April 2000 Vol. 221 No. 4
Feature Article
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SPECIAL REPORT: Southeast Asia Part 3
Thailand thrives on booming gas development
A healthy domestic gas market, solid gas prospects and developments,
and resurgent energy prices are all contributing to strong upstream activity in one of Southeast Asias
most stable nations
Kurt S. Abraham, International Editor
hailand
has generally fared better economically than its neighbors over the last 20 years. Bordering Cambodia, Laos,
Myanmar and Malaysia, the country experienced a decade of strong economic growth from 1987 to mid-1997. Growth
was based on a policy of encouraging industrialization, free trade, exports and an emboldened private sector.
Contributing to prosperity was the nations strategic position, the extensive use of low-wage labor and
fairly abundant natural resources.
Problems ensued, however, when the government decided to float Thailands
currency, the baht, in mid-1997. Rapid depreciation occurred, throwing the country into a deep recession that
eventually spread throughout Southeast Asia. Chastened government officials are now implementing economic
reforms and have taken assistance in the form of a loan from the International Monetary Fund.
One sector of Thailands economy that prospered during the decade of
growth was upstream oil and gas, buoyed by a combination of solid gas prospects and an expanding domestic gas
market. More than 80% of Thailands oil demand is imported. On the other hand, increases in gas
production have nearly met goals for utilizing more gas for electrical power generation. There are additional
plans to replace oil imports by utilizing gas supplies from Myanmar, as well as developing gas fields in the
Malaysia-Thailand Joint Development Area (JDA).
Many of Thailands oil and gas fields were discovered in the first half
of the 1970s. For instance, Surat, Erawan, Kaphong and Baanpot fields were all found before 1975. Sporadic
discoveries continued throughout the 1970s and 1980s. In 1978, the government founded a national oil company,
Petroleum Authority of Thailand (PTT). Several years after that, PTT formed its own E&P subsidiary.
Responsibility for supervising Thailands upstream sector is held by the
Ministry of Industrys Department of Mineral Resources (DMR). At the moment, the status quo is prevailing
on Thailands fiscal terms. DMR characterizes the situation as one where "the government is happy,
and the companies are happy." There is no legal requirement that the state must participate in
exploration or production projects.
Nationwide, crude and condensate production averaged a combined 83,000 bpd in
1999, while natural gas output was 1.851 Bcfd. Producing oil wells totaled 186, including 35 offshore.
Producing gas wells numbered 600, of which 495 were offshore. Drilling activity registered 205 wells in 1999,
of which 32 were exploratory. Within the total, offshore activity accounted for 186 wells, of which 29 were
exploratory.
This year, DMR forecasts 34 onshore (including 14 exploration wells) and 192
offshore wells (including 44 exploration holes). Seismic activity was expected to amount to 400 km of 2-D work
and 700 sq km of 3-D surveys, all offshore.
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Unocal, Chevron and PTTEP are the primary offshore operators
in Thailand, while Shell dominates onshore. |
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PTTEP
The upstream subsidiary of the Petroleum Authority of Thailand (PTT) was
established in June 1985 and named PTTEP. Approximately 61% of the firm is owned by PTT. The remaining 39% is
held by private investors, who accumulated shares through three public offerings held in 1993, 1994 and 1998.
Beginning in January 1996, Dr. Prajya Phinyawat served four years as president
of PTTEP, guiding the firm through its expansion phase. Shortly after
World Oil interviewed him for this article, and just before this feature went to press, Dr. Prajya was
promoted back to PTT as deputy governor, Corporate Plan and Development. He has been succeeded as PTTEP
president by Dr. Chitrapongse Kwangsukstith.
Like many state companies in the Far East, PTTEP was hit hard by the Asian
economic crisis. "Our pace of activity definitely slowed down from the middle of 1998, all the way
through 1999," said Dr. Prajya. "In fact, that is true for all of Thailands operators. I think
we will begin to see some increase in activity during 2000. There are some smaller companies, like Harrods
Energy, that will still be aggressive explorers, as will Chevron."
