Development is under way in the Gulf of
Thailand on a giant gas field that's a testament to patience, compromise,
perseverance and vision; two small countries and one independent
oil company are set to reap the rewards of a project that started
in the early 1970s.
Triton Energy, a U.S. independent focused entirely
on international ventures, has long used the strategy of identifying
new prospective exploration trends and remaining committed to those
That's never been truer than in the Gulf of Thailand.
Nearly 30 years ago the offshore region on the Malaysia
and Thailand border was a disputed area, and both countries awarded
the acreage to different companies: The Malaysian acreage was held
by Exxon, and Thailand awarded one block to Triton and two to BP.
Exploration under these contracts commenced, with
Triton drilling a dry hole and BP and Exxon making sub-commercial
"BP and Exxon subsequently relinquished their rights
because in the 1970s the focus was primarily on oil exploration
-- gas was regarded as having little value," said Brian Maxted,
senior vice president of exploration for Triton.
"Plus, there was a limited amount of infrastructure
in the area."
Triton maintained its rights to Block 18, but since
hydrocarbons had been discovered in a disputed area both governments
enforced a moratorium on further exploration activity until resolution
could be found for the dual claims.
By 1979 the two countries agreed to develop the acreage
jointly, and the Malaysia-Thailand Joint Development Area was established
with a 50-year term. The area was still a disputed region, but both
governments agreed to jointly exploit the resources of the acreage.
Even though the joint development agreement was reached
relatively quickly, it took the two countries another 10 years to
formalize the future production sharing contracts.
"The concept of a joint development area had never
been considered before anywhere in the world," Maxted said. "This
was the first time two governments were able to reach an agreement
to allow for exploitation of natural resources in a disputed area."
Even 20 years ago natural gas was beginning to emerge
as a fuel of choice, especially for power generation, and with the
rates of economic growth both countries were experiencing the governments
saw a huge future need for natural gas reserves.
"It made a lot of sense to set aside the territorial
claim and reach an agreement that would allow for early development
of gas resources in the area," Maxted said. "The compromising nature
of both the Malays and the Thais was essential to this agreement.
Both recognized the economic benefits of a compromise over a political
standoff that wouldn't benefit anyone."
During the years of negotiation Triton developed
strong ties and contacts within both countries and provided technical
assistance to both parties. Those ties proved very important.
"We don't have a business card with a well-known
brand name on it, so our future relationship with the host governments
was very much dependent on our ability to develop a good understanding
and working relationship," Maxted said.
"The Gulf of Thailand is a platform asset for Triton,"
he continued, "a long-term asset that will provide significant cash
flow for an extended period and provide the resources to grow the
company through other projects, particularly our offshore West Africa
The three divisional blocks that had previously existed
were maintained under the Joint Development Area agreement. Blocks
C19 and B17 were open acreage from both sides of the border, so
that acreage was awarded on a 50-50 basis to PETRONAS, the Malaysian
state oil company, and the Petroleum Authority of Thailand, the
Thai state company. Since Triton had maintained its 100 percent
rights to Block A18 jointly with the Thais, the firm was permitted
to enter into a joint venture with PETRONAS on a 50-50 basis.
It wasn't until 1994 that Triton signed a production
sharing contract and exploration once again commenced -- 20-plus
years after the first wells were drilled.
"Triton's vision was that one day there would be
a significant market for gas as an energy source in the region,
particularly for power generation," Maxted said. "There had been
discoveries to the north of this area in Thailand by Unocal and
other companies. As those developments came on line a gas market
did begin to emerge.
"Of course, Triton never dreamed it would take another
20 years," he added, "but the company realized there was a significant
gas resource in the disputed area and the only issue was a market.
"The technical risks of this project were relatively
low since the gas discoveries in that first round of drilling had
proved the hydrocarbon potential. It was basically a commercialization
No Dry Holes
After the production sharing contract was signed
, Triton and PETRONAS set up a joint operating company called Carigali-Triton
Operating Co. (CTOC), based in Kuala Lumpur, that is the E&P
arm of PETRONAS.
CTOC acquired an extensive 5,000-kilometer 2-D seismic
program over the block in 1994, and one year later kicked off its
exploration program. To date, 16 wells have been drilled on Block
A19 with no dry holes; there were eight discoveries, and the remaining
eight were appraisal wells.
"The geology is relatively simple and the geophysical
imaging is quite good, so the exploration risk is minimal," Maxted
Based on the eight discoveries, the block's gross
potential resource base is 10 to 12 trillion cubic feet of gas,
making Block A18 one of the largest gas discoveries worldwide in
the 1990s -- and one of Triton's core assets.
A development plan for the first discovery, the Cakerawala
Field, was submitted and approved in 1996. The field is expected
to come on line by the end of 2002 and have a 20-year life.
Block A18 covers about 731,000 acres and is about
30 kilometers offshore in 180 to 200 feet of water, with pay zones
found at 5,000 to 6,000 feet. The development plan is a straightforward
Gulf of Mexico type, he said, with three wellhead platforms, a living-quarters
platform, a processing platform with facilities for gas production,
a riser/compression platform, a floating storage and offloading
vessel and 35 development wells.
In addition, the world's largest offshore CO2
removal plant will be included.
Reserves for this first phase development on Block
A18 are approximately 2.5 trillion cubic feet of gas. A pipeline
will connect the field to Songkhla, Thailand, and a contract has
been reached to sell the first phase gas to Malaysia for power generation.
The first phase development costs will be approximately $500 million.
Production from this first phase of development in
Block A18 is expected to be 390 million cubic feet of gas per day.
No firm date has been set for phases two and three in Block A18,
although both are planned for this decade.
"The timing of future developments is dependent on
the availability of markets," Maxted said, "and finalizing negotiations
for additional gas supply to Thailand and Malaysia.
High Hopes for Tomorrow
Maxted said Triton is very optimistic about the future
of the gas markets in Malaysia and Thailand.
"It's really a question of timing and having the
patience to wait out future contract negotiations," he said. "There's
quite of bit of gas in this part of Asia, but one of the things
that makes this gas project unique is the competitive nature of
the situation. Both Thailand and Malaysia have a policy of preserving
their own strategic reserves and see the Joint Development Area
as an obvious secure gas supply that allows them to preserve their
own sovereign gas resources."
Of course, a project of this magnitude is an enormous
undertaking for a company Triton's size. So, in 1998 the company
accepted an offer by Arco for 25 percent of Triton's gross working
interest in the Joint Development Area.
Under the terms of the agreement Arco paid Triton
a bonus of $150 million, picked up the historical costs of the project
and provided a carry through to first gas or costs up to $377 million,
whichever comes first. BP has since inherited the deal through its
acquisition of Arco.
"Bringing in a partner like Arco was an important
step," Maxted said. "At this time Triton does not have any expense
toward development of the first phase gas, which makes this a very
valuable deal for us. Arco was looking to develop a long-term position
in Asian gas. Today BP-Amoco has significant reserves in Indonesia,
Tango and other areas. The Joint Development Area is strategic for
The Joint Development Area has some future exploration
potential as well.
"The low hanging fruit has been taken off the tree,
but we are drilling a couple of exploration wells later this year
to test some stratigraphic plays along the basin flank," he said.
"The structural potential has largely been drilled and tested, but
3-D seismic over about half the block has indicated some stratigraphic
prospects and the possibility of some oil production.
"Obviously, we could exploit any oil finds along
the flank of the Malay Basin relatively quickly."