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New oil-field bid process for ‘benefit of public’

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But unclear whether fresh approach will bring financial boost to Thai treasury.

POLITICIANS AND bureaucrats will play a bigger role in the decision-making process for oil and gas production in the Gulf of Thailand under new bidding terms and conditions approved by the National Energy Policy Committee (NEPC) yesterday, according to industry sources.
Prime Minister General Prayut Chan-o-cha said after chairing the NEPC meeting that the new round of bidding for both Bongkot and Erawan fields will be done with transparency for maximum public benefits and fairness for the private sector.
The new Production Sharing Contract (PSC) method will be used for the first time in the bidding for rights to explore and produce oil and gas from the huge offshore Bongkot and Erawan fields, which account for as much as 75 per cent of Thailand’s total gas |output.
The upcoming bidding, in which winners will have to invest tens of billions of baht annually for exploration and production work, is expected to attract both Thai and foreign petroleum giants, including PTT Exploration and Production (PTTEP), Chevron of the US and Mubadala of the United Arab Emirates.

Time to prepare
The current concessions for gas production in the Bongkot and Erawan fields will expire in 2022-2023 so the Energy Ministry must hold a new round of bidding a few years prior so that new investors have time to prepare for exploration and production work under the new PSC terms and conditions.
Bid winners are required to produce a minimum of 800 million cubic feet of gas per day for a 10-year period for the G1/61 tract and a minimum of another 700 million cubic feet of gas per day also for 10 years for the G2/61 tract. The output must be sold to the state at a price |comparable to the current market price.
Petroleum industry sources said the switch to the PSC method in the new round of bidding, replacing the previous concession method, had followed years of heavy lobbying and public protests by non-government groups such as one led by former Bangkok senator Rosana Tositrakul who asserted that the public would gain more from the PSC method.
However, it is unclear at this stage whether the PSC method would lead to increased financial benefits for the state in terms of royalties and other earnings from both gas fields. Politicians and bureaucrats would have more power in the decision-making process for exploration and production work as well as regarding the massive investment needed to carry out the work.
Under the current concession method, private petroleum companies have the sole right to make investment and other decisions. In contrast, under the PSC method these decisions would need approval by the government in a way similar to the current Joint Development Area (JDA) system for exploration and production of petroleum resources in southern offshore fields bordering with Malaysia’s territories.
According to the new PSC method, private investors are also required to share at least 50 per cent of their profits with the government, plus other benefits. At present, the Erawan and Bongkot fields produce a combined 2,110 million cubic feet of gas per day, with the former field operated by Chevron and the latter field operated by PTTEP.
Energy Minister Siri Jirapongphan said the ministry will issue an invitation for bids today and bid winners will be chosen by the end of December this year with the new PSC contracts to be signed by February next year.
Most of the gas from the Gulf of Thailand is used in electricity generation, so the government will ensure that the new bidding method will not affect the price of electricity, said Siri.

Published : April 23, 2018

By : The Nation