BIDDING PROCEDURES
 
The new invitation (19th Bidding Round) for concession rights is given on 1 july 2005. Interested companies can submit applications for concession rights within 1 year from the date of this announcement.

Open acreage with petroleum deposition potential has already been delineated into 82 exploration blocks located onshore throughout Thailand as well as offshore in the Gulf of Thailand and the Andaman Sea. Data packages are now available to interested companies for studying prior to their submission of application.

Applications should be submitted before the 15th of each submission month. Each submission month runs from 16th to 15th of the following month. Exploration blocks that have been applied during each submission period will be announced, as these blocks will be under consideration no further applications will be accepted.

The Department of Mineral Fuels will evaluate the applications based on the merits of the interested company. Such companies, be they individual oil companies or joint ventures must submit evidences showing their corporate profile, financial strength and petroleum exploration and production capability to be verified before they can be considered qualified to be concessionaires.

Qualified companies will be selected based on their exploration proposals (most suitable for the geological conditions of the exploration block), which covers 80% of the bid assessment. The final 20% covers special advantages.

Qualified companies that have been selected as concessionaires shall be a company of sufficient assets, machinery, and equipment and have the petroleum expertise to explore for, and produce or sell petroleum. If not, the qualified company will be required to submit a Letter of Guarantee or Bank Guarantee before signing the concession agreement.

Contract Terms

Contract type Concession system
Contract period (years)
Exploration 3 + 3 (with 3 years extendable)
Production
20 (with 10 years extendable) starting immediately after the end of the exploration period.
Contract Area  
Exploration Block
As defined in the bid announcement. Each concessionaires can hold up to five exploration blocks with a total area of not exceeding 20,000 square kilometers. Area relinquishment is 50% at the end of year 4 and another 25% at the end of year 6.
Production Area
With commercial discovery, production area will be delineated and production can start right away even in the exploration period.
Reserved Area
In the case the production area is declared, 12.5% of the original exploration area can be reserved for further exploration for another period of 5 years after the end of the exploration period.
Exploration Work Program After careful evaluation of geological data available the bidders will propose an exploration work program for each period. The work program can be revised to suit the information acquired from the work performed. Reduction of work commitment for extra area relinquished or waive of work commitment for area surrendered is allowed beyond the first three years.
Bonuses & State Participation Voluntary basis.

Fiscal Terms

Royalty To be paid in a sliding scale rate corresponding with the revenue from pretroleum sold or disposed of as follows :

Monthly Sale Volume (Barrel x 103) Rate (%)

0 - 60 5.00
60 - 150 6.25
150 - 300 10.00
300 - 600 12.50
> 600 15.00

10 million BTU/Barrel is used as conversion factor for natural gas.Royalty on petroleum produced from deep water Andaman Sea area and some certain areas selected by the government will be only 70% of the above rate.
Petroleum Income Tax
50% of net profit of the company and no ringfence for cost deduction. Royalty and SRB paid can be treated as tax deductible expenses.
Supplemental Tax Special Remuneratory Benefit (SRB) is designed for extra government’s take from windfall profit which will only be used if :
  • all capital cost (plus special reduction) are recovered, and
  • annual revenue become drastically high compared with the investment (i.e. unusual high oil price)
Incentives Exemption of any other corporate taxes, duties and taxes on imported equipment and materials.
Markets Pricing Petroleum produced can be sold for domestic consumption or overseas. At present, natural gas is for domestic use only due to readily market and sufficient infrastructure at fair price.