press release

PTT amended the Erawan and Unocal 2 and 3 Gas Sale Agreements, saving 10,294 million baht in gas prices

The following news release was issued by PTTEP Pcl

Bangkok, Thailand, April 25, 2002 -- Today at the Government House, His Excellency Thaksin Shinawatra, the Prime Minister of Thailand, chaired, and Mr. Suriya Jungrungreangkit, the Minister of Industry, witnessed the signing ceremony of the Amendments to two Gas Sale Agreements (Erawan and Unocal 2/3) between the gas buyer i.e. PTT Public Co., Ltd. (PTT) and gas sellers i.e. Unocal Thailand, Ltd., Mitsui Oil Exploration Co., Ltd. (MOECO) and PTT Exploration and Production Public Co., Ltd. (PTTEP).

This achievement has resulted in the saving of 5,293 million baht in gas prices from Erawan field and 5,001 million baht from Unocal 2/3 fields, totaling 10,294 million baht during the 10-year remaining concession period. Concurrently, the production costs of power and industrial sectors fueled by natural gas will also be lowered by about 1,000 million baht per annum.

Mr. Suriya Jungrungreangkit, the Minister of Industry, revealed that this third achievement was preceded by the first one with Bongkot gas sellers in July 2001, saving 863 million baht and the second one with Erawan, Unocal 2/3 and Tantawan/Benchamas gas sellers in October 2001, saving 638 and 512 million baht, respectively. With the inclusion of 1,106 million of state earnings, the total value then accumulated to 3,119 million baht, which could alleviate, in particular, economic woes on power tariff and industry to a certain extent.

The signing ceremony today is a result of continuous negotiations in amending the Gas Sale Agreements. More importantly, this is the second time Unocal Thailand, Ltd. and its counterparts, Thailand's major gas producers, reached the agreement with PTT in amending Gas Pricing Formula. And this time as much as 10,294 million baht can be saved from lowered gas prices of both agreements during the next 10 years or about 1,000 million baht per annum. Natural gas is, therefore, more advantageous than other fuels.

The Minister of Industry said that tasked with energy supervisory roles, the Ministry of Industry has put prime concern on and monitored the energy scenario, especially with economic impact resulting from higher fuel cost whether domestically or internationally. The negotiation concerning the amending of pricing formula and agreements is another means to accommodate changing circumstances based on mutual benefits, principally taking into account the country and the people.

Mr. Viset Choopiban, President of PTT, revealed that PTT has negotiated with Erawan and Unocal 2/3 sellers since 1998 to concur with the changing economy and circumstances because previously price index, a component of Gas Pricing Formula, has changed in accordance with economic factors.

Major issues of the Gas Sale Agreement Amendments included :

  1. The use of Producer Price Index (PPI) in place of Wholesale Price Index (WPI) in Gas Pricing Formula without adjusting price base, effective as of and from January 2000.
  2. The reduction of gas price in Erawan Agreement by 2% from July 2002 to June 2006 and by 7% during the Agreement extension from July 2006 to the expiration of the Agreement in April 2012.
  3. As for the Unocal 2/3 Agreement, the gas sellers have reduced gas price by 2% effective on October 2002 until the expiration of the Gas Sale Agreement in May 2010. In addition, in order to ensure full commitment of gas supply according to the amended Gas Sale Agreement, the concessionaires have incorporated Blocks 10A/11A as additional production fields.

Mr. Viset said that the Amendments to Gas Sale Agreements were undertaken on mutual benefits among the sellers, PTT and consumers. PTT has always been well aware of gas prices as a production cost component of electricity and industrial sectors. PTT's business has thus been conducted by taking into account price stability and competitive advantage with other fuels, as well as security in procurement and transmission of natural gas.

Mr. Chuck Williamson, chairman and chief executive Officer of Unocal Corporation, said "Unocal is pleased to be a part of long-term assistance to Thais and to continue our relationship with the Kingdom for many years to come. This agreement allows us to make capital investments needed to develop additional resources in the Gulf of Thailand to provide a low-priced source of clean fuel for the Kingdom over the next decade to propel economic growth. We have invested heavily in the Kingdom, close to $ 6 billion from the beginning, and have planned another $ 4.3 billion in the next decade alone. I believe that Thailand has 30-50 years of natural gas available to it."

The negotiations of gas Sale amendments were undertaken according to the government policy to alleviate the impact of energy cost on the public, especially the power tariff that has increased by fuel cost. Natural gas prices, in particular, since 1997 have been on the rise and fluctuated. Presently, Thailand's gas consumption totals 2,400 million cubic feet per day, equal to 30% of national energy demand; 70% of natural gas is used in power generation. The demand for natural gas is on a continuous rise because it is less costly than fuel oil and an environmentally friendly fuel.

Updated: April 2002