Untapped potential: There are many hydrocarbons reserves waiting to be exploited

With no new exploration concession issued since the 20th petroleum concession round ended in 2008, exploration and production firms are primed for new opportunities. The last round of bidding, which took place from May 2007-May 2008, offered up 65 exploration blocks (56 onshore and nine offshore). The government received 74 applications for 52 of these blocks and ended up issuing a total of 22 concessions for 26 blocks (19 onshore and seven offshore) to a number of firms, including Chevron Petroleum, PTTEP, Mitsui Oil Exploration, Salamander Energy, Pearl Oil and others. With the maturing production sites in the Gulf of Thailand in decline, the country is looking for new energy sources to develop. However, expectations have been running high in 2012 that the much-discussed 21st bidding round on could take place by the middle of the year.

UNTAPPED RESERVES: There are plenty of untapped hydrocarbon resources in Thailand, according to reserve estimates by the Department of Mineral Fuels (DMF). Proven and probable reserves are projected at 659m barrels of crude oil, 581m barrels of condensate and 22.07trn cu feet of natural gas, while possible reserves are estimated at 906m barrels, 710m barrels and 28.46tn cu feet, respectively. BP’s “Statistical Review of World Energy Report 2012” indicates there are 400m barrels of proven crude oil reserves and 11trn cu feet of natural gas, which is similar to the DMF’s proven crude and condensate estimates of 442m barrels and 10.59trn cu feet of natural gas.

While many in the sector are optimistic the bidding will open in 2012, some remain sceptical due to the fact little tangible progress has been made in the frequent discussions that have been ongoing since 2010. If and when the process does move forward, a total of 22 blocks encompassing a combined range of 46,000 sq km is expected to be offered. These will be located in different regions, including 11 blocks in onshore areas in the north-east, six in the central region and five in the Gulf of Thailand. Nearly all of the new blocks are bordering on or in proximity to concessions that have been productive in the past. While there are numerous proven gas fields in the north-east, the downside of prospecting in this area is that many of the fields are small and in relatively hard-to-access terrain.

Notably absent from these initial locations are any new blocks in the Andaman Sea. Although drilling in the deeper waters of the Andaman Sea, which has depths of up to 300m 30-40 km off the coastline, is more costly (up to $60m per well) than the closer, more shallow waters in the Gulf of Thailand (averaging between $3m-5m per well), surging global energy prices could push the more technical and smaller pocket concessions available into an economically viable range.

GAINING APPROVAL: Once the process is initiated, firms interested in the concessions offered up must submit information to the DMF regarding their financial and technical capabilities along with a petroleum exploration and production plan for each block. If approved by the DMF’s petroleum committee, concessionaires will then move forward with exploratory activities outlined in the development plan, including conducting seismic and geological studies and drilling stratigraphic wells. As part of the tender, potential exploratory firms must also agree to pay bonuses to the government. The payment amount depends on a number of variables, including the size of the concession in question, its estimated potential and location. Exploratory licences are valid for up to six years upon issuance with the possibility of an additional three-year extension. During the exploratory period, the company must fulfil a list of pre-set obligations to retain the validity of the permit.

The optimum culmination in this process is that the exploratory efforts reveal an economically viable hydrocarbon field. The concessionaire will then have to submit to one final round of permitting involving drilling and production licences, conducting further environmental and social impact studies, and obtaining other required approvals. Once granted, the initial production period may not exceed 20 years, though the concessionaire may renew the licence for up to 10 more years.

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The Report: Thailand 2012

Energy chapter from The Report: Thailand 2012

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