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All steamed up over payments for gasA new commercially viable gas field was among positive developments offsetting a financial dispute caused by delays in accepting Burmese gas Boonsong Kositchotethan
The feud between two Thai state energy enterprises over the extensive cost burden caused by Thailand's failure to fulfill commitments to buy natural gas from Burma came to a head in the first half of this year. The dispute flared into the open as the Electricity Generating Authority of Thailand (Egat) issued a statement flatly rejecting any responsibility. The debt, including mounting interest, arose from the Petroleum Authority of Thailand's contractual obligation to pay the Yadana developers - Total, Fina and Elf_ for gas even if it could not take delivery of the supplies. Acting irresponsibly The PTT charged that Egat was acting irresponsibly by not sharing the costs, as the PTT's failure to take delivery of the full contractual volume of the Burmese offshore gas stemmed from delays in the construction of Egat's Ratchaburi power plant.
The initial generating units came on line nearly two years behind schedule and there were no other Yadana gas users, mainly because of pipeline constraints. The Ratchaburi plant now uses only about 150 million cubic feet per day, while the PTT is committed to buy 525 million from Yadana, which is located in the Gulf of Martaban, south of Rangoon. According to Prasert Bunsumpun, president PTT Gas, there would be interest costs of 7.42 billion baht on loans that were taken out to make full advance payment for gas. As well, there would be extra costs including the PTT's projected loss of pipeline throughput fees. The gas bill due to the Yadana group for the year ending last March was US$280 million and about $260 million for the current contract year. For the first contract year that began in July 1998, the PTT paid the Yadana group about $50 million. However, the Burmese gas sale contract signed by the PTT allowed the Thai petroleum enterprise to take in later years the gas it failed to lift initially. Egat said it would not share the PTT's additional costs arising from the Yadana gas beyond the amount of gas actually received because such a move would translate into higher electricity tariffs for consumers. Citing a memorandum signed with the PTT in September 1998, the Thai state power utility insisted that Egat was not bound to the "take-or-pay" conditions which were applied only to the PTT and the Yadana group. The PTT disputed this. Mr Prasert suggested that Egat management had agreed to share the costs arising from the "take-or-pay" conditions. Reduce the price However, there were signs of compromise between the two parties following a consultative session organised by the National Energy Policy Office (Nepo), the state energy regulatory body. State energy planner Piyasvasti Amranand reminded the two disputing parties that there was a directive given by the cabinet last year that both the PTT and Egat share the cost burdens arising from the "take-or-pay" obligations. There has been no agreement so far on how the two parties would share the costs. Dr Piyavasti said it was essential that all parties concerned minimise the cost burden by taking as much as Yadana gas as possible, as well as supplies from the Yetagun field, located south of Yadana. Yetagun, operated by Premier Oil of the UK, is due to start delivering gas to the PTT in July this year under a contract that carries similar "take-or-pay" conditions. Egat was advised to speed up the installation of new generating units at Ratchaburi and find means to increase the off-take of Burmese gas by avoiding using fuel oil. At the same time, the PTT was told to find ways to reduce the Yadana gas price so as to encourage Egat to use more gas. Egat said the Burmese gas was 30-40% more expensive than indigenous natural gas coming from the Gulf of Thailand. Tri Energy Co, an independent power producer owned partly by Texaco, will also be asked to bring forward the production from its 700-megawatt combined cycle plant, located near the Ratchaburi plant, from July this year to increase the use of ng Burmese gas bought from the PTT. As well, the PTT was told to speed up the laying of a new onshore pipeline, stretching eastward from the Ratchaburi plant to Wang Noi, Ayutthaya, so that some of the Burmese gas could be diverted to Egat's Wang Noi combined cycle plants and to the PTT's national gas grid. The pipeline is being delayed to September this year from July as previously scheduled. Dr Piyasvasti said the PTT was also advised to look for lower-cost funds to lessen the interest payment burden due to the "take-or-pay" clauses. The current annual interest rate for funding the Burmese gas payment is about 10%. Extra Cost