"On average, we have been drilling about 10 development wells per year,"
said Senior Vice President Maroot Mrigadat. "At present, this activity has slowed down, but we anticipate
drilling seven exploration wells in 2000." In recent years, PTTEP found enough reserves to enable it to
slow down the pace of some exploratory drilling.
"Of the 17 million to 18 million boe that we have found recently, 90% is
gas," said Dr. Prajya. "So, we are pursuing a strategy of swapping assets to gain more oil. Perhaps
we will look at gaining assets in the Middle East Iran is a good place, or maybe Oman."
"As an operator, PTTEP produces about 100,000 boed, of which about 80% is
natural gas," said Maroot. "From Bongkot, the largest Gulf of Thailand (GOT) gas field, we produce
550 MMcfd, equivalent to 35% of Thailands daily consumption." In addition to Bongkot, PTTEP
operates PTTEP1 oil field onshore and the newly-discovered Arthit gas / condensate field offshore.
Located in Suphan Buri and Nakhon Prathom provinces, the PTTEP1 concession was
the first project operated by the company. Production from Kamphaengsaen and U-Thong oil fields began in July
1993. The fields now produce at a sustained rate of 600 bopd. Recent activity on the concession includes a 3-D
seismic survey in U-Thong field, covering 37 sq km, and interpretation of existing 2-D data for significant
areas of the tract. In addition, one exploration well and one delineation well were drilled. A study also has
been conducted to determine potential methods for improving and maximizing crude production.
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Since going onstream in 1993, Bongkot fields production
has risen from 150 MMcfgd to 550 MMcfgd. |
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Offshore, meanwhile, PTTEP has run Bongkot field since Total (now Total Fina)
handed over operatorship on July 1, 1998. Current partners include PTTEP (44.4%), Total Fina (33.3%) and
British Gas (22.2%). The original concession comprising Blocks 15, 16 and 17 in which Bongkot
lies, was awarded to Texas Pacific in 1972. The Bongkot discovery was drilled in 1973, but development of the
4.5-Tcf field was delayed for years by squabbles between Texas Pacific and the government over development
schemes and pricing.
Finally, 17 years later, PTTEP bought the rights to the field from Texas
Pacific and formed a consortium with Total, British Gas and Statoil. Total was named operator for the group.
That same year, 1990, a three-phase Field Development Plan (IDP) was formulated for Bongkot. Phase I of
development was subsequently begun, with first production in July 1993, at 150 MMcfgd.
Following startup of Phase I output, the consortium initiated Phase II
development, to expand production capacity to 350 MMcfgd. In April 1996, the new capacity went online, and
total output then represented 25% of Thailands daily needs. Shortly thereafter, work began on Phase
IIIA, to boost gas production further, to 550 MMcfd. Output from this phase began to go onstream in July 1998.
The project finished in July 1999, when the last of 39 wells was completed.
Meanwhile, PTTEP had inserted a clause in the 1990 consortium agreement,
whereby it had the option of transferring Bongkot operatorship from Total to itself, five years after
production start-up. On July 1, 1998, PTTEP exercised that option. In addition, Statoil opted to sell its 10%
interest to the remaining partners, split proportionately between them.
In August 1999, Phase IIIB development was begun. It comprises the
construction and installation of two additional wellhead platforms, plus the drilling of 42 new development
wells. This work is deemed necessary to maintain plateau production.
On the exploration side, in December 1999, the company struck additional GOT
gas and condensate in the Arthit-15-1X wildcat. The well tested 41 MMcfgd and 1,657 bpcd from five zones, with
net pay of 462 ft. On Block 15A, Arthit field is 21 mi northeast of PTTEPs Bongkot field. There are
initial estimates that reserves may run as high as 3 to 6 Tcf of natural gas. Six additional exploration and
appraisal wells were scheduled for drilling around the field, and they were slated to finish by mid-2000.
