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BKK POST: January 24, 1998: PIPELIN



January 24, 1998
PIPELINE / CONTRACT OBLIGATIONS 

              PTT says delay of
              Yadana project
              will cost $81m

              Opponetns say payment can be legally
              avoided

              Boonsong Kositchotethana

              Thailand must pay US$81.57 million to the Yadana consortium
              if it fails to take the Burmese natural gas supply within five
              months of the agreed starting date for gas purchases in July.

              This works out at 4.32 billion baht if the exchange rate remains
              53 baht/dollar.

              The figures from the Petroleum Authority of Thailand (PTT), the
              gas buyer, are based on the price it must pay the consortium led
              by French oil firm Total, regardless of whether its takes delivery
              of the gas, plus interest on loans for the gas pipeline project.

              The figures underline the costs facing the PTT if construction of
              the Thai section of the Yadana gas line, running from Tong Pha
              Phum in Kanchanaburi to Ratchaburi, is delayed.

              The PTT faces strong protests from conservationists because a
              six-kilometre stretch of the 260-km pipeline will go through
              pristine forest in Tong Pha Phum.

              The state oil firm's payment obligations to the Yadana
              developers will rise in line with the length of delay under the
              take-or-pay deal, as will loan interest on the 17-billion-baht
              pipeline.

              If the pipeline is delayed by two months, the cost to the state oil
              firm will be $4.75 million, rising to $22.91 million for a
              three-month delay, $45.07 million for four months and $81.57
              million for five months.

              The 30-year gas sale contract calls for the average delivery of
              525 million cubic feet per day (MMcfd), starting in mid-1998,
              with a "swing" to boost the rate by 15% to 604 MMcfd if
              required by PTT.

              Lawyers for the project's opponents claim that the PTT can
              avoid payment by declaring the delay in the Thai section a force
              majeure - a legal term for an act beyond anyone's control. But
              the PTT's legal experts have ruled out such a move.

              Work on the Burmese side - the offshore gas production
              facilities and the offshore and onshore pipelines - is advanced
              and expected to meet the completion date in June.

              With the Thai economy in a bad shape, Thailand - and the PTT
              in particular - could not afford the penalty payments. The only
              thing it could do was ensure the pipeline was completed on time,
              an industry observer said.

              Total has 31.24% stake in Yadana, Burma's largest known
              offshore gas field, with Unocal holding 28.26%, PTT Exploration
              & Production Plc of Thailand (part of the PTT) 25.5% and
              Burmese state-owned Myanma Oil and Gas Enterprise 15%.




                                     




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Last Modified: Sat, Jan 24, 1998