Thailand welcomes Chevron's resumption of talks to resolve energy dispute

[webfact]

Thailand welcomes Chevron's resumption of talks to resolve energy dispute

By Patpicha Tanakasempipat

 

FILE PHOTO: A Chevron gas station sign is seen in Del Mar, California, in this April 25, 2013 file photo. REUTERS/Mike Blake/File Photo

 

BANGKOK (Reuters) - Thailand's energy minister on Sunday welcomed a decision by U.S. energy company Chevron to continue negotiations rather than seek arbitration to resolve a dispute over who should pay for removing offshore oil and gas platforms.

 

Thailand wants Chevron to pay the full decommissioning costs, estimated by a local newspaper at around $2.5 billion, for infrastructure at the Erawan gas field, which it is due to hand over to Thai state oil firm PTT Exploration and Production Pcl in April 2022 when its concessions expire.

 

Reuters first reported last week that the U.S. company had "temporarily suspended" a plan to seek arbitration in order to allow more time for talks with Thailand's energy ministry, but that arbitration was still a possibility "within weeks" if talks do not succeed.

 

Thailand's energy minister Sontirat Sontijirawong said on Sunday the Chevron's decision was a good sign that the two parties could work together to resolve the dispute and ensure a smooth handover of the gas field.

 

"Chevron's decision to hold off the arbitration process to continue negotiations is welcomed," energy minister Sontirat Sontijirawong said.

"I also believe that we will arrive at the best agreements while prioritising Thailand's interests," he added.

 

The dispute arose in 2016 when Thailand retroactively enforced a new energy ministry regulation requiring gas field operators to pay the costs of decommissioning all assets they have installed even if they no longer operate them.

 

Chevron argues that under the terms of its initial contracts from 1971 it is only liable for infrastructure that is no longer deemed usable before it hands over the field to another operator.

 

The new law would require Chevron to pay the future costs of decommissioning all the infrastructure it has installed at the Erawan field, including still usable assets it will transfer to PTTEP free of charge.

 

The dispute has implications for other international energy companies such as France's Total and Japan's Mitsui & Co, which also have stakes in offshore energy concessions in the Gulf of Thailand.

 

Outside of the oil and gas industry, other foreign investors in Thailand were also concerned about the retroactive use of laws, and what precedent the case might set for the sanctity of their contracts.

 

(Reporting by Patpicha Tanakasempipat. Editing by Jane Merriman)

 

-- © Copyright Reuters 2019-09-30

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[Reigntax]

Thailand's use of retroactive laws is a joke. As for trying to enforce retroactive laws in a 40 year old contract....good luck!!!!

These Muppets who control Thailand are incompetent, uneducated fools.

[hotchilli]

6 hours ago, webfact said:

The dispute arose in 2016 when Thailand retroactively enforced a new energy ministry regulation requiring gas field operators to pay the costs of decommissioning all assets they have installed even if they no longer operate them.

 

Chevron argues that under the terms of its initial contracts from 1971 it is only liable for infrastructure that is no longer deemed usable before it hands over the field to another operator.

Thailand moving the goal posts again !!!

[Oziex1]

A couple of stories on business deal deadlocks today on TV. com.  This does not bode well for foreign investment.

[Srikcir]

7 hours ago, webfact said:

The new law would require Chevron to pay the future costs of decommissioning all the infrastructure it has installed at the Erawan field, including still usable assets it will transfer to PTTEP free of charge.

Without seeing the production license agreement but by the fact that any disputes between Chevron and the State MUST be resolved by binding arbitration infers that retroactive laws cannot apply.

The use of binding arbitration as is typical with free trade agreements limits a nation's sovereignty over the agreement. That means a nation cannot use its law enforcement and judicial processes to force favorable issue resolution unless expressly allowed under the agreement/license. This means that the Thai government cannot file a lawsuit in Thai courts to obtain a favorable judgement against the defendant as the ruling would have no authority over the agreement. Even in the likelihood of a ruling in favor of the defendant, the ruling would be irrelevant.

Why would a nation agree to such sovereign limitations? It reduces investor risk that attracts foreign investors. That is especially important when it comes to projects that require substantial investment over a considerable term. If Thailand refuses to honor the terms of the license/agreement, it creates the possibility of flight of foreign capital. This happened with Venezuela.

7 hours ago, webfact said:

"Chevron's decision to hold off the arbitration process to continue negotiations is welcomed," energy minister Sontirat Sontijirawong said.

"I also believe that we will arrive at the best agreements while prioritising Thailand's interests," he added.

If the license agreement is analogous to the typical free trade agreement, arbitration cannot be nullified even when parties reach an agreement made prior to complaints made with the arbitration tribunal (typically a 3-person panel). Any agreed resolution made outside arbitration must still be presented to the arbitration tribunal for final approval. That approval isn't automatic.

Any resolution must still abide by the conditions specified by the license agreement. For example, let's say that Chevron reaches a resolution outside the arbitration process that in part agrees to comply with a retroactive new law that otherwise would be forbidden by the license agreement. The arbitrators have the right to deny the resolution.

Note: the above is my opinion as a layperson.

[Artben]

Best reason NOT to invest in Thailand.