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Reuters-Thailand-Yadana natural gas

Subject: Reuters-Thailand-Yadana natural gas price row rumbles on 

Thailand-Yadana natural gas price row rumbles on
05:25 a.m. May 24, 1999 Eastern
By Anchalee Koetsawang

BANGKOK, May 24 (Reuters) - Thailand has still not resolved a dispute with a
group of oil companies over how much it should pay for natural gas from
Myanmar's Yadana field, industry sources said on Monday.

State-run Petroleum Authority of Thailand (PTT) is not expected to end talks
with the gas producers before the end of May over their claim for $62
million for gas sold under a 'take-or-pay' deal.

But most industry sources do expect the agreement to be settled fairly soon
and say commercial levels of production from Yadana are likely to be seen
from the third quarter of this year.

``The amount of compensation or price cut is being discussed. This kind of
talk takes time because each side wants to protect its interests, which is
natural,'' said an industry source.

``But we hope that an agreement will be reached by the end of this month,''
he added.

PTT signed a take-or-pay contract with the gas producers before the field
was due to come on stream in August 1998.

The gas was ordered for use as fuel for a new power station being built by
the state-run Electricity Generating Authority of Thailand's (EGAT) at
Ratchaburi in western Thailand.

The contract required PTT to take an initial 65 million cubic feet per day
(mmcfd), rising to 525 mmcfd over 15 months.

But output from the field was delayed a little and when production did
eventually start the Ratchaburi power plant had still not been completed.

As a result, PTT took much less than the volume originally contracted for

The oil companies -- Total (TOTF.PA), Unocal (UCL.N) and PTT unit PTT
Exploration and Production (PTTE.BK) -- are claiming $62 million for the
first tranche of gas. PTT says that is too much.

Under a take or pay agreement, a buyer must pay for the contracted amount of
gas whether or not he can take delivery.

Sources at EGAT say the Ratchaburi plant should be able to begin to take the
gas from Yadana in the third quarter of 1999 and increase offtake to full
capacity in 2000.

``There are two issues here that should not be mixed up. The first is the
resolution of the take or pay agreement involving a bill worth $62 million

for gas which was mostly not taken by PTT due to a delay in the construction
of a power plant,'' said a source from producers' side.

``The other issue is the commercial production of the Yadana gas after the
initial delays. The first issue is being resolved. We hope for a positive
outcome soon. As for commercial production, I don't think it will be delayed
beyond the third quarter,'' he said.

The $62 million payment, the first for a 30-year contract, has been due
since the end of March.

PTT has refused to pay, citing the economic crisis. It also says the
Total-led consortium has failed to meet a major requirement in the contract.
It says the energy content of the natural gas from Yadana field was slightly
lower than that specified in the contract.

Sources close to the negotiations told Reuters on Monday that both sides
were working on the amount of compensation which the producers had to pay
PTT for failing to meet that requirement.

The compensation could come in a form of a price cut, they said. Total is
said to have sold gas from Yadana to PTT at around $3.0 per million British
Thermal Unit (BTU), which is more expensive than gas from the Gulf of