Reuters-Thai PTT settles row with M

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Subject: Reuters-Thai PTT settles row with Myanmar Yadana gas group

Tuesday July 27, 9:25 am Eastern Time
Thai PTT settles row with Myanmar Yadana gas group
BANGKOK, July 27 (Reuters) - The state-run Petroleum Authority of Thailand
(PTT) has resolved a take-or-pay dispute with the producers of natural gas
from Myanmar's offshore Yadana field, sources close to the talks said on
Tuesday.

A deal agreed between the two sides allows for PTT to pay $51 million for
the first tranche of gas deliveries, down from $62 million, the sources told
Reuters.

The reduction reflects compensation for the producers' failure to meet the
energy content requirement in the first delivery.

The two sides also agreed that the producers would boost the energy content
of the gas to meet contract specifications, the sources said.

The Yadana field is operated by a consortium led by France's Total and
includes PTT Exploration and Production and U.S.-based Unocal (NYSE:UCL -
news).

``Both sides finally agreed and the deal is subject to approval from
participants' headquarters,'' said a source who took part in the
discussions, adding that the agreement was expected to be signed early next
month.

The Yadana gas is to be delivered to Thailand via a pipeline from
neighbouring Myanmar, but a power plant owned by the state-run Electricity
Generating Authority of Thailand (EGAT) that is supposed to use the gas is
not yet ready to take delivery.

PTT signed a 30-year take-or-pay contract with the Yadana concessionaires to
start taking gas from the offshore project in Myanmar from August 1998, to
use as fuel for EGAT's Ratchaburi power plant in western Thailand.

But industry sources now say EGAT is set to postpone taking delivery of the
gas until October and there is a chance the delays may drag on until January
next year.

EGAT is the biggest client of the PTT monopoly.

The contract required that PTT take an initial 65 mmcfd, rising to 525 mmcfd
over 15 months. However, PTT has been able to take only five mmcfd so far.

While PTT has completed its pipeline to transport the gas from the
Thai-Myanmar border to the plant on time, EGAT has repeatedly put back the
completion date for the plant.

But PTT's part as buyer has meant that although it could not take the gas as
agreed, it must still pay the bill.