Monday, December 16, 2019

Low oil clouds gas-field auction

Jun 30. 2016
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By PICHAYA CHANGSORN
THE NATION

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VEERASAK Pungrassamee, director-general of the Mineral Fuels Department, said yesterday that he was uncertain if any investors would be interested in taking part in next year’s auction of Thailand’s two largest gas-producing fields.

“At the current oil price of US$40 a barrel, it’s already hard [to find investors], if there will be people investing under this [production] volume,” he said.

The government has resolved to put up for bids the Erawan gas field, whose concession is held by Chevron Thailand Exploration and Production, and Bongkot, held by PTT Exploration and Production (PTTEP).

Their concessions will expire over 2022-23.

According to the department, the Erawan and Bongkot gas fields had combined P1 and P2 reserves of 3 trillion cubic feet (tcf) as of the end of last year. P1 or proven reserves are defined by a 90-per-cent rate of discovery and P2 or probable reserves by 50 per cent.

Veerasak told a press conference that based on the current production rate of 2,100 million cubic feet (mcf) per day, these reserves would be depleted before the concessions end if there is no new discovery.

If the estimated amount of contingent resources is included, whose actual production rate depends on economics and technical capability, reserves will reach 5.71tcf.

Chevron and PTTEP have recently begun negotiating with PTT for a revision of their gas-supply contracts concerning both volume and pricing for the remaining years of their concessions, since they were uncertain if they would win the upcoming auction to return as operators in those fields.

The pricing terms have to be approved by the Petroleum Committee, chaired by the permanent secretary of the Energy Ministry.

The department plans to hold talks with Chevron and PTTEP on their gas production and investment plans with the objective of having them continue their investments prior to the end of their concessions, to minimise the reduction in gas supplies during the transition.

The department is discussing with the Excise Department relaxation of some regulations regarding the deduction of petroleum-exploration expenses for the two companies.

It is also negotiating with Chevron and PTTEP to disclose the database of information on their petroleum fields, which is needed for potential investors to appraise and prepare their quotes in the upcoming tender.

The government plans to issue bidding invitations next March with the goal to select the winners by September.

However, if there are major amendments to the two petroleum bills under consideration by the National Legislative Assembly, such as to include the setting up of a “National Oil Company”, the auction time frame might not be met and there could be some negative impacts on the continuity of domestic gas supplies by the existing producers.

To prepare for the auction, energy officials are drafting the terms of reference, five ministerial regulations and one ministerial announcement.

To stretch the remaining life span of the fields to at least 10 years, officials may write in the ToR that the winning bidders can produce 1,500mcf of gas per day, which is lower than the current 2,100mcf rate.

However, it is considering increasing the production rate in the draft ToR to make it more attractive to bidders, Veerasak said.

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