Thailand expanding, integrating gas and electric power sectors

Jan. 27, 1997
How Thailand is developing its gas grid [185878 bytes] The Atwood Falcon semisubmersible flares gas during testing of Carigali-Triton Operating Co.'s 1 Suriya discovery on Block A-18 in the Malaysia-Thailand Joint Development Area. Photo by Ian Lloyd, Black Star, courtesy of Triton Energy Corp. Thailand is pressing expansion and integration of its natural gas and electric power grids. The kingdom's efforts are intended to leverage its position as an energy player in Southeast Asia,
The Atwood Falcon semisubmersible flares gas during testing of Carigali-Triton Operating Co.'s 1 Suriya discovery on Block A-18 in the Malaysia-Thailand Joint Development Area. Photo by Ian Lloyd, Black Star, courtesy of Triton Energy Corp.
Thailand is pressing expansion and integration of its natural gas and electric power grids. The kingdom's efforts are intended to leverage its position as an energy player in Southeast Asia, broaden its horizons via privatization, and generate needed revenue.

Gas from the Gulf of Thailand will be a focal point in bolstering Thailand's economy for years to come.

At the same time, the Petroleum Authority of Thailand (PTT), treading the road toward privatization along with state-run gas, communications, and telephone utilities, is pursuing an ambitious strategy of its own: PTT wants to become an international oil company by exploiting diverse market opportunities in both the upstream and downstream sectors in Southeast Asia.

In its 1996-2006 master plan, PTT outlined a 78.05 billion baht ($3.12 billion) capital spending program to develop a new onshore and offshore gas pipeline network to tie into the country's gas distribution grid.

This program is intended to accommodate gas supply to meet future demand, principally to fuel existing and planned electric power generating plants and industrial complexes (see map, p. 28).

And, as PTT pushes infrastructure development and energy expansion in Southeast Asia, the role of foreign oil and gas investment stands to gain added prominence in the government's energy/petrochemicals scheme (OGJ, Apr. 3, 1995, p. 23).

A major player in Thailand since 1968, Unocal Corp. plans to build on its extensive operating base whose growth has spanned almost 3 decades. Its Unocal Thailand Ltd. unit and partners expect to spend more than $1.38 billion during 1996-2000 on gas development projects in the Gulf of Thailand (OGJ, Nov. 18, 1996, Newsletter).

Development of gas fields in the highly prospective Malay- sia-Thailand Joint Development Area (JDA) is progressing on Blocks B-17 and A-18 (see related story, p. 26). Wood MacKenzie Consultants Ltd., Edinburgh, said the JDA could contain 6-7 tcf of gas, as well as condensate and oil (OGJ, Nov. 4, 1996, p. 43).

Big development projects are in stark contrast, however, to disappointing results of the most recent exploration license round; operators apparently see few new geologic opportunities in Thailand's maturing oil and gas provinces, say industry sources.

PTT is pursuing deals beyond exploration and production to accomplish its strategic goals. PTT plans more privatization studies, and it's looking to separate its business lines into distinct segments-oil, gas, and investment.

So far, PTT has seen promise in a joint-venture liquefied petroleum gas complex to be established in northern Malaysia's state of Kelatan, and it has made a major commitment to refined products marketing in the Philippines and elsewhere. PTT plans to invest about 6 billion baht ($231 million) in oil and gas marketing businesses in South and Southeast Asia the next 5 years.

In Southeast Asia during 1996-2000, the value of downstream projects that PTT will be involved in during the period totals about 28.57 billion baht ($1.11 billion), with an equity participation of 6.05 billion baht.

Offshore pipeline plans

The largest project in PTT's 10-year plan is a proposed offshore pipeline from the Malay-Thai JDA to Unocal's Erawan field, the country's first commercial hydrocarbon discovery, found in 1972.

Although Thailand's state-owned gas distribution monopoly has yet to determine exact routing and other details, PTT estimates cost at $1.73 billion. The line is expected to be completed in 1999, when initial JDA gas production of about 300-350 MMcfd of gas is to start up (see story, this page).

A $219 million, 170-km offshore pipeline is planned for 2005 from the Unocal-operated Pailin gas field in the Gulf of Thailand to southern Songkhla province. In addition, a $224 million onshore gas pipeline project is planned from Khanom, in Nakhon Si Thammarat province on the eastern coast of the Thai isthmus, to Krabi on the western coast via Surat Thani. Exact route has not been determined.

