PTTEP halts petroleum output in S1 block

SET-listed PTT Exploration and Production Plc (PTTEP), Thailand’s only upstream oil firm, has temporarily ceased petroleum production in some parts of its onshore petroleum block of Sirikit 1 (S1) to comply with a court ruling.

The suspension has cut the production at the S1 block by about 55% from the block’s total production of 27,351 barrels per day.

But president and chief executive Somporn Vongvuthipornchai said the halt was unlikely to have any major impact on PTTEP’s operations, as S1 accounts for just 4-5% of the company’s total production of 310,000 barrels of oil equivalent per day (boed).

Nonetheless, the order had an immediate impact on PTTEP’s share price, causing it to drop by 3% from an opening price of 90 baht a share in early trade during yesterday’s morning session.

Mr Somporn said the halt in production came after the Supreme Administrative Court revoked the Agricultural Land Reform Committee’s order to allow the use of natural resources in areas of land reform for any purposes other than agriculture, known as Sor Por Kor land. The court order affects some parts of the S1 block.

The case also applies to the development of wind farms in Chaiyaphum province on Sor Por Kor land.

The halt in S1 output was to allow state agencies as well as state land allocation policymakers to clarify the law before resuming production.

“A discussion is needed to clarify usage of Sor Por Kor land, as it has been unclear like this for decades,” he said.

PTTEP expects to rev up production from the S1 block to 30,000 boed if policymakers reach a conclusion about land usage and allow the company to resume activity.

Many infrastructure and power plant projects in Thailand are located on Sor Por Kor land, making policy clarification essential over the next five years because many huge projects are due to be developed, spanning transportation, irrigation, ports and industrial estates.

As a result of the ruling, the Energy Ministry’s Mineral Fuels Department has instructed all onshore concessionaires to temporarily cease petroleum operations located in areas of the agricultural land reform.

PTTEP Siam Co (PTTEPS), a wholly owned subsidiary of PTTEP and the operator of the S1 project, has ceased all operations in land reform areas on the S1 block since June 3.

Mr Somporn said PTTEP carried out its operations lawfully after acquiring the project from Thai Shell Exploration & Production Co Ltd (Thai-Shell) in 2004.

The S1 block covers an area in Sukhothai, Phitsanulok and Kamphaeng Phet provinces in which PTTEPS holds a 100% participating interest.