New oil-field bid process for ‘benefit of public’

[webfact]

New oil-field bid process for ‘benefit of public’

By The Nation

 

File photo

 

But unclear whether fresh approach will bring financial boost to Thai treasury.

 

POLITICIANS AND bureaucrats will play a bigger role in the decision-making process for oil and gas production in the Gulf of Thailand under new bidding terms and conditions approved by the National Energy Policy Committee (NEPC) yesterday, according to industry sources.

 

Prime Minister General Prayut Chan-o-cha said after chairing the NEPC meeting that the new round of bidding for both Bongkot and Erawan fields will be done with transparency for maximum public benefits and fairness for the private sector.

 

The new Production Sharing Contract (PSC) method will be used for the first time in the bidding for rights to explore and produce oil and gas from the huge offshore Bongkot and Erawan fields, which account for as much as 75 per cent of Thailand’s total gas |output.

 

The upcoming bidding, in which winners will have to invest tens of billions of baht annually for exploration and production work, is expected to attract both Thai and foreign petroleum giants, including PTT Exploration and Production (PTTEP), Chevron of the US and Mubadala of the United Arab Emirates.

 

Time to prepare

 

The current concessions for gas production in the Bongkot and Erawan fields will expire in 2022-2023 so the Energy Ministry must hold a new round of bidding a few years prior so that new investors have time to prepare for exploration and production work under the new PSC terms and conditions.

 

Bid winners are required to produce a minimum of 800 million cubic feet of gas per day for a 10-year period for the G1/61 tract and a minimum of another 700 million cubic feet of gas per day also for 10 years for the G2/61 tract. The output must be sold to the state at a price |comparable to the current market price.

 

Petroleum industry sources said the switch to the PSC method in the new round of bidding, replacing the previous concession method, had followed years of heavy lobbying and public protests by non-government groups such as one led by former Bangkok senator Rosana Tositrakul who asserted that the public would gain more from the PSC method.

 

However, it is unclear at this stage whether the PSC method would lead to increased financial benefits for the state in terms of royalties and other earnings from both gas fields. Politicians and bureaucrats would have more power in the decision-making process for exploration and production work as well as regarding the massive investment needed to carry out the work.

 

Under the current concession method, private petroleum companies have the sole right to make investment and other decisions. In contrast, under the PSC method these decisions would need approval by the government in a way similar to the current Joint Development Area (JDA) system for exploration and production of petroleum resources in southern offshore fields bordering with Malaysia’s territories.

 

According to the new PSC method, private investors are also required to share at least 50 per cent of their profits with the government, plus other benefits. At present, the Erawan and Bongkot fields produce a combined 2,110 million cubic feet of gas per day, with the former field operated by Chevron and the latter field operated by PTTEP.

 

Energy Minister Siri Jirapongphan said the ministry will issue an invitation for bids today and bid winners will be chosen by the end of December this year with the new PSC contracts to be signed by February next year.

 

Most of the gas from the Gulf of Thailand is used in electricity generation, so the government will ensure that the new bidding method will not affect the price of electricity, said Siri.

 

Source: http://www.nationmultimedia.com/detail/business/30343793

 

-- © Copyright The Nation 2018-04-24

[Chang_paarp]

Looks like they are preparing the troughs for future use.

[colinneil]

Benefit the public.

Only people who will benefit is the crooks involved with  making the deals.

[Cadbury]

25 minutes ago, webfact said:

".....bidding for both Bongkot and Erawan fields will be done with transparency for maximum public benefits and fairness".

When is anything the government does ever done with transparency and fairness, let alone maximum public benefit?

Those petroleum heavies interested in bidding will need to do some serious luxury watch shopping if they are to stand any chance of winning the tender.

[stephen tracy]

Just now, Cadbury said:

When is anything the government does ever done with transparency and fairness, let alone maximum public benefit?

Those petroleum heavies interested in bidding will need to do some serious luxury watch shopping if they are to stand any chance of winning the tender.

The fact that they need to even bring up the word transparency in a feeble attempt to assure people says it all. I've become so cynical over the last 4 years that now when I hear man-child say something I always assume the opposite is true.