A 58-km subsea pipeline is also planned to link Pailin and Erawan fields. Cost has been placed at about $170 million.

And a 50-km line will be laid from Benchamas field to connect with the existing Erawan-Rayong trunk line at an estimated cost of $61 million (OGJ, Apr. 1, 1996, p. 34).

Onshore pipeline plans

In terms of cost, the second major gas pipeline project on tap is the east-west stretch from Wang Noi, Ayutthaya Province, to Ratchaburi Province, planned for 1999.

Cost of the 150-km pipeline is estimated at $394 million. The line will provide secure gas supply to the Electricity Generating Authority of Thailand's (EGAT) 4,600-MW combined cycle power plant being constructed at Ratchaburi. That will help offset potential disruption of gas supplies to be transported to Thailand from Yadana, now under development, and Yetagun fields, off Myanmar in the Gulf of Martaban (OGJ, Feb. 13, 1995, p. 28). The Yadana pipeline is now under construction.

EGAT and PTT recently worked out their differences over price terms of a 20-year gas sales contract for 1 bcfd of gas that PTT will supply EGAT, effective Nov. 1, 1996.

In the planning stage is a pipeline that will link the power generation complex at Ratchaburi to EGAT's South Bangkok power plant. Cost of the project has been pegged at $104 million.

Incremental supplies from Myanmar could be routed to the Bangkok plant, if needed. Conversely, supplies from the Gulf of Thailand could be moved to Ratchaburi, in case of a Myanmar supply disruption.

Another project calls for an $111 million project to be implemented at the end of the 10-year plan involving a 90-km pipeline segment from Songkhla to Yala, Thailand's southernmost prov- ince.

Another 90-km stretch is also planned at Rayong, on the eastern seaboard, the hub of Thailand's industrial development. About $104 million has been tentatively set aside for the so-called Eastern Seaboard-Mab Kaar gas pipeline.

Unocal's work program

Unocal Thailand's 5-year investment program is focused on developing additional gas reserves from the Gulf of Thailand fields to meet gas supply volumes covered by four natural gas sales contracts with PTT.

In 1997 alone, Unocal earmarked about $900 million-67% of its capital spending budget-for Asian projects, including projects in Thailand. Unocal's 1997 Thai capital budget totals $220 million, up 34% from 1996, which is aimed at ramping up and then sustaining gas production to more than 1 bcfd.

Program involves development and extension of 11 fields, including Erawan, Baanpot, Satun, Platong, Funan, Jakrawan, Gomin, Pailin, Pakarang, Trat, and Pladang. Plans call for drilling 489 development wells, 52 appraisal/delineation wells, and completing 21 tie-backs. Development wells planned by year are: 93, 1996; 118, 1997; 90, 1998; 92, 1999; and 96 in 2000.

Plans also call for installing 38 wellhead platforms and laying 153 miles of infield pipeline.

Unocal Thailand plans to install Unocal-developed, fully automated tripod platforms in all subsequent offshore development schemes. The company said the tripod design is 30% cheaper, 50% lighter, and can be built quicker than a conventional platform. Nippon Steel is constructing the platforms at Samut Prakan yard at Bangkok.

First installations are slated for early this year in Funan and Pladang fields.

The company's wellhead platforms have traditionally been four-pile structures. The new design is more compact, requires 755 tons less steel per platform, and can support the same number of wells as the previous structures.

So far, Unocal Thailand has invested $4.2 billion in Thailand, principally for developing gas reserves in the gulf. As of August 1996, Unocal Thailand and partners had drilled 925 wells and installed 73 structures, including 59 wellhead, four production, four central processing, five accommodation, and one gas compression platform. A cumulative 625 km of pipeline had been laid.

Output levels, reserves

The development program laid out by Unocal Thailand and partners has an objective of increasing gas deliveries to PTT to a level of as much as 1.015 bcfd in 2000.

As of fourth quarter 1996, Unocal Thailand expected that production would average 990 MMcfd from the nine fields it operates, up 35% from the average for the first 9 months of 1996. Condensate production is expected to average about 32,500 b/d.

On Nov. 3, 1996, it achieved record gas production of 1.006 bcfd.

Its 1996 exploratory drilling program, including 1 Plamuk new field discovery, resulted in 11 successful wells. Field work confirmed extensions to Satun, Baanpot, and Platong; ascertained commerciality of Pladang; and delineated Trat. Plamuk will see further work in 1997 to confirm size and underpin a development schedule (OGJ, Nov. 18, 1996, p. 26).

