Thailand's Bid for Oil, Gas Concessions Delayed Indefinitely

[Jacob Maslow]

Thai PM Prayuth Chan-ocha says that bidding for gas and oil concessions will be put on hold indefinitely until an amendment to the petroleum law has been implemented.

Prime Minister Prayuth Chan-ocha says the Thai government will delay its bidding for new gas and oil concessions indefinitely, pending an amendment to petroleum laws.

The announcement of the delay comes amidst opposition to contract terms, which have attracted the interests of many international companies, such as Mitsui & Co Ltd. in Japan and China National Petroleum Corporation. The amendment will be made before the bidding can go forward.

At a public forum last week, the Thai government announced that it was considering a vote on whether or not to proceed with the auction of gas and oil blocks. Many senior politicians are opposed to the idea and want the Thai government to receive a larger cut of the profits from the concessions.

Prayuth says that bidding has been delayed to amend the petroleum law, which could take three months. No further details were given on the law’s amendment.

The opposition is pushing for production-sharing contracts that emulate the contracts in other Southeast Asia countries, such as Malaysia and Indonesia. In these countries, the state gets a 74% cut on average.

Under the current concession law, the Thai government only receives 67% taxes and royalties on pre-tax profits. The government’s offering consisted of six offshore blocks and 23 onshore blocks. The blocks hold between 1 and 5 trillion cubic feet of gas, and 20-50 million barrels of crude oil.

The original auction was set to take place in 2011, but severe flooding and political crises prevented the auction from taking place.

The decision to delay bidding follows Friday’s public hearing, which Prayuth did not attend. Thailand’s PM instead listened to the meeting from an outside location. A committee of representatives from the government and civil societies is being put together to look into the proposed bill. The committee’s first meeting is scheduled for February 26.

-- 2015-02-24

[NeverSure]

(bidding) "which have attracted the interests of many international companies..."

I never know what to believe.

In a world with an oil glut, major producers competing to maintain customers rather than prices, the lowest oil prices in many years, and some oil producers actually shutting down, WHO wants to pay the big Thai percentage and then risk their money speculating on oil? WHO?

I would guess no one.

[webfact]

PM defers concession bidding for Act rewrite
Anapat Deechuay
The Nation

Energy Minister Narongchai opposes change, says bidding should go ahead

BANGKOK: -- The 21st round of bidding for oil and gas concessions needs to be delayed until the Petroleum Act has been amended, Prime Minister Prayut Chan-o-cha said yesterday.

He made the remark after a meeting between the Cabinet and the National Council for Peace and Order on this contentious issue.

The decision was made after strong pressure from civic groups last week on the government to halt the awarding of concessions before the law is amended to enable the state to enjoy more profits. They needed the law to be rewritten to have profit sharing scheme between investors and state agencies in petroleum deals. The current law authorises the government only to grant concessions to investors.

Prayut said the planned government and people's committee would work out how to amend the law.

However, Energy Minister Narongchai Akrasanee disagreed, saying the Cabinet did not discuss the issue yesterday.

"For the standing point of the Energy Ministry, we are still supporting any progress that can be made in the petroleum concession bidding to ensure energy stability of the country. A conclusion should be made in advance of whether the Petroleum Act will be amended before or after the concession bid.

"We would like to affirm that the Act is not out of date as it has been amended four times so far," he said.

On February 16, the National Energy Policy Council extended the closing date for the 21st tender of oil and gas exploration and production concessions by four weeks from the original deadline of February 18 until March 16. The government held a public hearing last Friday to clarify the situation with lobby groups that have opposed the bidding.

Opponents of concessions, led by a member of National Reform Council (NRC) Rosana Tositrakul, advised the government to switch to a production-sharing system, which they said would be more flexible and beneficial for the country.

When asked how the government would create confidence for investors while the law is amended, Prayut said he couldn't say - and suggested they put the question to those opposing the awarding of a new round of concessions.

"Ask them [Rosana's group], don't ask me. I'm not the person who initiates the matter or delays the process," he said. "They told me to be open for people's opinions, now I have. But why do you ask me about investors' confidence?"

Prayut expected it would take at least three months or so to amend the law but the length of time would depend on how the Act will be amended and the people involved in the process.

The PM said the timeframe could be postponed if the deadline for drilling exploration bids on March 16 cannot be settled, so the joint committee set up by the government and civic sector on the issue would have to have further talks.

The 12 member panel will meet tomorrow. PM's Office Minister ML Panadda Diskul will represent the government and be a spokesperson. Kurujit Nakornthap, deputy permanent secretary at the Ministry of Energy, will attend as head of the panel on behalf of the government.

Participants for the people's sector will include former foreign minister Prasong Soonsiri, Panthep Phuaphongphan, ML Kornkasiwat Kasemsri, and Rosana, the former Bangkok senator now in the NRC.

Deputy government spokesman Maj-General Sansern Kaewkam-nerd said if the Petroleum Act is amended, or any new organisation set up to cater for changes if a production-sharing system is introduced, the process might be delayed.

Source: http://www.nationmultimedia.com/business/PM-defers-concession-bidding-for-Act-rewrite-30254813.html


-- The Nation 2015-02-25

[rotary]

Low oil prices, high requirements from the Thai government, possibility of high production wells being low, etc they would have had problems getting bidders to meet "their" terms. This bidding round may be on hold for a while unless the Thai government changes their demands and or oil prices come above $80 a Barrel. On the gas side which is in the Northeast it might be different.

Edited February 25, 2015 by rotary

[Sealbash]

(bidding) "which have attracted the interests of many international companies..."

I never know what to believe.

In a world with an oil glut, major producers competing to maintain customers rather than prices, the lowest oil prices in many years, and some oil producers actually shutting down, WHO wants to pay the big Thai percentage and then risk their money speculating on oil? WHO?

I would guess no one.

I believe most of the major oil companies are looking long term on their investments, not at a one or two year blip in the market. Petroleum products are not going away any time soon. It does not matter which commodity you look at; oil, gold, corn, etc, there are highs and lows. As the mining sector declined, it did not stop major mining companies from investing in the long term future while controlling expenditures. Today's low oil prices will not stop major oil companies from investing in the long term future.

At the same time, national oil companies worldwide are actively taking more control over their nation's resources. Thailand is no different. They are taking additional control over the national resources.

Why do you state that Thailand has "big percentage"? To which country is this in comparison to?

[Srikcir]

(bidding) "which have attracted the interests of many international companies..."

I never know what to believe.

In a world with an oil glut, major producers competing to maintain customers rather than prices, the lowest oil prices in many years, and some oil producers actually shutting down, WHO wants to pay the big Thai percentage and then risk their money speculating on oil? WHO?

I would guess no one.

I believe most of the major oil companies are looking long term on their investments, not at a one or two year blip in the market. Petroleum products are not going away any time soon. It does not matter which commodity you look at; oil, gold, corn, etc, there are highs and lows. As the mining sector declined, it did not stop major mining companies from investing in the long term future while controlling expenditures. Today's low oil prices will not stop major oil companies from investing in the long term future.

At the same time, national oil companies worldwide are actively taking more control over their nation's resources. Thailand is no different. They are taking additional control over the national resources.

Why do you state that Thailand has "big percentage"? To which country is this in comparison to?

"Today's low oil prices will not stop major oil companies from investing in the long term future"

As the USA found, awarding long-term offshore oil & gas concessions do not guarantee development and extraction of those reserves.

Companies want to hold as much reserves as possible for book purposes to attract shareholders but the decision to actually develop the reserves is a matter of pure economics. Thailand does not benefit by companies winning concessions and then withholding development, especially if resource value increases over time.