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Wednesday, July 2, 2008

PTTEP signs deal to drill for gas in gulf of Mataban

PTTEP signs deal to drill for gas in gulf of Mataban

PTT Exploration and Production (PTTEP) has signed a heads of agreement (HoA) with Myanma Oil and Gas Enterprise, paving the way for the drilling and supply of natural gas from offshore Block 9 to PTT, which could entail an investment of US$2 billion (Bt67 billion).

Under the HoA, a non-binding document outlining the main issues relevant to a tentative partnership, PTTEP's wholly owned subsidiary PTTEP International would drill natural gas from Block 9, so-called M9, in the Gulf of Mataban, Burma.

"This contract is of mutual interest and vital for Thailand's gas sourcing in response to increasing gas demand and an attempt to establish long-term energy security," said Energy Minister Poonpirom Liptapanlop.

The Energy Ministry estimated that Thailand's gas demand would expand from 3,600 million cubic feet per day (mcfpd) to 5,350 mcfpd in 2012 and over 7,300 mcfpd in 2021.

The signing marks two years of negotiation for Block 9 exploration. Under the HoA, average sales volume of natural gas from M9 will be 300 mcfpd. Around 240 mcfpd will be exported to Thailand and 60 mcfpd supplied to Burma. The gas price will be based on the existing price under the current Gas Sales Agreement between Burma and Thailand.

The conditions in the HoA will be the essence of the Gas Sales Agreement, expected to be concluded this year.

Thanatthep Chantakarn, an analyst at Bualuang Securities, said the M9 project would require an investment of around US$2 billion for the drilling and pipeline. The work is expected to be complete in the next three years and the company will start to realise revenue in 2012.

He also said that PTTEP told securities houses recently that it may seek partners for the subsidiary as the investment in the M9 project is huge. This could lead to a share dilution in PTT International.

"As the additional gas will be supplied to PTT, this will allow PTT to maintain retail gas prices in the future," he said.

Kitichan Sirisukarcha, an analyst at Kim Eng Securities (Thailand), said PTTEP would not realise revenue from the new investment until 2012.

By Sucheera Pinijparakarn
The Nation

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