PTTEP issues alert over potential Thai gas production and supply disruption

PTT Exploration and Production Plc (PTTEP) voiced its concern to the energy authorities regarding potential barriers that may impede the continued production of gas in the Gulf of Thailand. The current license to operate in the Pailin gas block is set to end in 2028. The reoccurrence of a disruptive incident similar to the one at the Erawan gas block has prompted PTTEP’s request for regulatory authorities to oversee a seamless transition.

PTTEP previously won an auction to fill in the position left vacant by US-based Chevron Corp at the Erawan gas block. The handover at Erawan, however, was delayed by two years due to a legal spat between Chevron and the Department of Mineral Fuels about decommissioning payment responsibilities for transferable assets. This transition led to a decrease in the domestic gas supply and production.

According to Thailand 1, a law dealing with petroleum exploration and production, the authorities can extend the Pailin concession for a decade if the operator present currently wishes to continue with its operations. To avoid future disruptions, the Department of Mineral Fuels must ensure a smooth transition for PTTEP, Montri Rawanchaikul, the Chief Executive of PTTEP insists.

Back in 2018, gas production at Erawan was at an average of 1,280 million standard cubic feet per day (MMSCFD). But during the transition to PTTEP, the volume dropped to 200 MMSCFD as there was a halt in new gas exploration and new production development, reported Bangkok Post.

As of April this year, PTTEP has been able to raise gas production to 400 MMSCFD, doubling the previous volume. Projections hint at the figure reaching 800 MMSCFD by April next year.

The diminishing domestic gas production and supply led Thailand to import more liquefied natural gas (LNG). The Russia-Ukraine conflict exacerbated the situation by driving the price of LNG exorbitantly high last year. The increased imports of expensive LNG have reportedly inflated electricity bills.

Currently, PTTEP and Chevron Thailand cooperate at the Pailin gas field, with the former holding a majority 60% investment and the latter, a 40% investment. This gas field contributes approximately 400 MMSCFD, which is about 10% of Thailand’s gas supply.

According to Sarawut Kaewtathip, director-general of the Department of Mineral Fuels, the department is in dialogue with Chevron Thailand about the Pailin concession. Chevron requires approval from its US headquarters to renew the concession under the Thailand 1 Act.

Sarawut emphasises that Thailand 1 advocates for fair practices in the petroleum exploration and production business, and permits operators to use decommissioning expenses in petroleum rigs as a tax deduction.