The two companies outbid US giant Chevron for rights to the huge Erawan and Bongkot gas fields after the Production Sharing Contract (PSC) method was used in the bidding process to find new investors and operators.
The current concessions for the Erawan and Bongkot fields, which expire in 2022-23, are held by Chevron and partners. Based on the PTTEP-Mubadala bids, Thailand will gain more benefits from the 10-year period during which the two firms will produce natural gas from the two fields, with discounts on gas prices estimated to reach Bt550 billion, or Bt55 billion per year. The new concessions will also yield more than Bt100 billion in royalties and other state benefits under the PSC method.
PTTEP said in a statement that it was ready to continue operating the Bongkot gas field and to become the operator of the Erawan field starting from 2022 so as to ensure continuity in natural gas supply for the country’s energy security.
PTTEP chief executive officer Phongsthorn Thavisin said the company has two decades of experience and know-how in both fields, hence the firm was confident it could produce natural gas in quantities of at least 700 million and 800 million cubic feet per day from the Bongkot and Erawan fields respectively, during the new PSC period.
“At the Bongkot field, where PTTEP is the existing operator, we are capable of investing immediately to deliver the committed production level, while we have a workplan and investment plan for the Erawan field during the transfer of operatorship. We expect good support from the existing operator, the Department of Mineral Fuels, and government agencies so that we can start the required activities immediately to ensure continuity of natural gas supply,” said Phongsthorn.
The Bongkot and Erawan gas fields are major sources of energy for Thailand with combined natural gas production that accounts for 60 per cent of the total domestic output.
Meanwhile, Chevron expressed disappointment at losing its multibillion-dollar bids for production at the two offshore fields. Prime Minister Prayut Chan-o-cha yesterday chaired a Cabinet meeting in the Northeast province of Nong Khai during which the PTTEP-Mubadala bids were approved based on PSC bidding, being used for the first time in Thailand.
The Energy Ministry is due to sign the contracts with the bid winners by the end of February next year. Bid evaluation was based on the natural gas price, profit-sharing ratio, bonuses and other benefits, as well as employment of Thai personnel.
Besides Chevron, Mitsui Oil Exploration Co Ltd was also involved in the bidding as equity partner of the US-based firm for both the Erawan and Bongkot fields. According to the Cabinet, bid winners PTTEP and Mubadala offered more benefits to the government as well as a big discount on the price of natural gas used for electricity generation.
Meanwhile, Praipol Koomsup, an independent economist who specialises in the energy sector, said PTTEP would face challenges investing in the Erawan field currently operated by Chevron.
Chevron is unlikely to make more investment because the current concession would expire in 2022, and this could have some impact on gas production. “So, PTTEP has to make sure that there would be minimal impact on the continuity of gas production at the Erawan field,” he said.
Energy regulator dismisses appeal
In a related development, Narupat Amornkosit, the secretary-general of the Energy Regulatory Commission (ERC), said the commission had |dismissed the appeal of Global Power Synergy Plc (GPSC), a subsidiary of |PTT Plc, to acquire Glow Energy Plc (Glow).
The commission said the merger and acquisition would have a significant impact on competition in the energy industry because the deal will reduce electricity producers to one company in the Map Ta Phut Industrial Estate, limiting competition.
The commission did not agree with GPSC’s argument that electricity production was a natural monopoly business.
The commission on October 10 blocked the merger deal estimated to be worth about Bt140 billion, arguing that it would hurt competition, but GPSC appealed the ERC ruling.
“The commission ruling to block the merger on the grounds that it would limit competition is in line with the law,” she said in the statement released yesterday.
Praipol, however, said he did not agree with the commission’s ruling. “Electricity production in Thailand is actually monopolised by the Electricity Generating Authority of Thailand [Egat], which generates almost half of the total electricity consumed, while other producers are small,” he said. Most independent electricity producers sell electricity to Egat and only a few sell directly to factories in industrial estates, so there is no logic to block the merger, Praipol argued.