Maroot noted that Thailand and PTTEP have their share of technical challenges.
"Weve drilled the easier wells, leaving us with the more difficult targets," he said. "Now,
much of our equipment needs to be looked at. Also, in some formations, we may need to do more fracturing. We
are also seeing water and sand production coming into some wells. Steps are being taken to address these
concerns. We are trying different approaches in our drilling, such as using different bits to drill larger
holes, implementing new chemicals for water shutoff, things like that."
Meanwhile, PTTEP continues to experiment with new technologies. "We know
that we have to think out of the box," said Maroot. "Were fortunate to be working with so many
world class partners; we can adapt our thinking and adopt their techniques. We have to keep on adapting our
development with new wells and platforms."
Unocal
King among Thailands E&P operators is Unocal. The company has been
in the country for 38 years and has produced in the Gulf of Thailand (GOT) for about 20 of those years. Unocal
struck its first discovery in 1973, at the Erawan 12-1 gas well. First production from Erawan field went
onstream in 1981.
Today, the company operates 13 offshore producing fields, with output
averaging above 1 Bcfgd. Net share to Unocal is about 60%. There are 90 platforms supporting 1,293 wells.
Unocals 1997 sales were $1.1 billion.
"The whole Southeast Asian region is rich in natural gas, and weve
made this our core business here, including conversion of gas to electric power," said Randy Howard,
Unocals vice president of International Energy Operations for Myanmar / Thailand / Viet Nam. "We
now see good reasons emerging for a steady rise in natural gas usage locally, particularly with the advent of
combined-cycle power plants. If you look back 20 or 30 years, most of these countries had similar GDPs, but
Thailand has surpassed its neighbors, due to use of natural gas. Our strategy is aimed at developing more of
those gas supplies. And if we find oil along the way, thats okay, too." Unocal has taken part in
two power generation projects to feed electricity to industrial users and the Electricity Generating authority
of Thailand (EGAT). Both projects run on natural gas.
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Drilling advances have helped Unocal exploit offshore
prospects that otherwise would not have been economical. |
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Unocals GOT development philosophy has been one of "capital
efficiency;" in other words, developing "just-in-time" resources. When the Asian financial
crisis hit in late 1997, it did dampen the companys spending on development projects. However, Unocal
has continued to develop fields as market conditions have allowed.
A recent example is Pailin gas field, the single-largest project ever
undertaken by Unocal in Thailand. The company installed five wellhead platforms and a central processing
platform at Pailin during 1998. In addition, 45 development wells were drilled before the field went onstream
in third-quarter 1999. "Output from Pailin is running 180 MMcfgd," said Howard. "The central
facility has CO2 removal capabilities, and it is one of the largest platforms installed anywhere
in Southeast Asia. Typically, we drill 75 to 100 development wells countrywide, to maintain our
deliverability. However, in 1998, we drilled 150 wells, due to the impact of Pailin."
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Unocals Pailin field is the firms largest
development project in Thailand to date. |
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Two additional gas fields that Unocal previously brought onstream in 1998 are
Plamuk and Pladang. These fields lie in a concession that is separate from Pailin. Plamuk has two platforms
tied into nearby Surat field. Pladang went onstream in April 1999 with one wellhead platform. A second
platform is planned to be operational in 2002.
From an exploration angle, Unocal continues to find additional opportunities
in existing tracts. "We still have plenty of territory to explore," said Howard. "Technical
advances have allowed us to go back and make old gas discoveries commercial that werent so earlier. The
rocks, themselves the geology continue to be one of the biggest challenges and a critical
operating problem. Mastering the geology has been necessary for us to remain commercial. Drilling innovations
have really helped us break through."
Howard explained that slimhole technology has been particularly helpful,
allowing the company to drill 6-in. holes instead of 12-in. holes, allowing drillers to put wells down faster.
