Published on August 9, 2010
The Bt131-billion Thai Landbridge Project – featuring an oil “bridge” link across the Thai peninsula and related industries – should be initiated as it is economically feasible, according an executive report sponsored by a UAE state agency.
“We were informed that the Thai ‘land-bridge’ is okay. The best internal rate of return we will receive is by focusing on the oil pipeline first and then transport logistics,” said Chula Sukmanop, deputy director-general of the Office of Transport and Traffic Policy and Planning (OTP), last week.
The report suggested creating the “oil bridge”, as well as a “land bridge” and free economic zone.
The project was expected to produce an average internal rate of return of 14 per cent on the US$4.1-billion investment over a nine-year payback period.
The OTP signed a memorandum of understanding with Dubai World in 2008 to study the project.
The results of the Bt200-million study are now ready to be submitted to the Transport Ministry for consideration at its meeting on August 18.
Chula said the findings of the Thai Landbridge Project study will be used for a separate study approved by the Cabinet in June to focus on determining which industries tied to the project would boost industrial development in the deep South, and which should invite foreign funding. It will also consider how to create understanding with local residents. The next study will take six months.
According to the report, Thailand is located at a strategic crossroads in the region as a gateway to many countries such as China, Japan, Australia and India, as well as to Southeast Asia and the Middle East.
Demand for transhipments of goods, oil and natural gas in the region via the Strait of Malacca has been increasing. About a quarter of global transhipments of goods and oil, including natural gas, go through the Malacca Strait. Of that, some 12 million barrels of oil and gas travel via the strait every day, which is 15-18 per cent of global oil trading or 80-90 per cent of total oil imports for Thailand, Japan, South Korea and China from the Middle East. The shipment time takes about three to four days per trip.
Most of the oil used in the region comes from the Arabian Gulf while oil demand in Thailand and East Asia, especially China, Japan, Korea and Taiwan, is likely to rise over the next two decades.
From the report, oil transport costs using options, depending on vessel sizes, via the Thai Landbridge, connecting Pak Bara on the west coast and Songkhla on the east coast, would be reduced by $0.30-$1 per barrel, compared to passing through the Malacca Strait.
Apart from the oil pipeline and storage facilities, containers and support logistics on the land-bridge should be able to serve demand for transhipments effectively.
The Andaman port should have a capacity to handle large container vessels with a size of 500,000 dead-weight tonnes (dwt), while the Gulf of Thailand port should be able to handle container vessels sized up to 300,000 dwt.
Suitable areas for port development would be at Pak Bara in Satun on the west coast and Ban Pak Bang in Songkhla on the east coast.
Sailing routes seen to have more advantage utilising the Thai “land-bridge instead of the Malacca Strait were between North Asia, including China, and the north Andaman, such as Chittagong, Kolkata and Rangoon.
Other routes were from Bangkok, Laem Chabang, Cambodia and the north Andaman, such as Chittagong, Kolkata and Rangoon. The sailing route from Bangkok to Chittagong via the Thai Landbridge would be 1,455 miles, and take 2.8 days, which would be shorter than going via Singapore which is a distance of 2,307 miles and takes 4.4 days.
The Thai Landbridge Project will have both an “oil bridge” and “land bridge”. The “oil bridge” project comprises a pipeline with investment worth $835 million, and oil storage facilities worth $800 million.
The “land bridge” project would involve building coastal ports for $1.38 billion, a cordoned-off road for $287 million and double-track rail for $787 million. The total cost of the oil and land “bridges” was put at $4.09 billion (Bt131 billion).
Besides the oil and land bridges, a free economic zone could be developed to help the project succeed.
With many participants likely to be involved, the structure of the Landbridge Project’s authority and operator were seen as priorities to be created at the beginning.
The Thai government should act as the authority that franchises an operator and appoints a regulatory body to monitor, control and facilitate the operator.
The operator would be set up as a company, with the Thai government holding more than 50 per cent and Thai and foreign investors the rest.
The operator would also run subsidiaries responsible for infrastructure construction, infrastructure operation and maintenance, industrial estate development and management and other related activities.
