Energy minister pledges Round 21 licences by mid-year

Energy minister pledges Round 21 licences by mid-year

Energy Minister Siri Jirapongphan (left) awards contracts to Mr Phongsthorn Thavisin for PTTEP's E&P bids for the Erawan and Bongkot fields.
Energy Minister Siri Jirapongphan (left) awards contracts to Mr Phongsthorn Thavisin for PTTEP's E&P bids for the Erawan and Bongkot fields.

Round 21 of new licence issuance for offshore exploration and production (E&P) of petroleum resources is expected to open in June.

This new petroleum round will open for offshore resources only in the Gulf of Thailand, following the signing of contracts for the offshore Erawan and Bongkot gas fields yesterday, said Energy Minister Siri Jirapongphan.

Onshore locations, mainly covering northern, northeastern and central provinces have yet to be concluded due to legal obstacles for many public lands that have petroleum underground.

The Mineral Fuels Department was told to prepare a Round 21 plan to invite interested investors, said Mr Siri.

Round 21 has been delayed since October 2014 due to political instability and an economic slowdown.

Many advocates called for a delay and revision of the country's petroleum laws from an E&P concession to a production-sharing contract.

In June 2017, two revised laws -- the Petroleum Act and Petroleum Income Tax Act -- were enacted. The government then opened bidding for the Erawan and Bongkot gas fields in 2018.

He said tentative conditions for Round 21 will be similar to the latest Erawan and Bongkot bids. More importantly, the round will include production-sharing contracts and 25% ownership for Thai state enterprises.

This move is also set to expand oil and gas reserves in the country as there have been no new E&P activities for over a decade.

There are many E&P offshore petroleum operators such as PTT Exploration and Production Plc (PTTEP), Chevron Thailand Exploration and Production Limited and Mubadala Petroleum among others.

In a related development, the Mineral Fuels Department on Monday awarded the production-sharing contract for Erawan gas field to PTTEP and MP G2 Thailand.

For the Erawan (G1/61), PTTEP has 60% ownership, while MP G2, Mubadala Petroleum's subsidiary, owns the remainder.

The department awarded the contract of Bongkot (G2/61) for PTTEP, the sole bidder for this gas field.

Both offshore Erawan and Bongkot gas fields each have 10-year contracts, selling to the state at 116 baht per million British thermal unit, compared with almost 200 baht for the latest contracts.

"After two existing concessions expire in 2022 and 2023, the new prices will positively impact gas users for 10 years, with a combined net worth of 550 billion baht," said Mr Siri.

The gas cost for power generation will be cut by 200 billion baht, reducing the fuel tariff by 15-20 satang per kilowatt-hour.

Many gas products from the Erawan and Bongkot fields will decrease in price for 10 years such as cooking gas (150 billion baht), natural gas (100 billion baht) and petrochemical (100 billion baht).

Phongsthorn Thavisin, PTTEP's president and chief executive, said PTTEP is ready to begin the takeover transition for Erawan field from US-based Chevron.

PTTEP runs the Bongkot concession.

"PTTEP will set up a team to smooth synchronisation during 2021-22 as the Erawan concession approaches expiry in order to avoid gas production interruption," said Mr Phongsthorn.

PTTEP allocated a massive budget of more than 1 trillion baht for two new 10-year contracts -- 700 billion baht for Erawan and 400 billion for Bongkot.

Mr Phongsthorn said the gas sales price PTTEP offered the state has been estimated at an appropriate level (116 baht) and will allow PTTEP to gain margins from two gas fields.

The Erawan and Bongkot fields can trim production costs due to greater gas production volume in the future.

PTTEP forecasts the production cost of two fields will average US$30 per barrel of oil equivalent.

PTTEP plans to invite new strategic partners for a joint venture in two gas blocks in the future, said Mr Phongsthorn.

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