PTTEP halts M&A plans in Indonesia
SET-listed PTT Exploration and Production Plc (PTTEP) has decided to suspend additional investment in upstream petroleum businesses in Indonesia until its legal dispute with the Indonesian government is settled.
Indonesia’s Coordinating Ministry of Maritime Affairs is suing PTTEP and its Australian unit for alleged environmental damage from an oil spill in the Timor Sea in 2009. The ministry is seeking US$2 billion in damages.
President and chief executive Somporn Vongvuthipornchai said yesterday that most new PTTEP expansion projects in Indonesia to be suspended are mergers and acquisitions (M&A).
PTTEP’s only petroleum production block in Indonesia still operating is Natuna Sea A Project, in which PTTEP owns an 11.5% stake. The project’s total sales volume is 224 million standard cubic feet per day of natural gas and 1,200 barrels per day of crude oil.
PTTEP acquired its stake in the project from Hess Corporation in April 2014 through the wholly owned PTTEP Netherlands Holding Cooperative.
Mr Somporn said the company was in talks with several oil and gas companies in Indonesia, aiming to acquire new assets. Those talks have been suspended, however.
The suspension of business in Indonesia is not expected to have any impact on PTTEP’s five-year capital expenditure (capex) for 2017-21 of $9 billion, as M&As are excluded from its total capex, Mr Somporn said. Other Asean nations remain targets of exploration and production efforts.
Indonesia’s lawsuit was registered last week at the Central Jakarta District Court against PTTEP and PTTEP Australasia (PTTEP AA), which runs the Montara project that had the leak. The Indonesian government claims that more than 400 barrels of oil a day flowed into the Timor Sea and stained the coasts of Indonesia and East Timor before mud pumped through a relief well shut off the deep-water spigot 11 weeks later.
Mr Somporn said PTTEP has not officially received the lawsuit but is prepared to defend itself.
The company’s legal adviser said the Indonesian government has no right to seize PTTEP’s assets. Even if the court finds PTTEP AA guilty, the assets belong to PTTEP, not PTTEP AA, the adviser said.
The Indonesian court does not have jurisdiction, according to the adviser, as the case pertains to a joint investment between Thailand and Australia and there is no precedent for allowing the ruling of a court from one country to be applied to another’s waters.
Mr Somporn said PTTEP has adhered to high safety standards for a long time.
The company is following a cost-cutting
scheme to reduce unit costs to below $30 per barrel from an average last year of $30.46. The average for the first quarter this year was $27.50.
PTTEP is maintaining its sales volume average for 2017 at 312,000 barrels of oil equivalent per day.
PTTEP shares closed yesterday on the Stock Exchange of Thailand at 94.25 baht, down 25 satang, in trade worth 455 million baht.