Energy Minister Anantaporn Karnjanarat has given the green light for PTT Plc, the national oil and gas conglomerate, to acquire Chevron's stake in Thai gas resources.
He gave an interview in Bangkok yesterday in which he said the purchase should be based on fair pricing and it being a worthwhile investment.
Chevron is considering a sale of its assets in Thailand as the oil giant continues to cut costs by divesting of its Asian holdings.
According to a Bloomberg report, Chevron is "considering options" for its 16% holding in the Arthit gas field in the Malay basin.
A source cited by Bloomberg said the company was negotiating a sale to PTT Exploration and Production (PTTEP), the operator of the field and owner of 80%. Chevron is already looking for buyers interested in its Indonesian oil and natural gas fields.
Last month Chevron put its Yadana gas block stake in Myanmar worth an estimated US$1.3 billion up for sale.
The Yadana output is sold to Thailand to the tune of 560 million standard cubic feet per day through PTT via a gas pipeline from the offshore block to Thailand's Kanchanaburi province. Yadana gas makes up 12% of Thailand's total supply.
The Chevron sale is part of the US giant's efforts to save cash and retreat from non-core assets in the wake of collapsed oil prices.
PTTEP announced last week it would finalise its merger and acquisition plans by the end of the year, aiming to acquire upstream oil firms with petroleum production assets in Asia, said Pannalin Mahawongtikul, PTTEP's executive vice-president overseeing finance and accounting.
PTTEP has approximate cash on hand of $3.7 billion after production cost cuts over the last two years. Its production cost per unit has been trimmed to $28.57 a barrel from $40 a year earlier.
Meanwhile, Thai policymakers will consider whether to renew concessions for existing petroleum production licence holders or open new bids for new investors on the Erawan and Bongkot gas blocks.
The final decision will be made by the National Energy Policy Council this coming Monday.
Whether the council decides to renew concessions or open up new bids, the business model will be Thailand 3 Plus or a product sharing contract (PSC) system, including a royalty fee of 5-15%, corporate tax of 50% and windfall profits tax of 0-75%.
The concessions of Chevron Thailand Exploration and Production's B10-B13 or Erawan gas block and PTTEP's B15-B17 or Bongkot gas block are due to expire in 2022 and 2023, respectively, after the concessions were extended in 2012.
Exploration began on the two gas blocks in 1969, and gas production started in 1983. Now gas production from the two blocks accounts for 2.214 billion standard cubic feet per day or almost 50% of Thailand's total gas supply.
Separately, PTT's board of directors agreed at a meeting yesterday to maintain its coal business in Indonesia after the company managed to cut operating costs to allow an acceptable profit margin, said Tevin Vongvanich, group president and chief executive.
Operating costs at mines in Indonesia's Jembayan and Sebuku fell from $35 a tonne to $30. With global coal prices at $50 a tonne, Mr Tevin said there is room to make a profit.
However, PTT is still open to spinning off the business, saying if it receives a good offer, the board would consider again the decision to sell it, he said.