Thailand: PTTEP pushing to close M&A deal by year's end

Thailand: PTTEP pushing to close M&A deal by year's end

PTT EXPLORATION and Production (PTTEP) has been striving to conclude a
merger and acquisition deal by the third or fourth quarter this year, the
company's president and chief executive officer Somporn Vongvuthipornchai
has said.

However, he declined to provide details on the deal, just adding that the
company's main M&A focus was in Southeast Asia.

He said that PTTEP currently had cash in hand of US$4 billion (Bt137.3
billion). However, its M&A spending this year is not likely to exceed $2
billion.

"I've pushed heavily to make the deal happen this year," he added.

The company, together with its major shareholder PTT, is also looking for
opportunities to invest in upstream and mid-stream liquefied-natural-gas
businesses, in a joint venture between PTT and PTTEP expected to be set up
this year. The LNG output will be supplied to the Thailand market.

PTTEP will also bid for a contract in the Bongkot petroleum field, which it
currently operates, and the Erawan petroleum field, which US oil giant
Chevron currently operates. Both fields are in the Gulf of Thailand.

For the Bongkot field, PTTEP will join with existing partners to bid for the
contract. PTTEP already holds a 44.445-per-cent stake in the field.

For the Erawan field, he said PTTEP was in talks with Chevron on possible
cooperation to enter the bid jointly. The company is also in negotiations
with Chevron on increasing its shareholding in the Erawan field from the
present 5 per cent if they win their joint bid. If the talks with Chevron on
a joint bid fail, one of the options is for PTTEP will bid on its own,
Somporn added.

The National Energy Policy Council has resolved for the government to put to
bid the Erawan and Bongkot fields, whose concessions will expire in 2022 and
2023 respectively.

The combined output of the Erawan and Bongkot gas fields is 2.2 billion
cubic feet per day, or 76 per cent of the gas production in the Gulf of
Thailand. The Department of Mineral Fuels is holding public hearings on
three draft ministerial regulations on benefit-sharing of the gas fields
related to the production-sharing contracts (PSCs).

Earlier the government granted rights to operate the fields on a concession
basis. But under the pending amended petroleum law, the Energy Ministry will
define which fields will be operated under concessions, PSCs or service
contracts.

Somporn said he had no preference between the concession or PSC method, as
both could be designed to offer almost the same benefits to the state.

However, he noted that the winning bidders might operate with less
flexibility under the PSC regimen than under the concession regimen, as the
PSC method paves the way for the state to have a big say in the field
operators' processes.

He added that the Department of Mineral Fuels was already aware of this
point and it remained to be seen how it would address this issue.

PTTEP is waiting to see the terms of reference for bidding on both the
Bongkot and Erawan fields. The Department of Mineral Fuels is reportedly
expected to complete the TOR for both fields within a few months.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com