By Patpicha Tanakasempipat
BANGKOK (Reuters) – Thailand’s energy minister on Sunday welcomed a decision by U.S. energy company Chevron (NYSE:) to continue negotiations rather than seek arbitration to resolve a dispute over who should pay for removing offshore oil and gas platforms.
Thailand wants Chevron to pay the full decommissioning costs, estimated by a local newspaper at around $2.5 billion, for infrastructure at the Erawan gas field, which it is due to hand over to Thai state oil firm PTT Exploration and Production Pcl in April 2022 when its concessions expire.
Reuters first reported last week that the U.S. company had “temporarily suspended” a plan to seek arbitration in order to allow more time for talks with Thailand’s energy ministry, but that arbitration was still a possibility “within weeks” if talks do not succeed.
Thailand’s energy minister Sontirat Sontijirawong said on Sunday the Chevron’s decision was a good sign that the two parties could work together to resolve the dispute and ensure a smooth handover of the gas field.
“Chevron’s decision to hold off the arbitration process to continue negotiations is welcomed,” energy minister Sontirat Sontijirawong said.
“I also believe that we will arrive at the best agreements while prioritizing Thailand’s interests,” he added.
The dispute arose in 2016 when Thailand retroactively enforced a new energy ministry regulation requiring gas field operators to pay the costs of decommissioning all assets they have installed even if they no longer operate them.
Chevron argues that under the terms of its initial contracts from 1971 it is only liable for infrastructure that is no longer deemed usable before it hands over the field to another operator.
The new law would require Chevron to pay the future costs of decommissioning all the infrastructure it has installed at the Erawan field, including still usable assets it will transfer to PTTEP free of charge.
The dispute has implications for other international energy companies such as France’s Total and Japan’s Mitsui & Co, which also have stakes in offshore energy concessions in the Gulf of Thailand.
Outside of the oil and gas industry, other foreign investors in Thailand were also concerned about the retroactive use of laws, and what precedent the case might set for the sanctity of their contracts.
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