Thailand
Thailand: Gas block contracts signing this month
The two petroleum contracts for the Erawan and Bongkot gas blocks are still on track to be signed this month, says the Mineral Fuels Department.
The government completed the auction of the Erawan (G1/61) and Bongkot (G2/61) blocks on Dec 12.
PTT Exploration and Production Plc (PTTEP) won the concession contracts for both the offshore Erawan and Bongkot blocks, starting from 2022 and 2023, respectively.
In the Erawan concession, a joint bid from PTTEP and its partner, the UAE’s Mubadala Petroleum, won out against Chevron Thailand Exploration and Production and its partner, Mitsui Oil Exploration.
PTTEP submitted a solo bid for the Bongkot concession to compete with Chevron and Mitsui’s joint bid.
US-based Chevron runs the Erawan block while PTTEP, PTT’s petroleum exploration flagship, works on the Bongkot one.
PTTEP will have the right to explore and produce petroleum for 20 years, with an option to extend operations for another 10 years.
Premrutai Vinaiphat, the department’s director-general, said two contracts for gas sales and production-sharing are being vetted by the Office of the Attorney-General.
The Mineral Fuels Department is the country’s regulator for the upstream petroleum industry.
“Although Thailand is preparing for the general election on March 24, the final procedures for the Erawan and Bongkot blocks will continue without any interruption,” said Mrs Premrutai.
“There will be no further delays because the concessions for the two blocks are going to expire in 2022 and 2023, so the renewal contacts should be completed in time. Otherwise a disruption in the synchronisation for gas production will affect overall gas consumption in the country.”
The Erawan and Bongkot blocks have a combined production of 2,110 million standard cubic feet per day (MMSCFD), contributing up to 75% of gas production from the Gulf of Thailand.
Erawan produces 1,240 MMSCFD, while Bongkot generates 870 MMSCFD.
Under the new bids, PTTEP offered to sell gas — a byproduct of petroleum exploration — to the state at 116 baht per million British thermal unit (BTU), which is lower than the current prices of 165 baht per million BTU quoted at Erawan, and 214.26 baht per million BTU at Bongkot.
The new prices can help reduce the production cost for gas-powered electricity by 17 satang per unit (kilowatt-hour), said Energy Minister Siri Jirapongphan.
The bid documents required the offer for profit-sharing must not be less than 50%, but PTTEP offered to give 68% of the profit it receives from the Erawan field to the state.
For the Bongkot field, it offered to share 70% of the profit it receives.
The government will earn 100 billion baht more, while exploration and production (E&P) operations in the two blocks will help reduce liquefied petroleum gas imports by 22 million tonnes, or 460 billion baht.
The sum could be used for further investment, that could in turn feed about 1.1 trillion baht to the economy.
Mrs Premrutai said new procedures are expected for E&P activities under Round 21, which will fall within the tenure of the next administration.
She said licences for Round 21 should be granted in the second half of this year.
Round 21 has been delayed from October 2014 because of political instability and an economic slowdown.
Many advocates called for a delay and revision of the country’s petroleum laws from an E&P concession to a production-sharing contract.
In June 2017, two revised laws — the Petroleum Act and Petroleum Income Tax Act — were enacted.
In 2018, the government opened bids for the Erawan and Bongkot gas fields.
The Foundation for Consumers filed a legal motion against the auction last year, arguing the government violated the Petroleum Act of 1971 by handing out benefits to the winning bidders.
On Monday, the Supreme Administrative Court dismissed the foundation’s accusation as the government has the legal authority to hold the auction according to profit-sharing contracts.
Source: https://www.bangkokpost.com/business/news/1628302/gas-block-contracts-signing-this-month