Analysts worried about gas auctions

Analysts worried about gas auctions

Energy analysts are anxious about the possibility of further delays in the upcoming auction for the two gas blocks in the Gulf of Thailand, even as policymakers kicked off the official bidding on April 23.

The auction process allows exploration and production (E&P) investors to download applications for the Erawan and Bongkot blocks. Policymakers will then screen applicants' qualifications.

Winning bidders are expected to be announced around December, with contracts to be signed next February.

Analysts are worried the winning operators will not have sufficient time to prepare production facilities at both gas blocks, with only three years until the current concessions begin to expire.

Concessions expire for the Erawan and Bongkot blocks in April 2022 and 2023, respectively.

New operators are required to produce a daily contract quantity of at least 800 standard million cubic feet per day (MMSCFD) at Erawan and 700MMSCFD at Bongkot.

Bowon Vongsinudom, vice-chairman of the Federation of Thai Industries, said new operators will have limited time for gas pocket drilling and seismic processing before starting production.

He said any possible factors that postpone the auction will be objected to by public advocates and activists, and the current government pays attention and takes action in response to public outcry.

For example, activists led by former Bangkok senator Rosana Tositrakul successfully called for shifting the business model of Thailand's E&P activities from concession-based to a production-sharing contract (PSC), as well as a postponement the country's petroleum exploration of the Round 21.

"We expect policymakers may follow the group's suggestion to set up a national oil company and take absolute control of the entire E&P business. The policymaker is also studying the feasibility of this proposal," said Mr Bowon.

"Moreover, the Prime Minister announced to public that the auction would be ready within 2016, but the actual schedule have been delayed dozens of times."

Mr Bowon added any postponement will have multiple impacts on the country's power generation cost because state utilities have to seek other resources to replace the shortage of natural gas, such as liquefied natural gas, which is expensive to import.

Further delays will also create pressure for new petroleum investment in the government's Eastern Economic Corridor scheme because the 10 targeted industries are based on petrochemical feedstock and require electricity, so once a power supply has a high cost, the country's industrial sector will lack competitiveness.

Nonetheless, Thitisak Boonpramote, an academic at Chulalongkorn University for mining and petroleum engineering, said the upcoming auction should have been carried out as planned because E&P activities in Thailand have declined since the long-delayed Round 21 petroleum exploration in 2008.

The worst situation possible scenario for the country's energy sector is a collapse of the global oil prices, as seen in 2014.

"This auction is the last chance for the country's energy security, while the university itself has produced new petroleum engineers for several years to support this sector," said Mr Thitisak.

Phuwadon Suntornwipart, chief executive of Equator Solar Co, said the PSC model for Erawan and Bongkot will create greater opportunity for corruption and political intervention.

"The policymakers have to outline a clear-cut direction for the country's energy structure," said Mr Phuwadon.

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