Criteria for Erawan and Bongkot bidding released

Energy policymakers have announced crucial criteria for the upcoming auctions of the Erawan and Bongkot gas blocks, which will be focused on gas price offered to PTT and benefits shared with the state.

On Monday, the National Energy Policy Council, chaired by Prime Minister Prayut Chan-o-cha, acknowledged the terms of reference for the auction of the two blocks, Erawan (G 1/61) and Bongkot (G 2/61).

The two gas block concessions will expire soon, in 2022 and in 2023.

Veerasak Pungrassamee, director-general of the Mineral Fuels Department, said policymakers will weight the gas price at 65% of the decision, while the remaining 35% will be state benefits.

“Thailand will be the first country globally shifting from an energy concession model to production-sharing contracts,” he said.

Mr Veerasak said the country’s power generation system has to rely on natural gas as the majority fuel, representing 65% of total generation.

He said a fluctuation of one baht of the natural gas price per million British thermal units (Btu) could impact the fuel tariff rate by five satang per kilowatt-hour on consumers’ power bills.

“The policymakers have to ensure that the gas price from this auction round will not be higher than the current rate and there will be no impact to power bills,” he said.

The average gas price from Erawan was 160 baht per million Btu and Bongkot was 200 baht per million Btu, as of February.

Meanwhile, the government has failed recently to diversify power generation to reduce production cost with two planned coal-fired power plants in Krabi and Songkhla.

This matter will make the import of liquefied natural gas more crucial to supply the power generation system in the near future.

Mr Veerasak said LNG is priced at US$8 per million Btu, with Thailand’s gas pool system priced at $7.

He said the benefits shared with the state should not be lower than the current level.

The Erawan and Bongkot blocks contributed a combined 50 billion baht in fiscal 2016.

Mr Veerasak said investors can receive documents for pre-qualification evaluation in this auction and can access data related to Erawan and Bongkot from April 30 to May 1.

Bidders can submit an intention-of-auction document during May 15-16.

The screening period will be around September and November, while the winning bidders will be announced in December this year.

The contracts for both gas blocks will be signed next February.

The Erawan and Bongkot gas blocks have a combined production of 2,110 million standard cubic feet per day, contributing up to 75% of gas production from the Gulf of Thailand.