Options mulled for concessions expiring in 2022

Economy January 09, 2014 00:00


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A SUB-PANEL of the Energy Ministry's petroleum committee may propose that the government permit existing concession holders to continue to operate petroleum fields after their concessions expire and the government convert the assets in those fields into s

Songpope Polachan, director-general of the Department of Mineral Fuels, said this was among several options to deal with the concessions that will expire in 2022, including Chevron Thailand Exploration and Production’s Erawan field and PTT Exploration and Production’s Bongkot field.

After the concessions’ expiration, assets such as drill facilities will become the government assets.

Songpope believes the remaining 4 trillion to 6 trillion cubic feet of gas reserves in those areas should still entice private companies to set up operations. The current combined production capacity in the Gulf of Thailand including the Joint Development Areas is about 2,240 million cubic feet per day, or more than half the natural-gas supply in the entire gulf. Hence it is crucial for maintaining Thailand’s petroleum production output.

The 30-year concessions of Chevron’s and PTTEP’s fields, which were to expire in 2013, were extended by 10 years by the Cabinet in 2007.

Songpope said the next (21st) round of bidding for petroleum concessions was likely to be ready by June.

For the next concessions, the state will collect revenue at the rate of 5-15 per cent of sales from field operations. After deduction of investment expenses, the profits will be shared 50:50 between the state and the private operator, which is higher than the 23-per-cent corporate tax rate. In addition, there will be a special compensation fee ranging from 0-75 per cent if the private operator discovers a major petroleum source, or if petroleum prices rise sharply.

On top of that, the state stands to reap other benefits such as contract signing bonuses, production bonuses, and supporting funds to develop petroleum projects in Thailand.

The private sector is urging the Department of Mineral Fuels to raise the royalty fee to 50 per cent. However, the department is still uncertain if such a rate would still attract private entities to submit concession bids in the upcoming round.

As for PTTEP’s petroleum concession, the state must clearly specify the management guidelines at least five years in advance of its expiry to allow the company to prepare its management plans to support investment in drilling and exploration sites and additional production to maintain the output level. Without such clear guidelines, output could be disrupted during the transition stage after the concession expiry, said Tevin Vongvanich, PTTEP’s president and CEO.