Deals on petroleum sales from the Erawan and Bongkot gas fields in the Gulf of Thailand have been finalised, paving the way for more domestic gas production to reduce dependence on expensive liquified national gas (LNG) imports.
The Department of Mineral Fuels, national oil and gas conglomerate PTT and PTT Exploration and Production Plc (PTTEP) have signed seven agreements, including for gas, crude and condensate oil sales from Bongkot, also known as G2/61, and gas and condensate oil sales from Erawan, also known as G1/61.
PTT produces and sells petroleum through PTTEP, which won an auction to renew its exploration and production rights at Bongkot and another auction to succeed US-based Chevron Corp to operate Erawan in 2018.
The agreements were signed before the current concessions for the two gas blocks are set to expire this Saturday, said Sarawut Kaewtathip, director-general of the Department of Mineral Fuels.
Operations under the new exploration and production licences are based on production-sharing contracts.
PTTEP can continue petroleum production at Bongkot, though the company faced an almost two-year delay in entering the Erawan area following a legal dispute between Chevron and the Department of Mineral Fuels regarding who would pay for the decommissioning of transferrable assets.
The conflict was settled earlier this year, allowing PTTEP to fully prepare for gas production.
However, PTTEP expects the delay and a lack of new petroleum exploration at the gas blocks to cause a decrease in gas supply to 200 million metric standard cubic feet per day between May and July this year.
The company earlier decided to offset the decrease by supplying gas from other gas fields.
Natural gas makes up more than half of the fuels used for national electricity generation. A drop in gas supply from the Gulf of Thailand caused the country to import more LNG.
LNG prices have increased, following a surge in global oil prices. The increase is blamed for causing higher electricity bills.
In a related development, a new auction for petroleum exploration and production licences in the Gulf of Thailand started a week ago, according to Mr Sarawut.
He expects the new bidding to draw massive interest from investors based on higher oil and gas prices in the global markets.
The 24th auction was previously scheduled to start in 2020, but was delayed because of the impact of the Covid-19 pandemic.
The licences cover three offshore areas, not including Erawan and Bongkot.