"It takes us about six days now to drill a well, as opposed to 60 days many years ago. That (the drilling
cost today) translates to about $800,000 per well. We currently have two rigs operating in the GOT tracts."
One of Unocals more noteworthy wells is the Trat A-07, which was the
companys first GOT horizontal gas well. It was completed early last year after drilling 6,530 ft,
including a horizontal section that penetrated 1,500 ft of 60-ft-thick gas-bearing sands. From Trat A-07 and
four other wells, Trat field began producing gas and condensate last September. Output from this Block 11
field is 70 MMcfgd and 2,100 bcpd.
In Thailand, Unocal has benefited from a long-term relationship with the
governments Department of Mineral Resources (DMR). "Weve pretty much grown up together with
DMR," said Howard. "The same way that weve worked with DMR here is beginning to pay off in
Viet Nam, too. We very much value the trust that the government ministries in these countries put in us. We
like the people here, and weve been able to build up a competent Thai workforce that stacks up against
anybody around the world. About 90% of Unocals personnel in Thailand are local citizens."
Something else that Howard takes pride in is the contribution that Unocal has
made to Thailands economy. "We take great pride in the opportunity to make a difference thats
visible," he said. "Through our development of abundant natural gas supplies, and our efforts toward
helping the Thais harness the gas for commercial purposes, weve seen a whole variety of new industries
and businesses spring up, creating employment for citizens while raising their standard of living."
Chevron
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Chevrons Tantawan field produces from five wellhead
platforms that are tied back to the Tantawan Explorer FPSO. |
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Chevron is a relatively new player offshore Thailand, having acquired
Rutherford / Morans share of the B8/32 Block in December 1998 for $91 million and assumed Rutherford /
Morans debt. The B8/32 Block was awarded originally to Maersk Oil. The company successfully drilled the
Tantawan 1 discovery in October 1992. Houstons Pogo Producing Co. bought into a 45% share of the block
in early 1995 and took over operatorship on the Tantawan Area part. Now, Chevron will try to take the blocks
development to a new level.
"This is a kind of once-upon-a-time story for us," said Jay Pryor,
managing director of Chevron Offshore (Thailand) Ltd. "For about three years, our New Ventures staff in
San Ramon, California, looked at how to enter the Thai market in a big enough way to create a growth platform
for Chevron in the area. In addition, we wanted to get involved on the development side, with some existing
infrastructure, rather than spend a lot of time up front on exploration. In Rutherford / Moran, we found a
company that allowed us to satisfy these criteria." It also didnt hurt that B8/32 was just west of
Blocks 7, 8, 9 in the disputed zone with Cambodia. Chevron has been an interest holder since 1972.
Since the blocks inception, there have been about 150 wells drilled,
with the recent rate averaging 40 wells/year. Average measured well depth is 9,000 to 10,000 ft, and most
wells are drilled directionally.
To date, four field areas have been discovered on the B8/32 Block, including
Tantawan, Benchamas / Pakakrong, Maliwan and Jarmjuree. According to Pryor, all the fields are named after
Thai flowers. Peak production from Tantawan and Benchamas / Pakakrong reached a collective 150 MMcfgd and
32,000 bpd of liquids earlier this year.
"The B8/32 Block has four major components," explained Pryor. "In
the first of these, Pogo Producing began development of Tantawan (meaning "sunflower") field, and we
are continuing that development. Tantawans production went onstream in February 1997. Output is now 78
MMcfgd and 6,900 bcpd. Currently, there are five wellhead platforms, the latest of which went online in June
1999. Production is tied back to the
Tantawan Explorer FPSO, which has been in place since late 1996."
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Developed on a fast-track schedule, Benchamas field is the
second project producing on Chevrons Block B8/32. |
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Second of the blocks four major components is Benchamas (meaning
Chrysanthemum) and Pakakrong fields. Benchamas went onstream in July 1999. Facilities include three wellhead
platforms, one processing platform and one quarters platform, with oil stored in an FSO. Output is running at
about half of potential, averaging 78 MMscfgd and 25,000 bcpd.