Unocal Thailand said the wells drilled in 1996 "will increase our gross recoverable reserves in the Gulf of Thailand by more than 300 bcf from 10 new platform locations."

Unocal Thailand credits advanced technology downhole with reducing the drilling time and per-well cost, allowing it to test a larger number of prospects: "Using slimhole drilling technology, we averaged only 8 days/well for drilling, logging, and testing, keeping the average cost below $900,000/well."

Unocal Thailand's cumulative Gulf of Thailand gas production as of mid-third quarter 1996 totaled about 2.65 tcf and 97 million bbl of condensate.

Dispute resolution needed

Unocal Thailand continues to press Thai, Cambodian, and Vietnamese officials to resolve their disputes over territorial claims in the Gulf of Thailand, stressing that adoption of Malay-Thai JDA concept might resolve such controversy.

The Malay-Thai JDA essentially involves an equal hydrocarbon split.

"The issue has been going on for a long time, and we would like to see some resolution," said Unocal Thailand Pres. Brian Marcotte. "We feel in some cases a JDA of some kind would be the quicker way to resolve the disputes."

Unocal Thailand has been barred from drilling in so-called "overlapping areas." About 45% of its total petroleum concession area as granted by the Thai Ministry of Industry lies in overlapping areas.

A second way to resolve disputes, Marcotte said, would be for the governments involved to first reach agreement on an "informal boundary." Then, they could work out details over how the distribution of wealth would occur from the areas involved.

Bongkot development

The Thai-European group led by Total's Thailand unit will spend about $270 million for next phase development of the gulf's Bongkot gas field.

The spending is aimed at boosting production capacity by about 58%.

Operator Total Exploration & Production Thailand said investment in the field will be targeted toward installation of two additional wellhead platforms and drilling 48 new wells. Also, new processing equipment will be installed on the existing production complex, including a third gas train, additional gas/liquids separation, and related equipment.

So far, the group has spent about $675 million for phases one and two, completed in 1993 and 1995, respectively.

Phase III-A development, which will be completed in 2 years, forms part of a larger Phase III scheme calling for installing 12 new wellhead platforms and drilling about 110 wells.

Phase III work will center on the main portion of Bongkot, about 640 km south of Bangkok, and on satellite Ton Sak field. Entire development is expected to take 10 years. Phase III is aimed at increasing production capacity to 630 MMcfd from the current 400 MMcfd level and increasing condensate output to 13,000 b/d from 10,000 b/d presently.

Expected incremental production will allow the group to meet new contractual gas delivery requirements to PTT of 550 MMcfd, effective in mid-1998. Last August, Total and PTT signed an amendment to an existing gas sales contract, calling for increasing deliveries by 200 MMcfd from the current 350 MMcfd level.

Pogo, Texaco action

Thaipo Ltd., a unit of Houston's Pogo Producing Co., plans to begin liquids sales at posted world prices from Tantawan field early this year. The field was discovered in 1992.

Agreement calls for monthly tanker shipments of blended crude and condensate under a year-to-year contract. Production will be processed and produced through a floating production, storage, and offloading system. Pogo also has a 30-year take-or-pay gas sales agreement with PTT for Tantawan gas, signed in 1995 (OGJ, Nov. 13, 1995, p. 34).

The company holds about 1.3 million gross undeveloped acres in Thailand, of which about 68,000 acres are under development as Tantawan production license area.

In addition to operator Thaipo, interest owners include Thai Romo Ltd., a unit of Rutherford-Moran Oil Corp., Houston, and Sophon Thai Gulf Ltd., a Thai firm.

Early in January, Texaco Inc. disclosed unit Texaco Exploration (Thailand) II Ltd., as part of a farm-out from Dragon Oil plc unit Songkhla Resources Ltd., drilled 2X Bussabong, a Block B12/32 discovery, in the Gulf of Thailand. Well was drilled to a vertical depth of 8,570 ft subsea and tested three separate zones, yielding a maximum flow rate of 21 MMcfd of gas and 115 b/d of condensate.

Bruce Appelbaum, president of Texaco's international exploration division, said the discovery, combined with the recent award of block B11/38 as a result of the 15th license round, gives Texaco a solid position in the Thai gulf. "These blocks are highly prospective," Appelbaum said.

Results of the Block B12/32 well are being evaluated. Following approval by the Thai Ministry of Industry, Texaco will hold a 65% interest in the block, and Songkhla Resources the remainder.

