PTTEP to bid for Bongkot gas field

“We are still confident that operation by the existing company will bode well for the continuity [of petroleum production].”

“But there are many conditions to consider,” PTTEP president and chief executive officer Somporn Vongvuthipornchai said when asked if his company would also bid for the Erawan block, currently operated by Chevron.

The National Energy Policy Council chaired by Prime Minister Prayut Chan-o-cha resolved on Monday for the government to put to bid the two major petroleum blocks whose concessions will expire in 2022-2023. 

The Erawan and Bongkot gas fields have combined production of 2.2 billion cubic feet per day, or 76 per cent of the output in the Gulf of Thailand. Direct negotiations will be held with Chevron and PTTEP if there are no interested bidders.

PTTEP holds a 44.445-per-cent stake in the Bongkot block, with the balance held by Total E&P Thailand (33.33 per cent) and BG Asia Pacific (22.22 per cent). Bongkot is 203 kilometres off the Songkhla coast in the Gulf of Thailand.

Somporn said PTTEP had prepared for the auction and would give importance to production continuity to ensure energy security for the nation, or, if there were a discontinuity in production, to minimise its impacts.

Asked if PTTEP would cut its investment and production if it does not win the right to continue operating the Bongkot block, Somporn said the company had been obliged by contracts with gas buyer PTT to a minimum production volume of about 850 million cubic feet per day. But according to its current capital-investment plan, its output will be lowered during the last few years of the concession.

“The government is considering ways to minimise the impact [if existing operators fail to win the auction]. 

“We’ll wait to see what the mechanism will be. The easiest way is to import LNG,” liquefied natural gas, to cushion any shortfall of domestic gas supply, he said.

Somporn said PTTEP was waiting to hear the terms and conditions for the bid and would be ready to join regardless of the fiscal-regime options. 

“As we [have said before], we don’t mind if it is a production-sharing or concession regime, but the concession system would be better for continuity, since we are familiar with this system and the government already has an administrative system in place,” he said.

Energy Minister Anantaporn Kanjanarat said the benefits returned to the state from the upcoming petroleum auction that would he organised within a year must not be lower than the current terms stipulated under the so-called Thailand III fiscal regime. 

Somporn said the government could mean that it would expect more favourable terms, but given the current oil price slump, the amount of money it gets will not necessary be the same.

PTTEP executive vice president Suchitra Suwansinpan said the LNG price in the spot market was currently about US$5-$6 per million British thermal units, cheaper than the average price of gas or the so-called gas-pool price in Thailand, but gas from spot market is not always available.Under Thailand's current fiscal terms (Thai III), the country operates a concession regime, consisting of a sliding scale royalty paid to the government based on production, a specified (50%) petroleum income tax applied to profits, and a special-remuneratory-benefit windfall profit tax. According to a study conducted in 2014 by Wood Mackenzie, a consultant for the oil & gas and mining industry, based on a 250 billion cubic feet (bcf) gas field in shallow water (less than 400 metres) in a medium cost environment - a standard field-type for offshore Thailand - Thailand's government takes a 67% share of oil and gas profits under current terms. This exceeds the global average share of 58%.