After a seven-year hiatus, Thailand has launched a new licensing round offering 29 blocks in a bid to offset falling oil and gas reserves in the country.

“[The] ministry of energy is seeking bids for exploration and development of 29 blocks—23 onshore blocks in central and northeast provinces and six in Gulf of Thailand,” Kurujit Nakornthap, deputy permanent secretary for the energy ministry, said after the round was approved Oct. 22 by the National Energy Committee (NEC) headed by prime minister General Prayuth Chan-o-cha. The deadline to submit bids is Feb.18, 2015.

The onshore blocks are: L1/57, L2/57, L3/57, L4/57, L5/57, L6/57, L7/57, L8/57, L9/57, L10/57, L11/57, L12/57, L13, L14/57, L15/57, L16/57, L17/57, L18/57, L19/57, L20/57, L21/57, L22/57, and L23/57. These span more than 54,655 sq km (21,102 sq miles) in the northeast, north and central provinces. Eleven of these blocks are in the hydrocarbon-rich Khorat Plateau in northeast Thailand, which is believed to have gas reserves of about 141.5 Bcm (5 Tcf).

Apart from the established plays, the Khorat Plateau still contains significant plays and prospects which have not yet been fully explored. Three significant gas fields have already been discovered in this region. The Nam Phong and Sin Phu Horm commercial gas discoveries in this region are estimated to have proven recoverable reserves of about 48 Bcm (1.7 Tcf). The gas contains mostly 95% methane and between 1% and 3% of CO2.

Six offshore blocks (G1/57, G2/57A-G2/57B, G3/57, G4/57, G5/57A-G5/57B and G6/57) are in the tertiary basins of the Gulf of Thailand, the country’s largest oil- and gas-producing zone. The southern part of G1/57 block is considered to be the most attractive area for exploration and development. It is near the existing Jasmine and Ben Yen oil fields, which produces about 9,472 boe/d and 5,040 boe/d, respectively. Other blocks are also located adjacent to the producing oil and gas fields in the southern part of the Gulf of Thailand.

This is the first bidding competition for oil concessions since 2007 when the Department of Mineral Fuels offered 65 exploration blocks (56 onshore and nine offshore). It received 74 applications for 52 blocks, but awarded only 28.

New PSC Norms

The blocks being offered will be awarded in accordance with the new production-sharing contract (PSC) regime approved by the NEC at its recent meeting. The new regulation is designed based on “Thailand III Plus.”

Unlike the previous Thailand III basic, the new PSC norms feature a signature bonus and a production bonus. The signature bonus is a one-time fee the department of mineral fuels collects when it signs a concession deal, which carries from 2 million to 100 million baht (US$61,634 to $3.1 million) depending on the block’s development prospects. The payment production bonus is applicable when the total oil gas production from the block reaches the specified thresholds. The level of bonus is in the range of 200 million to 400 million baht (US$6.2 million to $12.3 million).

The changes for oil and gas companies also include:

  • A royalty fee charged at a rate of between 5% and 15% of the value of petroleum sold or disposed of during the month;
  • A petroleum income tax of 50% of net annual profits in lieu of corporate income tax;
  • Supplemental (windfall profit) tax if all capital costs are recovered and annual revenue becomes drastically high (such as an unusually high oil price) compared with the investment;
  • Exemption of corporate taxes, duties and taxes on imported equipment and materials; and
  • Sale of produced oil and gas to the local users at a fair price.

The production period for the concession is 20 years from the date of termination of the exploration period (6 years) and can be extended by the concessionaire up to an additional 10 years.

The operator for the blocks will be selected based on “exploration proposals (most suitable for the geological conditions of the exploration bock) and development plan (for block numbers G3/57, G5/57 and G6/57), which accounts for 80% of the bid assessment and the remaining for 20% for special advantages.”

The deputy secretary also said that the new PSC regime has imposed restrictions on exploration activities in environmentally sensitive zones such as protected watershed areas and national parks and wildlife sanctuaries.

Falling reserves

Capturing power following a bloodless coup in May 2014, the military-led government headed by Chan-o-cha has focused on exploration and development of new oil and gas fields to offset falling hydrocarbon reserves and to ensure energy security for the country.

“The existing natural gas fields will be exhausted in 2018. If we stop exploring now, all of the gas used in the country will have to be imported,” the premier said in a weekly televised address.

The energy ministry estimated that the country’s natural gas reserves fell by 24% to 238 Bcm (8.41 Tcf) by year-end 2013, down from 312 Bcm (11.03 Tcf) in 2009. It also said that the average daily domestic gas production from January through July 2014 was down about 7% compared to the same period in 2013. Production at PTTEP’s Bongkot Field—Thailand’s largest offshore gas field—is down by more than 7.4% during the first seven months of this year.

Despite the presence of proven reserves of oil (453 MMbbl) and natural gas (283 Bcm, or 10 Tcf), Thailand imports about 85% of its crude oil and 24% of its natural gas needs. The country uses about 1 MMbbl/d and 145 MMcm/d (4.82 Bcf/d) of natural gas. Myanmar supplies the majority of the gas.

Kurujit estimates that Thailand pays about 1 trillion baht (US$30.8 billion) for imported oil and gas product, which is almost 10% of GDP.

Development of new oil and gas fields are needed to boost the supplies.