[YetAnother]

1 hour ago, webfact said:

private investors are also required to share at least 50 per cent of their profits with the government, plus other benefits.

add in the new required participation in decison-making of politicians and bureaucrats and the private parties will be very unhappy indeed

[Sealbash]

add in the new required participation in decison-making of politicians and bureaucrats and the private parties will be very unhappy indeed

Please name a hydrocarbon producing country in which the government does not participate in decision making


Sent from my iPad using Thailand Forum - Thaivisa mobile app

[Cadbury]

37 minutes ago, YetAnother said:

add in the new required participation in decison-making of politicians and bureaucrats and the private parties will be very unhappy indeed

Caveat emptor! Those who submit tenders need to be very aware of the existence of Article 44 which PM has granted to himself and keeps under his pillow. 

Article 44 can be produced at a moment's notice to compulsorily acquire the assets of any foreign investment regardless of Trade Agreements or not. No good of crying later and saying......"I didn't know".

[mikebell]

File under 'Goldmines of Thailand.'

[ChiangMaiLightning2143]

Why can’t Thailand exploit it’s own resources with Thai companies/Management without costly Frang engineers and offshore lads and Big Foreign Oil taking cuts?

 

[CGW]

11 minutes ago, ChiangMaiLightning2143 said:

Why can’t Thailand exploit it’s own resources with Thai companies/Management without costly Frang engineers and offshore lads and Big Foreign Oil taking cuts?

 

They do! Bongkot is owned & operated by PTT, a state owned company! A fair bit of "spin" in this article both Bongkot and Erawan are ~30/35 years old and pretty well depleted!

[kaorop]

49 minutes ago, ChiangMaiLightning2143 said:

Why can’t Thailand exploit it’s own resources with Thai companies/Management without costly Frang engineers and offshore lads and Big Foreign Oil taking cuts?

 

lack of expertise.

lack of skilled workers.

lack of functional safety programs.

lack of trust among thais.

[weegee]

1 hour ago, ChiangMaiLightning2143 said:

Why can’t Thailand exploit it’s own resources with Thai companies/Management without costly Frang engineers and offshore lads and Big Foreign Oil taking cuts?

 

Because they cant !!

[CGW]

29 minutes ago, kaorop said:

lack of expertise.

lack of skilled workers.

lack of functional safety programs.

lack of trust among thais.

I would respectfully disagree with your "opinion" its just plain wrong! Are you aware of just how extensive the Thai oilfields are?

[kaorop]

38 minutes ago, CGW said:

I would respectfully disagree with your "opinion" its just plain wrong! Are you aware of just how extensive the Thai oilfields are?

to a certain extent, but then tell me why they would welcome forign companies if they can do it for themselves, they cant mine without it and i know that industry far better than oil/gas..

[ExpatOilWorker]

2 hours ago, CGW said:

They do! Bongkot is owned & operated by PTT, a state owned company! A fair bit of "spin" in this article both Bongkot and Erawan are ~30/35 years old and pretty well depleted!

It is actually PTTEP that is operating Bangkok and they have always worked close together with Total. There are a few French guys implanted in the PTTEP office.

Ownership is shared:

Bongkot has been in production since 1993, it is operated by PTT Exploration and Production Plc. (PTTEP), with 44.45% interest. The remaining stakes are owned by Total (33.33%) and BG Asia Pacific Pte. Limited (22.22%).

[ExpatOilWorker]

28 minutes ago, kaorop said:

to a certain extent, but then tell me why they would welcome forign companies if they can do it for themselves, they cant mine without it and i know that industry far better than oil/gas..

For a national oil company PTT and all it subsidiaries are actually remarkably well run and they always plan well for the future. They are already expanding LNG import facilities well in advance of a declining domestic gas production.

The oil industry is a very dynamic industry, so it actually make sense to have an American company (Chevron) producing gas in the gulf of Thailand while PTT drill for shale gas in the US or heavy oil in Canada.

Plenty of foreign oil companies in the North Sea, Gulf of Mexico and Canada. It is just the nature of the industry.

 

[CGW]

1 hour ago, kaorop said:

to a certain extent, but then tell me why they would welcome forign companies if they can do it for themselves, they cant mine without it and i know that industry far better than oil/gas..

Investment, foreign companies put up the initial investment, they & this isn't only the Thai government always have a good slice of the pie!

