PSC in focus amid efforts to up output

The Department of Mineral Fuels (DMF) is working closely with PTT Exploration and Production Plc (PTTEP) on new gas production at the Erawan gas block to take advantage of a production-sharing contract (PSC).

PTTEP won an auction to succeed US-based Chevron Corp in the exploration and production of gas at Erawan in the Gulf of Thailand in 2018, with operations to be run under a PSC for the first time.

Previously the Thai government had only granted concessions to oil companies, which could freely operate their businesses at gas fields, but were required to pay royalties to the government.

The PSC allows authorities to intervene in gas production and sales to some extent.

The new operating model is being used while Thailand is struggling to increase its domestic gas supply to replace the import of expensive liquefied petroleum gas (LNG).

Gas production capacity at Erawan currently stands at 50 metric million standard cubic feet per day (MMSCFD), down from 400 MMSCFD produced by Chevron one year before its concession expired on April 24 this year.

The decrease is the result of a shutdown of some production facilities under PTTEP’s maintenance programme.

Authorities earlier would not allow PTTEP to carry out a complete shutdown as an option as the country needs gas from domestic sources to fuel electricity generation. Without this, the country would have to import more LNG.

The production capacity at Erawan must also eventually increase as the gas sale agreement under the PSC was set at 800 MMSCFD.

Sarawut Kaewtathip, director-general of the DMF, said increasing the production volume to meet the target is not easy, especially during the energy price crisis, caused by the impact of the Russia-Ukraine war and sanctions imposed by the US and its allies.

He said the DMF, PTTEP and its parent firm PTT Plc, are currently putting efforts into increasing domestic gas production in other areas to offset the drop in gas supply at Erawan.

Gas makes up 60% of the fuel used to generate electricity in Thailand.