But Mr Prasert said the largest burden would be incurred during 2002-2003 when the PTT is committed to pay a total of 40 billion baht for gas from Yadana and Yetagun. Thailand's petroleum consumption, excluding demand from petrochemical industries, increased 3.2% in the first quarter of this year to an average of 906,300 barrels per day of oil equivalent. The year-on-year figure conceals a mixed demand pattern for refined oil products and natural gas, the two main categories of fuel. While use of refined oil products dipped 0.4% to 628,500 barrels per day, consumption of natural gas surged 12.2% to 277,800 barrels equivalent, PTT figures showed. Higher world oil prices caused a drop in demand for most refined oil products in the first quarter. On the other hand, use of natural gas increased on the back of increased power generation and industrial demand. Consumption of most refined oil products, except aviation fuel, LPG and kerosene, decreased in the first quarter. On the supply side, total petroleum procurement in the first quarter averaged 1,070,600 barrels per day, down 0.2% from the same period a year earlier. Total petroleum imports dropped 9% to 645,900 barrels per day, comprising 48,600 barrels of refined products (up 140.1%), 589.700 barrels of crude (down 14.5%) and 7,600 barrels of natural gas from Burma. The combined petroleum import bills shot up 119% to 57,483 million baht. Other major developments -Thai Oil Co, Thailand's largest oil refiner, got a new lease of life with the restructuring of debts, which were cut by US$876 million to $1.41 billion from $2.29 billion. Of the $876 million, debt-to-equity conversion by the PTT eliminated $101 million. Immediate repayment of commercial loans cleared $29 million, and refinancing absorbed $346 million. Debt-to-equity conversion for other creditors accounted for $180 million, and the debt-to-equity conversion for unsecured creditors accounted for the remaining $220 million. The PTT injected $149 million in cash to buy back debts from creditors who wanted to exit the plan. Creditors owed $315 million have agreed to accept 55 cents per dollar. Repayment of the remaining debt, $1.412 billion, has been rescheduled to between 10 and 14 years. The commercial loans of $26 million will be repaid within three years. Under the plan, the PTT will hold a 49.99% stake in Thai Oil Co while other creditors hold 49.99% and the Crown Property Bureau 0.02%. -The Bongkot consortium has embarked on a new development scheme which is aimed at sustaining production from Thailand's single largest gas field at the current level of 550 million cubic feet of gas per day, plus 14,000 barrels per day of condensate. The so-called phase 3B development includes drilling of 42 wells and installing two additional well-head platforms at the existing production complex, lying about 600 km south of Bangkok in the Gulf of Thailand. Drilling by Norwegian driller Smedvig, due to start in August this year, is to be completed in 30 months. Hyundai Heavy Industries of South Korea has been commissioned to build two well-head platforms which are scheduled for installation in the field in the middle of next year. - A new commercially viable gas field- Arthit (sun in Thai)- in the Gulf of Thailand is on the horizon. Arthit is poised to become another major gas producer following the successful exploration campaign on blocks 15A and 16A operated by PTT Exploration & Production Plc, the majority state-owned Thai company. The recently concluded drilling campaign resulted in gas/condensate discoveries in all seven wells sunk in the concession blocks. Each well encountered an average 73 metres of pay zone and tested at a daily gas average of 34.5 million cubic feet per day gas and 882 barrels per day of condensate. The wells are located about 35 km northeast of the Bongkot gas field. - The development of the first gas field lying in the once disputed Thai-Malay continental shelf in the South China Sea made a headway with an international group awarded a contract to build the gas production and related facilities. The consortium comprising Technip of France, South Korea's Samsung and Italy's Saipem, was picked by Carigali-Triton Operating Co, a Malaysian-American joint venture, from among four bidders to serve as the contractor for the Cakerawala gas project. Phase one development of the project is estimated to cost US$800 million. The contract was hailed as demonstrating a commitment to get the offshore gas field on stream in mid-2002. That removed doubts that the development could be delayed by the economic crisis that began in 1997. The economic meltdown in Thailand has put a brake on otherwise explosive growth in demand for gas. |
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