"Well continue drilling through 2000 at Benchamas, with two rigs
running," said Pryor. "Its been an interesting field to work with. In the beginning, we
suffered from a lack of production data. Lately, its been very nice to see the initial production rates
come up to exceed expectations. Well start the first offshore waterflood program in Thailand later this
year, and that effort will be expanded with time." Chevron is pursuing fast-track development of Tantawan
and Benchamas, including a move toward horizontal drilling to maximize production and minimize development
cost.
Third component of the block is Maliwan field, where five successful
exploration wells have found commercial hydrocarbon accumulations. "We have a production license, and a
development plan is moving forward," said Pryor. "In the Chevron project development and execution
process, we are in phase 2, Identification of alternatives that meet our development criteria.
Alternatives include sending the output to Tantawan or to Benchamas, or a new stand-alone project. We hope to
let bids in mid-to-third-quarter 2000. Speed of the development will depend on progress made in the gas
marketing efforts. Our projection is that Maliwan will be onstream in late 2001. Its got the potential
to be a very big field over time."
The fourth and final component in Block B8/32 is the Jarmjuree exploration
area, a high-potential location that is on trend with the Pakakrong discoveries. Six wells had struck
hydrocarbon accumulations on this trend as of late 1999, and another six to eight wells will be drilled last
year. Chevron applied for a production license area (PLA) early this year.
Pryor said his operations have not experienced any major technical problems or
logistical headaches, with one glaring exception. "Short term, the only problem is when Mother Nature
throws those typhoons at us. It rearranges all your priorities. We have typhoon preparedness plans that are
composed of stages. For instance, in the lowest level, Stage 1, your daily business meetings are cancelled,
and the whole company schedule changes. In advanced stages, we have specific plans for curtailing or even
halting operations, as well as evacuating personnel, both offshore and near the coast. After a typhoon has
come and gone, we sit down later and do an after-fact assessment. One of the most important things that we do
is focus on protection of people and the environment."
Chevron is working hard to develop a local workforce. Approximately 70% of the
firms employees in Thailand are local citizens, and efforts are underway to expand the available skilled
pool. "We need some very talented technical people to make our operations here a success," said
Pryor. "We need to attract more young Thai engineers and other professionals. Thats why I support
the local SPE chapter so much, including the bringing-in of visiting professors and supporting summer training
programs. The university is our feeder here."
The Thai upstream industry has made a lot of progress since the 1970s, and
Pryor is very happy with the manner in which industry and government work toward the common goal. "One
thing I like about the Thai market is its very predictable in the long term," said Pryor. "The
government officials value the industry, and you get a lot cooperation. The DMR is very open, discusses
things, and they are very efficient. They handle their responsibilities well, which encourages us to invest
more money."
Looking to the future, Chevron is likely to enter into additional Thai blocks,
said Pryor. "Theres additional growth potential in this market, and we may even get into the
exploration end, now that we have a base of infrastructure. Were able to take advantage of incremental
projects." Pryor said that his Thai business plan is based on doing projects that are viable in a range
as low as $15/bbl. Given that factor, which contrasts with recent high price levels, he does not expect to
significantly adjust his activity level, either up or down. "Our international E&P work level isnt
going to go up or down very much in any one year. We are focused on growing a long-term profitable business in
the region, based on gas market expansion as the economy continues to grow."
Shell
As the dominant onshore operator in Thailand, Shell began upstream activities
20 years ago. In 1981, the firm struck its Sirikit oil field, which has remained the S1 concessions
principal asset. Development ensued, and output first peaked in 1992 at around 24,000 bopd.
