Thailand's recent exploration block awards – a new hope to revive upstream activities in the country

Introduction

The 24th Bidding Round is the first offshore acreage offering in Thailand since 2007, excluding the special auction for the expiring contracts of the Bongkot and Erawan fields which was officially deemed as 22nd Bidding Round. The 21st Bidding Round, originally planned in 2011, was eventually cancelled after numerous delays caused by political and economic issues, the latest of which was related to the coronavirus disease 2019 (COVID-19) pandemic. Companies who won the recent offshore blocks are Thailand's NOC and an existing player.

Energy Security

The recent blocks awarded (G1/65 and G3/65 to PTTEP, G2/65 to Chevron) are situated near some of the major producing fields in the country with available infrastructure, therefore any exploration success could be monetized relatively quickly. The three contracts will add to the 55 licences currently active in Thailand, of which 31 are located offshore, and are expected to boost upstream activity. The country produced 2.2 Bcf/d of gas and 143 Mb/d of liquids (55:45 oil and condensate) in 2022, down 20% compared to the previous year, mainly due to a lower output from the Erawan complex, now operated by PTTEP.

PTTEP is responsible to provide energy security to the nation through a continuous effort to maximize the potential of existing resources as well as reducing dependence on energy imports. Throughout 2023, the NOC will be focusing on providing affordable energy for local consumption by maximizing production and expedite the development program in the Erawan Project. Future discoveries within the awarded exploration blocks would facilitate PTTEP objective to reach the targeted 800 Mcfg/d in the Erawan Project by April 2024.

Some of the awarded blocks also include discovered fields in which production areas were previously approved but were relinquished prior to development, such as Jarmjuree South (in block G1/65) and Bussabong, Chang Daeng and Pikul (in block G3/65). Chevron has been operating in the Gulf of Thailand for 60 years and has been providing effective technology solutions for the complex geological conditions in the Gulf of Thailand. One such example is the execution of the first horizontal monobore oil well which effectively reduced cost and time from conventional drilling period of about sixty days to six days. As of September 2022, the company produced over 17 Tcfg and over 1,065 MMbbl of liquids in Thailand. Chevron will continue to unlock the remaining potential of the existing projects by extending production period in the Pailin field and reconsidering to develop Ubon project within the Gulf of Thailand.

Moreover, the success of the 24th bidding round could stimulate for more blocks to be offered within the Gulf of Thailand and onshore area, and potentially could drive the government to progress in discussions over the Thailand-Cambodia Overlapping Claim Area (OCA). The current energy security issues and high LNG prices on the international market could be an incentive for both sides to make some progress, given the potential multi-Tcf gas resources estimated in the OCA.

Emissions and Carbon Capture Storage (CCS)

Any new developments in the recently awarded blocks may require the implementation of low-carbon inititatives. PTTEP's 'EP Net Zero 2050' concept will utilize a new strategy that emphasizes natural gas and greenhouse gas intensity for investment decision. The company would pursue the development of technology to reduce greenhouse gas emissions from the production process, particularly through Carbon Capture and Storage (CCS) and zero routine flaring initiatives. Chevron has also initiated several technologies linked to carbon emissions reduction and the use of solar cells and wind power at the drilling rigs.

Thailand sees the significance of CCS in the context of nation decarbonization. The country aims to achieve carbon neutrality by 2050 and net zero greenhouse gas emissions by 2065, which could be achieved through collaboration with private operators. The ongoing development of CCS facility in the pilot project of Arthit field would boost carbon storage in aquifers or depleted reservoirs within the Gulf of Thailand. The project will reduce carbon dioxide emissions by over 500,000 tonnes per year. PTTEP has likewise commenced feasibility studies in other areas within the Gulf of Thailand to evaluate future potential CCS projects. It is believed that a cluster of oil and gas fields extending for 300 km in a north-south alignment in the Gulf of Thailand (which also covers the awarded blocks G1/65, G2/65 and G3/65) contain the bulk of the carbon dioxide storage potential for the country (Asian Development Bank, 2013).

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.