BANGKOK (Reuters) – U.S. energy major Chevron Corp has resumed arbitration proceedings with Thailand to try to resolve a dispute over who should pay for removing offshore assets in the country’s Erawan gas field, the company told Reuters on Friday.
The move comes a year after the company suspended the legal process to allow more time for talks with Thailand’s energy ministry, ahead of the end of its concession in April 2022.
“For the last 12 months we have been seeking a solution on this issue … in order to reach agreement that protects our rights as an investor,” a company spokesman told Reuters.
“With no such solution likely in the near term, we are regretfully compelled to reinstate arbitration.”
Thailand’s energy ministry was not immediately available for comment, but has said it would be ready to enter arbitration if needed.
The dispute resulted from a retroactive Thai law in 2016 requiring gas field operators to pay the costs of decommissioning assets they have installed, including those they will transfer free of charge to a next operator.
Last year, Thailand asked Chevron to pay the full decommissioning costs of around $2 billion for assets in the Erawan gas field, including those it will hand over to PTT Exploration and Production Pcl, a unit of the state-owned PTT Pcl.
Chevron argues that, under the terms of its initial contracts from 1971, it is only liable for infrastructure that is no longer deemed usable and the transferred assets are the responsibility of the new operator.
The decommissioning work of the unusable assets was already underway, Chevron said on Friday.
Reuters reported in September 2019 that Chevron had suspended the arbitration process to continue talks with then-energy minister Sontirat Sontijirawong, who resigned in July.
The new energy minister, Supattanapong Punmeechaow, formerly a vice president of PTT, met with Chevron’s representatives last month but has not made public comments about the dispute.
The case has implications for France’s Total SA and Japan’s Mitsui & Co, which also have stakes in soon-expiring offshore energy concessions in the Gulf of Thailand.
Foreign investors in Thailand beyond the energy sector have followed the dispute closely due to concerns about the retroactive use of laws and the precedent the case might set.
(Reporting by Patpicha Tanakasempipat; Editing by Matthew Tostevin and Mark Potter)