Yadana field start-up delayed again over power plant woes

Aug. 30, 1999
Commercial production from Yadana, Myanmar's largest offshore gas field, has been postponed again, to early next year due to the extended delay in completion of a major power station in Thailand.

Commercial production from Yadana, Myanmar's largest offshore gas field, has been postponed again, to early next year due to the extended delay in completion of a major power station in Thailand.

The latest delay in the construction of the Ratchaburi plant-the fifth in a row-means that Yadana start-up will have been on hold for at least 18 months from the original start-up date in July 1998. Thai state utility Electricity Generating Authority of Thailand (EGAT) was recently informed of the further delay in building the huge power station by contractors General Electric and Mitsui & Co, according to Thai official sources.

Recently, the contractors indicated that the first units at Ratchaburi, the only taker of Yadana gas under the field's initial development phase, would come on line this month.

Later, and still without a firm commitment, EGAT officials said, GE and Mitsui then suggested that the installation of the first two 230-MW gas turbines at Ratchaburi, about 130 km southwest of Bangkok, might be completed in November, with the second set of two more 230-MW gas turbines being rescheduled to January, at the same time as the first 735-MW thermal unit.

As in the past, the contractors cited technical problems for the further delay in installation of the generating units.

A senior EGAT official claimed that the contractors, in offering a low-bid cost for the Ratchaburi project, used equipment built in "third-world production bases, which resulted in the quality standards of the product not conforming with specifications set forth in EGAT's terms of reference."

A number of senior EGAT officials have called for a blacklist of the U.S.-Japanese consortium from future contracts, but several members of EGAT management, including Gov. Viravat Chlayon, felt that such action may be too harsh. One official cited a potential political backlash as a negative repercussion and cited GE-Mitsui's efforts to address the project problems by replacing the Ratchaburi project manager three times.

Yadana group concerns

The delays have deepened concerns of the Yadana consortium led by Total SA, which has invested $1 billion in developing the field, about 240 km south of Yangon in the Gulf of Martaban.

The added delay has further complicated the issue of payment for Yadana gas during the second contract year under the take-or-pay arrangement between Thai state petroleum firm Petroleum Authority of Thailand (PTT) and the Yadana group. PTT and the Yadana consortium have recently struck a deal under which the latter agreed to accept $50 million from PTT as settlement for the disputed take-or-pay volumes. The payment is $12 million lower than the $62 million PTT would have paid the Yadana consortium under the original take-or-pay contract. The amount represents the cost of 65 MMcfd of natural gas supply during the first contract year, which extended from July 1, 1998, to Mar. 1, 1999. PTT had claimed force majeure in refusing to pay under the contract.

PTT was contractually bound to receive 325 MMcfd of Yadana gas in the second contract year that began Mar. 1 this year before rising to the plateau rate of 550 MMcfd in subsequent years.

For the time being, it remains unclear as to whether PTT would be able to take the full amount of Yadana gas supply stipulated for the second contract year, because there has been no confirmation as to when the huge Ratchaburi power plant would start up.

PTT and EGAT have yet to discuss how they would share the burdens arising from the first year's take-or-pay payment. That would be another complicated subject, especially in the absence of a formal gas sales-purchase contract between the two Thai state enterprises.

But EGAT sees itself as having a better bargaining position than PTT, considering the lack of a contract.