Chevron loses second major production asset in South East Asia

Following today's announcement by Thailand's Department of Mineral Fuels (DMF) that PTTEP has won the auction round for both G1/61 (Erawan) and G2/61 (Bongkot) PSCs after putting an aggressive bid on the gas price and the profit share, Wood Mackenzie's research analyst Jean-Baptiste Berchoteau shares the following commentary:

"This confirms PTTEP’s strategy to secure domestic gas supply and increase its reserves in the country. The low gas price constant value offered by PTTEP (3.55 US$/mmbtu) truly reflects the national oil company's (NOC) ambition to beat the competition and satisfy DMF’s intention to offer more affordable gas.

"DMF should be commended for leading this bidding round successfully and ahead of schedule, a big achievement for a country usually known for approval delays.

"This is the second major loss for Chevron in South East Asia after losing its Rokan asset to Pertamina in Indonesia earlier this year. Chevron’s reserves and production in the region is now expected to fall drastically post-2022 and South East Asia could become a non-core region for the Major.

"This also confirms a trend that Wood Mackenzie identified last year where we anticipated a progressive retreat of the Majors from South East Asia, opening a gap we expected to be filled by regional NOCs.

"Chevron’s focus will most likely now turn towards the Permian play in the US where the company recently announced it will increase its budget by 10%.

"Many uncertainties are still to be clarified, such as the transfer of liabilities and decommissioning between Chevron and PTTEP, the guarantee of a smooth operatorship transition between the two companies and the level of CAPEX that Chevron will dedicate to develop Erawan until 2022."