However, the field and tract have had their shortcomings. The location is in a
remote area of north-central Thailand, with the nearest city being Phitsanulok. Given the oil price declines
of 1982 and 1986, the fields economics did not justify building a pipeline out of the field complex, not
even to the closest railroad, in Phitsanulok. Hence, Shell from Day One has trucked every barrel of oil
produced to Phitsanulok, where the crude is transferred to railroad tankcars for trans-shipment to refining
facilities further south.
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Shells tanker-truck fleet moves the firms entire
24,000-bopd output from Sirikit field and satellites to a rail connection in Phitsanulok. |
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In early 1998, Shell said it had grown weary of operating Sirikit field and
announced that the concession would be sold. Analysts valued the assets at about $300 million, but the bids
that were received fell below Shells expectations.
In late 1998, the company said that it had changed its mind. Instead of
selling the onshore assets, Shell announced an expanded development scheme for Sirikit, in which the company
will spend $360 million from 1999 through 2007, to drill nearly 190 new wells. Within that total, there will
be 132 development wells in the main portion of the field. Officials said that the plan is designed to recover
another 110 million bbl of oil. This should ensure that the current output level of 23,000 to 24,000 bopd is
maintained for another 10 years.
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World Oil International Editor Kurt Abraham stands
next to one of Thai Shells producing 113 oil wells in north-central Thailand. |
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By late 1998, Shell had drilled about 230 wells on the S1 concession since
operations were begun in 1981. Of these, 50 were exploratory wells. The 1992 output record for Sirikit and
satellite fields was broken in November 1998, when production reached 24,393 bopd.
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Service company personnel consult at one of many new wells
being drilled by Shell to ensure that Sirikit fields crude output remains at plateau. |
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Shell also has had on-again, off-again operations offshore in GOT Block B6/27
southeast of Chumphon. In January 1997, Shell had begun oil production from Nang Nuang field, at about 10,000
bpd. Unfortunately, technical problems forced the company to end output in August 1997 at what had been
Thailands first offshore oil field.
Last year, Shell announced plans for fresh activity on B6/27, scheduling two
wildcats to be drilled in the next year or two. One site is 2 km north / northwest of Nang Nuang. The other
site is on the Nok Kaew prospect. In all, Shell has drilled eight wells on the B6/27 concession.
Harrods Energy
The newest operator in Thailand, Harrods Energy, is a venture begun by Mohamad
al-Fayed, owner of London-based Harrods department store. Fayed is also known for his late son, Dodi, who,
along with Britains late Princess Diana, was killed in the infamous car crash of Sept. 1, 1997, in
Paris.
Harrods Energy set up an office in Bangkok during second-half 1998 and
acquired offshore Block B2/38 through the 17th Licensing Round. In addition, the company farmed into a 50%
interest in PTTEPs B5/27 license and took over operatorship of the offshore tract. In June 1999, Harrods
expanded its presence, acquiring a 50% interest in GOT Blocks B11/32, B11/38 and B12/32 from Texaco. Harrods
agreed to take over as operator from Texaco, which now has a 32.5% interest in each block. Britains
Dragon Oil holds the remaining 17.5% of each tract.
No money changed hands as a result of the Harrods / Texaco deal. Instead,
Harrods agreed to drill two appraisal wells in Blocks B11/38 and B12/32, where traces of gas were found
previously. The company will drill these wells after finishing a number of wells on its other blocks. This
activity is part of a 10-to-15-well, jackup-based program for year 2000.
Last year, Harrods drilled about 10 wells in Blocks B2/38 and B5/27. Per the
B2/38 license agreement, the firm is obligated to conduct a 3-D seismic survey and drill one exploratory well.
At B5/27, a 50-km, 2-D seismic survey is to be conducted, and at least one appraisal will be drilled. Prior to
Harrods assuming the operatorship, two wells were drilled at B5/27. One of these was a minor oil discovery
that flowed 200 bpd. Harrods has stated that it entered Thailand, because company managers are enthusiastic
about the Thai energy sectors long-term prospects.
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