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YADANA GAS FIELD / MORE PROBLEMS AT
- Subject: YADANA GAS FIELD / MORE PROBLEMS AT
- From: suriya@xxxxxxxxxxxx
- Date: Fri, 23 Oct 1998 19:56:00
Subject: YADANA GAS FIELD / MORE PROBLEMS AT RATCHABURI PLANT
October 23, 1998
YADANA GAS FIELD / MORE PROBLEMS AT
RATCHABURI PLANT
New delays damage
all parties
PTT hopes talks with Burmese can reach
settlement
Boonsong Kositchotethana
New delays affecting the supply of Yadana gas from Burma to
Thailand are damaging both countries and all investors involved.
Burma faces delays in obtaining urgently-needed revenue; Thailand
has to pay for gas it cannot process; investors in the Yadana field are
paying mounting interest bills for no return; and contractors in Thailand
face demands for compensation.
Thailand is now unable to take commercial delivery of the offshore gas
until April, almost nine months behind the original supply date and four
months later than the previously rescheduled deadline.
The longer delay stems from new difficulties experienced by Mitsui &
Co of Japan and its American supplier, General Electric, in equipping
the 1,800-megawatt Ratchaburi power station, according to Thai
officials. The plant will be the only burner of Yadana gas for some
years.
The Petroleum Authority of Thailand (PTT), the gas buyer, is
contracted to pay for supplies since last July, regardless of whether or
not it takes delivery.
PTT executives are due in Burma next month in a bid to persuade the
Yadana development consortium, led by Total of France, to relax the
conditions.
Problems with the power station had already delayed the start of
commercial operation of Burma's largest known offshore gas field to
December this year.
Senior officials of the Electricity Generating Authority of Thailand
(Egat) said General Electric, which has a good track record in building
power stations, appeared to have struck more problems with the
delivery of initial units for the Ratchaburi plant from Mitsui.
Mitsui had earlier told Egat that the first two 200-megawatt gas
turbines at Ratchaburi would be ready for commissioning in
November or December.
"They (General Electric) seem to have problems with components
manufactured by their production facilities," a senior Egat official
noted.
The delay in delivery of the two units would have a domino effect on
the completion of the other generating units, Egat officials said.
Egat has told Mitsui that the Japanese company will be subject to a
penality fine of one billion baht for the delay - the maximum amount
the authority can claim from Mitsui under its 10-billion-baht contract.
The problems have more far-reaching implications for the PTT's
ongoing negotiations with the Yadana developers to relax penalties for
late purchase of gas.
The PTT is citing force majeure - unforeseeable circumstances - for
its failure to meet the contractual supply rate and dates in a bid to
avoid heavy penalties under the 30-year take-or-pay deal.
Since July 30, the PTT has been able to take delivery of only five
million cubic feet per day of the 65 million initial rate stipulated in the
Yadana contract.
The initial flow was made possible only with the installation of a small
25-megawatt turbine as a temporary burner. Egat moved the unit from
Kamphaeng Phet.
Under the contract, the PTT is committed to gradually raise its offtake
of gas from Yadana, 240 kilometres south of Rangoon in the Gulf of
Martaban, to a plateau level of 525 million cubic feet per day 15
months after the scheduled production start-up date of last July 1.
The PTT wants to pay only for the amount of gas actually taken, but is
bound by contract to pay for the undelivered gas at year-end.
But a legal expert said the PTT's citing of force majeure had come
too late. Panas Tassaneyanont, former dean of Thammasat
University's law faculty, said the step should have been taken while
environmentalists were protesting against pipeline-laying in
Kanchanaburi early this year. The government could then have
ordered the PTT to stop the project, lifting liability from the agency.
Pibhob Dhongchai, an adviser to the Kanchanaburi Conservation
Group, a leading group of protesters against the laying of the Thai
section of the Yadana line, said: "Had the PTT listened to the
environmentalists, we would not have wasted a large amount of
money and would have saved fertile forest." Thai environmentalists
opposed the project on the grounds that it cut through rain forest and
had displaced wildlife including elephants.
The Burmese junta, through the state-owned Myanma Oil and Gas
Enterprise, which has a 15% stake in the $1-billion Yadana project,
has so far insisted that Thailand adhere to the original Yadana
contract.
"Burma is very unhappy with us because it had high expectations of
steady, sizable revenue from the sales and planned to use the money
to turn its economy around," said a senior PTT official involved in
negotiations.
John Imlee, president of Unocal Corp, a major shareholder in the
Yadana development group, said the PTT's request for easier
conditions needed to be addressed to the whole consortium. "I'm sure
it will be worked out because we invested $1 billion together to have
this gas," he said.
Total of France has a 31.24% stake in Yadana, Unocal 28.26% and
PTT Exploration and Production Plc of Thailand (part of PTT)
25.5%.
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Last Modified: Fri, Oct 23, 1998
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