October 8, 2019 / 1:17 PM / 2 months ago

Thai energy ministry sets March target to resolve Chevron dispute

BANGKOK (Reuters) - Thailand’s energy ministry said on Tuesday it had set a March target to resolve a $2 billion dispute with U.S. oil and gas major Chevron Corp and would make the “utmost effort” to reach a deal after the company halted arbitration.

FILE PHOTO: A Chevron gas station sign is seen in Del Mar, California, in this April 25, 2013 file photo. REUTERS/Mike Blake/File Photo

The dispute resulted from a retroactive Thai law in 2016 requiring gas field operators to pay the costs of decommissioning assets they have installed even if they no longer operate them.

“This negotiation will require our utmost effort because it concerns national interests,” permanent-secretary Kulit Sombatsiri told Reuters.

“We have up to 180 days to work it out,” Kulit said, adding that the time frame was stipulated by law.

It was not immediately clear if Chevron had agreed to the 180-day time frame, and a spokesman could not immediately comment on Tuesday.

Reuters reported late last month Chevron had suspended the arbitration process for a matter of “weeks”, adding it would revert back to it if talks with Thailand failed.

Kulit, in charge of leading negotiations from the ministry side, said he could not reveal details of ongoing talks, but Thailand was ready to enter the arbitration process if needed.

“Now we have a truce. We’ll see what happens if war starts again, but for now, we don’t want to provoke or do anything that will adversely affect the negotiations,” he told Reuters.

Chevron objected to a June request by Thailand’s energy ministry to pay the full decommissioning costs of around $2 billion for infrastructure in the Erawan gas field, including still usable assets it will transfer free of charge to Thai state oil firm PTT Exploration and Production Pcl when its concessions expire in April 2022.

The company argued that under the terms of its initial contracts from 1971, it was only liable for infrastructure deemed no longer usable.

The dispute has implications for France’s Total SA and Japan’s Mitsui & Co, which also have stakes in soon-expiring offshore energy concessions in the Gulf of Thailand.

Ministry officials estimated the decommissioning costs for some 50 assets in the Bongkot field, operated by PTTEP and Total, are worth around $1 billion.

In the Erawan field, Chevron and Mitsui & Co operate some 200 assets, estimated to cost around $2 billion to remove.

Reporting by Patpicha Tanakasempipat. Editing by Kay Johnson and David Evans

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