Oil, gas exploration due after law revision

Oil, gas exploration due after law revision

PSC system will run alongside concessions

Licences for Thailand's 21st round of oil and gas exploration and production are expected to be granted after revision of the Petroleum Act is completed this year, says the Mineral Fuels Department.

Director-general Puangthip Silpasart said the Office of the Council of State was revising some parts of the law to include the production-sharing contract (PSC) system as an alternative to the concession system.

Licensing has been delayed by civic groups' concerns that the concession system gives only a small share of profits to the state.

Activists favour a PSC model to replace the current system, which charges a progressive rate of royalty fees throughout the concession period and a 50% tax on corporate income.

Under the PSC system, the contract requires an investor to bear the entire cost of investment and production. The net profit is mostly shared with the government and the company takes a smaller cut.

Ms Puangthip said the revised parts of the Petroleum Act were due to take effect this year and after that the 21st round would be opened.

"The cabinet will consider whether to use the concession system or PSC system," she said.

She said Thailand should continue its exploration and production because its proved reserves stood at only six years and were about to deplete very rapidly because granting of licences had been delayed by more than eight years.

This meant new resources should be explored as soon as possible in order to secure energy supply for the country.

Thailand's gas demand rose above 5 billion cubic feet per day in April, the height of the hot season, up from normal demand of 3.5 to 4 billion cfpd in recent years.

The 20th round was in 2007 for 65 blocks with total investment of 14 billion baht.

The G8/50 block was granted a licence for gas production in 2012 to PTT Exploration and Production Plc, with 20 million cfpd due to become available this year.

The Mineral Fuels Department said the government would be more flexible with regulations in the 21st round of bidding this year, as bidders for some gas and oil blocks might be allowed to participate under the PSC system.

In the exploration period, the government will discuss with investors which system is preferable between PSC and a concession in order to help allow the exploration to continue rather than stop every procedure to argue about regulations.

Three offshore blocks are being considered for more flexible regulations — G3/57, G5/57 and G6/57.

The 21st round covers 29 gas and oil resource blocks, of which 23 are offshore.

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