Fifteenth round results

The offering, which closed last May 30, included 101 onshore and offshore blocks. Only nine companies applied for exploration rights out of about 200 solicitations by the Department of Mineral Resources (OGJ, July 8, 1996, p. 63).

Six production-sharing contracts have been signed since late October.

First contract awarded was to Snyder Oil Corp. (SOCO) late in October 1996 for Gulf of Thailand/Pattani trough Block B8/38, a 100% interest block that covers 9,584 sq km. SOCO also holds Block B4/32, acquired in 1995 from Freeport-McMoRan.

Texaco's Block B11/38 award covers 8,690 sq km in the Thai gulf/Pattani trough. According to data provided by Wood Mackenzie, the block was "hotly contested," and carries a two-well commitment. The area represents relinquished areas of block B12/27, encompassing Pailin field.

Onshore awards included blocks in the Khorat plateau, signaling a mild resurgence in the area, according to Wood Mackenzie.

In November 1996, a group of operator Amerada Hess Corp., Kerr-McGee Corp., and Novus Petroleum Ltd., Sydney, were awarded Blocks 5340/38 and 5440/38, each covering 2,964 sq km. Interests in each are held by operator Amerada and Kerr-McGee 35% and Novus 30%. The group plans to drill the first of a two-well commitment by mid-1997. First drilling is planned on Block 5440/38 after data from a 250-km seismic shoot can be analyzed.

The Amerada Hess group will spend about $10 million the next 3 years to prove up gas prospects, centering on the Block 5440/38 area atop the Chonnabot gas structure, which was drilled more than a decade ago by Esso Exploration but proved noncommercial.

Edinburgh's Cairn Energy plc, with a 100% interest, was awarded Khorat plateau Block 5643/38, totaling 2,941 sq km.

Anschutz Corp., Denver, was awarded Khorat plateau Block 541/38. Anschutz (Thailand) Co. Ltd. unit's immediate plans are to shoot additional 2D seismic over the block. Existing 2D seismic is being reprocessed. It does not currently have a drilling commitment.

Thai-Malay LPG deal

PTT and Keloil Sdn. Bhd. of Malaysia have agreed to terms involving a $27 million joint venture to establish a liquefied petroleum gas terminal and bottling complex in the North Malaysian state of Kelatan.

A letter of intent calls for PTT to have a 40% stake, with Keloil holding the remaining interest.

The deal stems from a feasibility study that found high energy market potential and political stability of Malaysia would support the investment and subsequent LPG trading activities from the Malay project.

While the project is another step in the continuing PTT expansion, including ventures in China, Cambodia, Laos, and the Philippines, it marks a first for Keloil, a part of the Kelatan State Economic Development Corp., an investment arm of the north Malaysian state.

The terminal will involve installation of two 1,000-ton LPG storage tanks. The bottling plant is slated to be on stream in April-May 1997, according to PTT.

PTT's downstream plans

PTT's move into downstream retailing in the Philippines-the first oil entity to enter that segment since Filipino President Fedel Ramos' decision early in 1996 to deregulate the country's oil business-includes investment of as much as 6 million baht ($231 million) during the next decade.

According to officials of PTT, the Philippine oil market offers high potential, with annual forecast growth of 4% during the next 10 years. Current demand for crude is 300,000 b/d. Honolulu's East-West Center predicted 4 years ago that the Philippine downstream was poised for significant growth by 2000 (OGJ, May 11, 1992, p. 28).

Through a recently created unit, PTT Philippines Inc., PTT is planning to build as many as 265 service stations by 2006 at a cost of 6 million baht. Subic Bay was the location of the first station to open, in November 1996.

In addition, PTT and Houston's Coastal Corp. teamed several years ago to advance four petroleum-related business ventures in the Philippines (OGJ, Dec. 13, 1993, p. 27):

  • Subic Bay Petroleum Products (Cayman Islands) Ltd. engages in oil and products trading in the Asia-Pacific region.

  • Subic Bay Petroleum Products (Philippines) Inc. is involved in petroleum trading in the Subic Bay Free Port Zone, exporting oil from the Subic depot to countries in the region and providing jet refueling services for aircraft at Cebu Airport.

  • The Pipeline & Clark Depot Co. will operate an oil pipeline linking the Subic depot and the Clark depot at Angeles City. A 2.4-million bbl storage complex is included at Subic, while the depot at Clark will have a capacity of 450,000 bbl.

  • Subic Petroleum Distribution Inc. will deal with importing and wholesaling of oil from both of the depots.

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