More contract options approved for energy exploration

energy4In a move to attract more international energy firms and investors, Thailand’s legislature approved changes to the country’s energy laws last week that will allow for more options besides concession models in the types of contracts they can negotiate with the government, as officials said they had already drawn up initial terms for auctioning gas blocks in the Gulf of Thailand.

The National Legislative Assembly passed an amendment to the Petroleum Act that will allow companies to seek production-sharing arrangements or service contracts with the government as alternatives to the concession model, which is currently the only model on offer.  Prime Minister Prayut Chan-o-cha had said that he wanted the law amended and the other options available before the blocks in the Gulf of Thailand were open for bids.

“Things have changed drastically for energy … in one of Southeast Asia’s most important markets,” Valuewalk, a New Jersey-based investment and asset management firm, wrote on its website about the new revenue-sharing options.

The changes are the biggest shift in the Kingdom’s energy landscape outside of the plan to source 25 percent of the country’s energy needs by 2036. Thailand is heavily dependent upon both natural gas and Middle Eastern crude oil, despite being the largest producer of wind and solar energy in the region. A major source of natural gas is the country’s blocks in the Gulf of Thailand.

The concessions on those blocks will expire in 2022 and 2023, and the government has said it will open those blocks up for bidding rather than automatically renew the current concessions held by PTT and Chevron.

Veerasak Pungrasamee, director-general of the Mineral Fuels Department, said bidding for the concessions would take place in the second half of this year, and that firms applying should have a strong track record in exploration and production.

He added that companies would need to commit to producing a certain amount of gas. He did not reveal what that figure would be, but said it would not be lower than the figure in the current concessions, which require a minimum of 1.5 billion standard cubic feet per day.

The legislature has removed the controversial section from the amendments before they were voted on, allaying the concerns of various groups.

Thailand’s energy giant PTT Group is already 65 percent government owned. It was once completely owned by the government but was partially privatized roughly 15 years ago.