Oil deregulation stumbles on Asian currency turmoil

Oil deregulation stumbles on Asian currency turmoil

SINGAPORE (Reuter): The currency turmoil in Asia is creating
further hurdles for investment in energy, but governments should
not allow that to hinder their struggle towards deregulation,
analysts said yesterday.

"Asia will welcome funding especially for the electricity and
pipeline grid," said Gordon Kwan, an oil and gas analyst from
Daiwa Securities in Hong Kong.

He was referring to the $150 billion Southeast Asian plan for
a gas pipeline grid and multi-billion dollar power grid.

"But it is very difficult right now given the state of the
economies and the uncertainty facing some of the countries such
as Thailand and the Philippines...particularly with the currency
devaluation, the pipeline project is in limbo," Kwan said.

Investment bank Goldman Sachs has cut its 1997 gross domestic
product forecast for the four economies worst-hit by currency
speculation -- Thailand, Malaysia, the Philippines and Indonesia
-- to 5.2 percent from 6.3 percent.

Although above growth rates seen in most of the developed
world, equities in the countries were sliding this week.

The Philippine peso suffered a sudden seven percent fall
Thursday. Malaysia's ringgit hit a new low versus the dollar.

"Who is going to finance projects if they are going to get
their money back in pesos and baht?" asked Kwan.

Analysts said the Asia-Pacific Economic Cooperation (APEC)
forum needed to provide risk-free regulatory regimes and open
markets to attract funds to finance growth in Asia's energy
industries. The World Bank has estimated $100 billion per year
was needed through 2000.

Energy ministers from the 18 APEC members agreed on Wednesday
they should encourage more foreign investment in power. They met
for two days in Edmonton, Canada.

APEC member countries, including North and South American and
Asian countries such as China, Thailand, Indonesia, Australia,
are attempting to establish free trade amongst developed nations
by 2010 and undeveloped nations by 2020.

Thailand, the Philippines, Japan and South Korea have made the
most inroads in energy deregulation, analysts said.

But others like Indonesia, Malaysia, Taiwan, Vietnam and China
have yet to make meaningful moves, struggling to reconcile the
strategic importance of energy with growth and protecting
domestic industries.

James Brown, Merrill Lynch's Asia-Pacific's oil and gas
analyst told Reuters that the devaluation would create negative
market perception, something governments would want to avoid.

"But the fact remains with currency devaluation or not, these
countries need to build their industries and there comes a point
where you have to encourage foreign investment to move a country
forward," Brown said.

"It is ultimately what is driving deregulation...that these
countries tried to build their industry with their own resources
and found they don't have the resources," said Brown.

"There is a problem for a country with a depreciating
currency, but it is a much bigger picture...a problem relating to
broader economy of the country.

"They are not in a position to let their currency problems get
in the way of deregulation," Brown said.