rise to 3.5 million tonnes, up from roughly 3 million tonnes in 2007.

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