Petroleum Act

Section 4 defines petroleum activity ("กิจการปิโตรเลียม") as exploring for, producing, storing, transporting, selling or distributing petroleum. "Petroleum" covers crude oil, natural gas, natural gas liquids, by-product substances and other naturally occurring hydrocarbons in a free state (solid, viscous, liquid or gas), including heavy hydrocarbons that can be brought up directly from a deposit using heat or chemical processes; it excludes coal, oil shale and other rock that must be distilled to yield oil. An exploration block ("แปลงสำรวจ") is an area fixed for petroleum exploration and a production area ("พื้นที่ผลิต") is an area fixed for petroleum production. "Kingdom" includes the continental shelf to which Thailand is entitled under generally accepted international law and treaties with foreign states.

Section 16 lists the functions of the Petroleum Committee (membership is set by Section 15). It advises the Minister on the powers in Section 22, gives its consent to the Director-General on the powers in Section 22/1, agrees the price for natural gas sold within the Kingdom (Section 58), may permit a concessionaire to own land (Section 65), issues orders on bringing foreign nationals into the Kingdom (Section 69) and on the import of machinery and equipment with exemption from import duty and value-added tax (Section 70), and performs any other function given to it by the Act, by the Minister or by other law.

Section 22 gives the Minister, acting on the advice of the Petroleum Committee, powers that include granting a concession (Section 23), extending the exploration period (Section 25) and the production period (Section 26), approving changes to work commitments (Section 30) and transfers of commitments between blocks (Section 33), allowing another company to join the operation (Section 47), allowing transfer of a concession (Section 50), revoking a concession (Sections 51 to 53), ordering concessionaires to supply petroleum for domestic use (Section 60), announcing a ban on exports (Section 61), ordering joint production (Section 72), requiring royalty to be paid in petroleum (Section 83) and reducing royalty (Sections 99 bis and 99 ter). Granting a concession, extending the production period, allowing transfer of a concession and reducing royalty under Sections 99 bis and 99 ter each require Cabinet approval.

Section 23 provides that petroleum belongs to the State. Anyone who explores for or produces petroleum anywhere, whether on their own land or someone else's, must hold a concession, a production-sharing contract or a service contract; applying for and obtaining production-sharing rights follows Chapter 3/1 and obtaining a service contract follows Chapter 3/2. An application for a concession must follow the criteria, procedure and conditions set in a ministerial regulation, and the form of concession is also set by ministerial regulation. Which form (concession, production-sharing contract or service contract) is suitable for a given area is decided under criteria the Petroleum Committee announces in the Royal Gazette with Cabinet approval. Breach of the first paragraph is an offence under Section 103.

Under Section 25 the exploration period under a concession is no more than six years from the date the concession is granted. A concessionaire wanting an extension must apply, together with proposed money and/or work commitments for the third commitment period, at least six months before the exploration period ends. An extension can be granted only if the concessionaire has complied with the concession in every respect and has agreed the third-period commitments at least fifteen days before the end of the second commitment period. An extension can be made only once and for no more than three years.

Under Section 26 the production period under a concession is no more than twenty years, counted from the day after the exploration period ends, even if petroleum was already being produced during exploration. A concessionaire wanting an extension must apply at least six months before the production period ends. An extension can be granted only if the concessionaire has complied with the concession in every respect and has agreed the terms, commitments and conditions generally in use at the time at least fifteen days before the period ends. An extension can be made only once and for no more than ten years.

Under Section 28, when a concession is granted the Department of Mineral Fuels fixes the boundaries of each exploration block by notification in the Royal Gazette. An exploration block that is not at sea may cover no more than four thousand square kilometres. An exploration block at sea includes any islands inside the block's boundaries.

Before producing petroleum from any place in an exploration block, Section 42 requires the concessionaire to show that it has found a petroleum well with commercial capability and has fixed the production area correctly. Production from that production area may begin only after the Director-General has approved. The criteria and procedure for deciding a well's commercial capability and for fixing a production area are set by ministerial regulation. Producing without that approval is an offence under Section 104.

Section 53 sends two kinds of dispute to arbitration under the procedure set in the concession if the parties cannot agree: a dispute over the Minister's order that the concessionaire remedy a ground for revocation under Section 52, and a dispute over whether the concession has been complied with. If the concessionaire does not comply with the arbitral award, or does not comply in time, the Minister may revoke all or part of the concessionaire's rights or benefits, or revoke the concession.

Section 53/3, added by the 2017 amendment (Act No. 7), sets minimum terms for a production-sharing contract. All petroleum operating costs fall on the contractor and are recovered out of production. The contractor may deduct only actual expenditure, in line with normal petroleum-industry accounting practice and the work programme and budget approved by the Director-General, and the deduction may not exceed fifty per cent of total production; any excess over fifty per cent in a year may be carried into later years within the same cap and the life of the contract. Of the production left after royalty and the cost deduction, the contractor's share may not exceed fifty per cent. The contract must also cover minimum spending, exploration and production commitments, each side's right to sell its own share, management of the operation, enforcement measures and penalties, and grounds for termination.

Section 80/1, added by the 2007 amendment (Act No. 6), makes the concessionaire responsible for removing the structures, materials, equipment and facilities used in exploring, producing, storing or transporting petroleum, to promote and protect environmental quality. The concessionaire must submit a decommissioning plan and cost estimate for the Director-General's consent, following the criteria, procedure, conditions and timing set by ministerial regulation. The Director-General can order the plan or estimate to be revised if more structures must be removed, decommissioning technology changes or the cost estimate proves inaccurate. If the concessionaire does not carry out the removal, or delays in a way that may cause damage, the Director-General may assign someone else to do it, paid from the security the concessionaire must lodge under Section 80/2.

Section 84 requires the concessionaire to pay royalty on petroleum produced in each exploration block. Paid in money, it is a percentage of the value of petroleum sold or distributed in the month at the rates in the royalty schedule annexed to the Act; paid in petroleum, it is the quantity worth the same amount. The annexed schedule applies five tiers to the monthly volume of all petroleum sold or distributed: 5 per cent up to 60,000 barrels, 6.25 per cent for the part from 60,000 to 150,000 barrels, 10 per cent from 150,000 to 300,000, 12.5 per cent from 300,000 to 600,000, and 15 per cent above 600,000 barrels (natural gas of 10 million BTU counts as one barrel). For production from blocks the Department of Mineral Fuels designates as sea deeper than 200 metres, royalty is 70 per cent of the amount otherwise payable. Sections 99 to 99 ter allow reductions.

Section 100 quinquies (Thai "มาตรา ๑๐๐ เบญจ") sets the special remuneratory benefit, charged on a concessionaire's annual petroleum profit in a block at rates that depend on the value of the year's revenue per metre of well depth drilled (defined in Section 100 sexies). The first 4,800 baht of that value per metre carries no benefit; the part above 4,800 and up to 14,400 baht is charged at 1 per cent for the first 240 baht, rising by 1 percentage point for each further 240 baht; the part above 14,400 and up to 33,600 baht rises by 1 percentage point for each further 960 baht; and the part above 33,600 baht rises by 1 percentage point for each further 3,840 baht. The benefit charged may not exceed 75 per cent of the petroleum profit for the year.

Under Section 103, a person who explores for or produces petroleum without holding a concession, production-sharing contract or service contract, in breach of the first paragraph of Section 23, faces imprisonment of up to two years, a fine of up to 400,000 baht, or both.