OPINION: Thailand’s stagnating upstream industry has been dealt a blow after Chevron restarted arbitration with the government over the US supermajor’s decommissioning liabilities for the Erawan gas asset, for which the concession agreements expire in 2022.
Wildcatting and new field developments in the country have been thin on the ground in recent years and the unresolved Erawan decommissioning dispute will do little to help.
Chevron is exerting its right to contest the government’s position on the Erawan decommissioning issue, not least as it could translate to a bill upwards of $2 billion.
The government’s assertion that Chevron is responsible for the ultimate decommissioning of all production infrastructure on the asset contradicts its decades-old Erawan concession agreements.
Informed sources also said that the government’s stance is diametrically opposed to the bidding terms of the 2018 Erawan auction, in which existing operator Chevron lost out to Thailand’s national upstream company PTTEP.
The dispute casts another shadow over Thailand’s upstream industry, which is already reeling from the Covid-19 fallout that has led to lower commodity prices and opereators slashing budgets.
The responsibility for decommissioning liabilities has direct implications for operators including PTTEP and Mubadala Petroleum. Plus the wider issue of contract sanctity threatens to further undermine Thailand’s upstream oil and gas sector.
Chevron’s Erawan arbitration needs to be settled quickly, for both the operator and wider industry.
(This is an Upstream opinion article.)