FOCUS: Thai PTT E&P Braces For Report Findings On Montara Oil Spill

17th Jun 2010 08:42

By Oranan Paweewun OF DOW JONES NEWSWIRES BANGKOK (Dow Jones)--An oil rig fire and subsequent leak of thousands of barrels of crude oil into the sea that took months to cap may result in one of Thailand's biggest companies being fined by the Australian authorities, but it seems unlikely that its license to develop the oil field will be revoked. A commission of inquiry report into the cause and handling of PTT Exploration & Production PCL's (PTTEP.TH) 2009 Montara oil spill in the Timor Sea is due to be handed to the Canberra government Friday, at a time U.S. investigations are underway into that country's worst environmental disaster. The company is expecting a fine of up to A$2 million (US$1.7 million), a drop in the ocean when compared with the $20 billion BP PLC (BP) is setting aside to compensate victims of its Gulf of Mexico spill. The Montara oil leak, which took more than two months to cap, was among the worst in Australian history, but it was on a relatively minor scale. Only some 400 barrels a day of crude escaped into the sea in a remote area between Northern Australia and East Timor, compared with the 35,000-60,000 barrels a day now gushing into the Gulf of Mexico. Australian Minister for Resources and Energy Martin Ferguson may make a statement on receiving the report, but its findings are unlikely to be made public immediately, with an official government response possibly not coming for weeks. PTT Exploration Chief Executive Anon Sirisaengtaksin has refused to comment about the report, but industry analysts are not being hesitant. The company could be confronted by with requirements for higher operation standards, and increased costs, in Australia, which is a key country in its growth strategy. However, given PTT Exploration executives' claims they strictly followed existing regulations, it seems less likely that it will have its license revoked, said Nalinrat Kittikumpolrat, an analyst with Asia Plus Securities. Australia had never cancelled licenses of operators who have suffered oil leaks, she said. The spill began Aug. 21 last year. PTT Exploration, the 100% owner of the project, stopped it briefly but then a fire broke out on its wellhead platform, resulting a renewed escape of oil that wasn't plugged until Nov. 3. Production at the estimated 25,000 barrels a day field was originally scheduled to start at end-2009, but has since been delayed until the second half of 2011. Kim Eng Securities says PTT Exploration's $267 million insurance coverage for Montara is sufficient to cover expenses incurred from the accident. The company set aside A$1.5 million in provisions in the fourth quarter last year to cover any potential fine for the Montara incident, with company executives estimating a maximum financial penalty of A$2 million. It recorded another THB10.43 billion ($321.8 million) in expenses for cleanup and fire damage costs from Montara during the second half of last year. "We do not believe that a worst case is likely given that the incident was relatively minor. Also, PTTEP insists that it strictly followed best practices both before and as a reaction to the oil spill," JP Morgan noted. A worst case scenario of the project being canceled would result in an estimated THB20 billion in write-offs, JP Morgan said. KGI Securities analyst Sutthichai Kunworachai also said a license revocation is unlikely, although it couldn't be ruled out. Shares in the company, Thailand's second largest stock by market capitalization, remain at THB147--the same level as the start of the year--compared with a Thai SET index rise of 7.3%. -By Oranan Paweewun, Dow Jones Newswires; 66 2690 4200; [email protected] (END) Dow Jones Newswires June 17, 2010 03:42 ET (07:42 GMT)