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Tension from PTT Exploration and Production (PTTEP)! Failed to accomplish a production level caused by Chevron restricting the Erawan platform because of an accident fear.
It seems like PTTEP’s confidence is currently ineffective because they could not accomplish a production level as planned, plus Chevron restricted PTTEP to enter the Erawan platform because of the potential accident fear with the recommendation to pay the insurance premium for it.
As expected, gas production from the Erawan platform can no longer proceed according to the yield sharing agreement or PSC at 800 million cubic feet per day. Due to the Company PTTEP Energy Development Company Limited or PTTEP Energy Company Limited Company subsidiary company of PTT Exploration and Production Public Company Limited or PTTEP was still unable to enter the area and prepare for various operations during the transition period and is going to end the Company’s concession Chevron Thailand Exploration and production is limited on April 23, 2022 as well.
The signing of the second land entry agreement between PTTEP and Chevron has not yet happened, although according to the plan, it must be signed in the third quarter of 2020. As a result, PTTEP was unable to enter the area to install wellhead platforms, lay down piping systems, drill on newly installed platforms, as well as to connect the system in the first quarter of 2021. Moreover, Chevron did not allow PTTEP to enter the area to install the wellhead platform because it was feared that it would cause an accident-causing damage to its operations and assets in spite of the fact that the concession was still around 14 months, including the legal offense according to the law without any agency responsible.
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This means that with the remaining 14 months, PTTEP will not be able to operate the gas production contract at 800 million cubic feet per day on April 24, 2022, and the Company is concerned whether the Ministry of Energy has a plan to support or not, it may potentially have an impact on the national energy security. However, the Department of Mineral Fuels, Ministry of Energy as an intermediary must find an urgent solution and conclude this matter so that gas production does not halt. Likewise, the government has to issue a letter or take out accident insurance to be responsible if an accident occurs. If so, Chevron will allow access to the Erawan platform, where government accident insurance payments are not required. It will be simply a party and has PTTEP as the payer, but in the past negotiations with the Department of Mineral Fuels on this matter, it remained silent.
Chevron disclosed that “The company is willing to allow PTTEP to install a platform in the Erawan area if the government sector or PTTEP agrees to pay for accident insurance that may potentially occur because the government has no regulations to deal with the damage that has occurred if allowing a new concessionaire to enter the platform.”
Nevertheless, the demolition insurance has not yet been settled in the arbitration process and the state will keep 142 units for use and 49 must be removed (currently 7 removed), but Chevron was originally required to secure the total demolition cost of approximately US 2.5 billion dollar. However, Chevron disagrees to do such action because the state took the platform to further use on its own. Therefore, this controversial matter was unable to reach an agreement until the matter was brought into the arbitration process for the arbitral tribunal to solve. In the past, there have been negotiations with the government and the government has agreed to provide a collateral for demolition according to the remaining natural gas reserves as a joint solution.
On the other hand, there was an objection that if Chevron did not pledge the entire demolition fee, Chevron will not probably dismantle the demolition and the negotiations have to be re-discussed, requiring a full guarantee of the demolition fee. As of now, the settlement has not yet been reached, as Chevron considers it unfair to secure the total demolition cost as the state leverages most of the platforms to continue its demolition, thus it is not a duty to dismantle. Furthermore, it has been held for more than 30 years in the concession agreement, the demolition of the platform was determined in detail in the ministerial regulations after the year 2016, causing the disadvantage of bearing all the burdens.
While the progress of the arbitration for 3 parties, whether it is the Chevron, government and the intermediary, are in the process of collecting evidence and facts to bring into the consideration process in which it may take several years to reach a consensus resolution.
Stay tuned and update more news here.
Source: https://shorturl.asia/eIAfr
