
Chevron submit to arbitration to settle the Erawan decommissioning dispute

Chevron exited negotiation of decommissioning petroleum platforms and submitted to arbitration. Chevron firmly declined to pay the 4 billion baht’s collateral for the Government to use the platforms continually.
THAC’S NEWS & ARTICLES
The situation may not progress as intended since Chevron, a US giant energy company and a parent company of Chevron Thailand Exploration and Production Co., Ltd., has sent the letter to Thai’s Ministry of Energy, through the Department of Mineral Fuels, that Chevron has submitted the dispute to an arbitration proceeding in the late September 2020. This is to resume the suspended arbitration proceeding, which suspended since November 2019, and to conclude the responsible party of the Erawan gas field’s decommissioning expenses.
Reported in September 2019, Chevron had suspended the arbitration process to continuously negotiate with then-Energy Minister, Mr. Sontirat Sontijirawong, who resigned in July.
In the last negotiation with Mr. Kulit Sombatsiri, the Permanent Secretary of the Ministry of Energy as the chairman of the committee and working together with the Department of Mineral Fuels to set timeframe for the negotiation to be concluded in 180 days or by the end of May 2020. The negotiation seems to be progressing in some issues such as the number of Erawan platform; by the end of the concession in 2022, there will be 142 platforms that will continue to operate while 49 platforms will be decommissioned (they are already decommissioned 7 platforms)
As for the negotiation’s issues, the Government wants Chevron to be responsible for the decommissioning expense, including the placement of collateral for the decommissioning cost for the platforms that the Government will continue to operate. This negotiation cannot be settled yet as each party’s claims are arising from the different laws, maintaining the best interests of themselves. Therefore, it has to rely on an impartial party or a third party as a mediator.
Chevron declined the offer
Source from Thannsetthakij disclosed that for almost over the year, both parties had negotiated the decommission expense and the return of collateral payment of such decommissioning to the Government. However, Chevron declined this offer and perceive that the regulation in B.E. 2559 that governs the expense and the collateral for petroleum decommissioning were enacted after the concession agreement and therefore, will not have a retroactive effect on the concession. Moreover, the Government has never requested for the concession agreement to be amended. If the Government wants to continue to operate the petroleum platforms, it should be the responsibility of the Government or the new concessionaire.
On the contrary, The Department of Mineral Fuels viewed that the decommissioning of the platforms used by the Government should be responsible by the original concessionaire, which is clearly stated in the Ministerial Regulations, under the Petroleum Act.
Not going to pay a 4 billion
As the time passed by and there are likely that the negotiations will not be settled, Chevron decided to submit to an arbitration proceeding, which may take at least 1 year before concluding.
If Chevron has to pay for 4.1 billion Baht for the decommissioning and has to submit a collateral payment for the 142 platforms in a duration of 10 years, this deems to be a heavy financial burden, which is unfair to the petroleum concessioner.
Nevertheless, although Chevron has restarted the arbitration proceeding, there is still room for negotiation between parties during the arbitration process.
Total Company, a Giant French oil company who holds 33.3% of shares in Bongkot gas field has to submit a collateral payment, in pro rata of its shares, to cover for the decommissioning cost in 46 platforms. The Company has previously submitted the dispute to arbitration but has also suspended the proceeding and now is under negotiation. TOTAL still not inform to resume the arbitration yet.
Prior to this, there are rumors that the Ministry of Energy has prepared the budget for the legal proceeding an approximate 450 million baht, which will be used in hiring both local and foreign legal consultants
Source: https://www.thansettakij.com/content/Macro_econ/451454?fb=&fbclid=IwAR1H3lVrmGBtuHJpbzES3iCkKvRWnsE_c0z0ey7Hih0HYEMAIB8n5d9H4dY