A research study submitted in partial fulfillment of the requirements for the degree of Master of Engineering, School of Environment, Resources and Development

Research Studies Project Report (M. Eng.) - Asian Institute of Technology, 1989

The basic question in petroleum exploration and production seems t o be whether, geologically s peaking , there are oil deposits or not . In reality, this plays less of a role than one would expect : Once it is established t hat petroleum can be found, much of what happens successively is a matter of negotiating and pricing. Typically, there are two parties involved in this process, viz an exploration and production company (supplying the khow-how and hardware ) and t he government granting t he concession. Much of t he :interaction between the t wo is over he sharing of risk. The study, subsequent l y, :is in two parts . Part I takes stock of the past experience and current status of petroleum exploration and production in Thailand. It further analyzes the bargaining situation bet ween companies and governments in more abstract terms . Finally , it identifies major issues in decision- making at company and government levels, which reflect geological expectations (such as fie l d size , drilling efforts required , e t c ) and economic considerations (profitability) of the venture. Part II is devoted to some quantitative work. In particular , .it addresses the question how a government should f or malate .it s .incentive scheme - or fiscal regime - to assure both maximum production and a fair share in profits made. For t he case of Thailand , it shows that Fiscal Regime III seems better suited than .its predecessors to achieve t his goal. Results are obtained by successive formulation of scenarios varying fiscal terms for various geological and cost assumptions.