|
Nature of
rights |
Concession
agreement signed with Ministry of Energy since 1 October 2002 (formerly
Ministry of Industry). |
|
Management
responsibility |
Company, subject
to plans approved by Department of Mineral Fuels (formerly DMR). |
|
Eligibility |
Concessionaire
must be a foreign or Thai limited company. |
|
Area of blocks |
Ceilings on number and area of blocks were deleted by PA (No. 6). Special concessions not exceeding 200 sq. km., with
relaxed royalty rates, may be issued for high-cost onshore fields. |
|
Duration |
|
Exploration period |
6 years + 3-year renewal. |
|
Production period |
20 years from end of exploration period + 10-year renewal.
Commercial field test.
Production plans and reports and government approval of amendments to
plans required.
Obligation to
produce within 4 years, with possible deferrals of 2 years each.
Government sole
risk option: Exercisable after a 12-month negotiation period. If
government does not proceed within 2 years, concessionaire may request
return of the area.
If government
proceeds and realizes profits, concessionaire will be reimbursed its
costs. Concessionaire may elect to co-venture with government for a
period of 3 years. |
|
Relinquishments |
50% after 4 years (35% in deep water block).
25% after 6 years
(40%in deep water block). |
|
Reserved exploration area |
12.5% of initial
area, up to 5 years after end of exploration period. |
|
Economic obligations |
- |
|
1.
Work expenditure |
Fixed for each of first 3 years, and,
later, for each of second 3 years. Excess may be carried forward.
Modification possible with consent of Minister. A bank guarantee may be
required.
|
|
2.
“Special benefits” |
As proposed in concession application
(e.g.
bonuses, scholarships,
grants to educational institutions, study tours, etc.). |
|
3. “Special remuneratory
benefit” |
SRB is “windfall profits”
tax, payable only in
years concessionaire has “petroleum profit”. In calculating such
petroleum profit for the year, there may be deducted capital
expenditure, operating costs, a special reduction
(an
expense “uplift”)
for the year, and
petroleum loss carried forward from prior years. SRB is calculated by
exploration block at following rates, subject to a ceiling of 75% of
petroleum profit:
|
Income per meter of well |
SRB |
|
Up to Baht 4,800 |
zero |
|
Baht 4,800 to 14,400 |
1% per each Baht 240 increment |
|
Baht 14,400 to 33,600 Baht |
1% per each Baht 960 increment |
|
Over 33,600 Baht |
1% per each Baht 3,840
increment |
To determine
“income per meter of well”, first calculate annual petroleum profit and
adjust for inflation and exchange rates; then calculate accumulated
total meters of all wells drilled during concession period. Income per
meter of well equals adjusted annual petroleum profit divided by total
depth of all wells + GSF. “GSF” means “geological stability factor”,
which is fixed for each geological region and is at least 150,000
meters, higher in difficult drilling areas. |
|
4.
Royalty |
Imposed at progressive rates:
|
Up to 2,000 barrels per day |
5.0% |
|
2,000-5,000 barrels per day |
6.25% |
|
5,000-10,000 barrels per day |
10.0% |
|
10,000-20,000 barrels per day |
12.5% |
|
over 20,000 barrels per day |
15.0% |
In deep water blocks,
royalty is 70% of the above rates. Government has authority to fix
lower rates in special situations.
Royalty in cash based on posted,
realized or market price.
Royalty in kind is
volume equivalent in value to royalty paid in cash. Payable monthly.
Royalty disputes to be
settled by court, not international arbitration. |
|
5.
Income tax |
50% on profits
(or
35% on profits plus 23.08% remittance tax, under Royal Decree).
Payable semi-annually.
Revenues, deductions and taxes for all “Thailand III”
blocks of the same concessionaire may be
consolidated. Other blocks of the same concessionaire must be
consolidated separately.
Capital costs generally
amortized over 5 to 10 years (accelerated depreciation permitted).
Operating costs, royalties and SRB expensed.
Revenues on crude oil sales based on realized price or, for exports, on
the higher of realized or “tax reference” price, the latter being the
posted price with a discount.
Ten-year loss carryforward, no loss carryback. |
|
Pricing |
|
Crude oil |
Export sales on f.o.b.
posted price fixed by concessionaire and agreed by government.
Domestic sales, in absence of regular exports, on price not exceeding
that of imported crude oil; otherwise, on average realized price of
exports by all concessionaires. |
|
Natural gas |
Negotiable |
|
Disposition of crude oil |
|
Local market
supply |
Government may
require supply to local market at domestic sales prices.
First priority must be given to
government at a domestic oil refinery. |
|
Exports |
May be subject to
ban or restriction under PA Section 61. (Currently none.) |
|
Disposition of
natural gas |
In practice, must
be sold to PTT at negotiated price, as it has a de facto monopoly
on the internal transportation of natural gas. |
|
Additional
factors |
Office in
Thailand.
Employment and training of Thai nationals.
Preference to local goods and services, including ships.
Approval of employment of foreign nationals.
Equipment becomes property of Thai government at end of production
period.
Exemption from customs duty and VAT on imports required for petroleum
operations.
No surface rentals, except for reserved exploration areas.
No mandatory government
participation. |
|
Disputes |
Bangkok, unless
otherwise agreed. Rules of International Court of Justice of 6 May
1946, as amended. Royalty disputes to be settled by Thai court.
(An amendment of the dispute settlement clause in the form of petroleum
concession is under final review) |
|
Transfers |
Qualifications of affiliated company transferees now to
be scrutinized. |
|
Confidentiality |
Confidentiality
period for reports submitted by concessionaire ends 1 year after date of
receipt. |
|
Application to
prior concessions |
Upon application
and consent if concessionaire not yet in production. |