[CGW]

1 hour ago, ExpatOilWorker said:

It is actually PTTEP that is operating Bangkok and they have always worked close together with Total. There are a few French guys implanted in the PTTEP office.

Ownership is shared:

Bongkot has been in production since 1993, it is operated by PTT Exploration and Production Plc. (PTTEP), with 44.45% interest. The remaining stakes are owned by Total (33.33%) and BG Asia Pacific Pte. Limited (22.22%).

PTTEP is a subsidiary of PTT, Bongkot was originally drilled then operated by Total, after 5 years it reverted back to PTT operations (PTTEP),  I'm sure Total keep an eye on their shares in the field. I was on the first well drilled in Bongkot, 1990 I believe it was.

[AgMech Cowboy]

3 hours ago, ChiangMaiLightning2143 said:

Why can’t Thailand exploit it’s own resources with Thai companies/Management without costly Frang engineers and offshore lads and Big Foreign Oil taking cuts?

 

Had PTTEP been the operator of the Erawan field it would not have been developed. When Unocal discovered the Erawan field there were very few Thais in the petroleum business. Had Erawan been discovered by Total with the 50/50 partnership they had with PTTEP at Bongkot, Erawan would have been a financial disaster. Total and PTTEP were very successful in developing the Bongkot field, but even then the cost was very high. It was through the years of development of the Thai work force with Unocal, Total, Thaipo and Chevron that the Thais have gotten there experience and developed their expertise. And those Thai Engineers, Geologist. Geophysicists and Managers have done well. They kicked out most of the Total personnel and are slowly letting other Expats go.

 

I can tell you though that the PSA system is one of the most corrupt business models on the planet. The Jasmine oil field discovered by Harrods, now operated by Mubadala, would have never been developed with a PSA. PTTEP washed their hands of their shares in 2000 claiming it was not economical. After Harrods & Pearl got the field up and running PTTEP were offered a chance to buy back in to have a piece of the pie, which they readily accepted.

 

Yes, sir, the Thai petroleum people are very competent, but the PSA is not a competent way of doing the business here.

[RuamRudy]

8 hours ago, webfact said:

The new Production Sharing Contract (PSC) method will be used for the first time in the bidding for rights to explore and produce oil and gas from the huge offshore Bongkot and Erawan fields, which account for as much as 75 per cent of Thailand’s total gas |output.

Is the offering of a PSC a sign of a lack of faith in the stability of the Thai economy by the international players? Such agreements are generally only used in highly volatile countries. 

[NanLaew]

43 minutes ago, RuamRudy said:

Is the offering of a PSC a sign of a lack of faith in the stability of the Thai economy by the international players? Such agreements are generally only used in highly volatile countries. 

Since this switch to PSC caused a moratorium on all exploration when the idea was first floated almost 2 years ago, it's more of a rearrangement of the deck chairs on the Titanic.

 

Note that the reference to the "huge offshore Bongkot and Erawan fields" in the article from the OP, the size descriptor is relative and only for journalistic effect.

[farcanell]

5 hours ago, ChiangMaiLightning2143 said:

Why can’t Thailand exploit it’s own resources with Thai companies/Management without costly Frang engineers and offshore lads and Big Foreign Oil taking cuts?

 

Umm....

you really didn’t put a lot of thought into that question.

???

[CGW]

2 hours ago, NanLaew said:

Note that the reference to the "huge offshore Bongkot and Erawan fields" in the article from the OP, the size descriptor is relative and only for journalistic effect.

I think who ever wrote this piece was previously selling real estate in Pattaya!

[ExpatOilWorker]

18 hours ago, NanLaew said:

Since this switch to PSC caused a moratorium on all exploration when the idea was first floated almost 2 years ago, it's more of a rearrangement of the deck chairs on the Titanic.

 

Note that the reference to the "huge offshore Bongkot and Erawan fields" in the article from the OP, the size descriptor is relative and only for journalistic effect.

I like your Titanic analogy. It is very kind they give out 10 years concessions with fixed price and production targets, starting 2022 when the proven gas reserves are sinking fast. As of 2018 Thailand have 5.5 years of gas left, so they better get started with some serious in field drilling.