Chevron Corporation (NYSE:CVX) has said that there will be no arbitration regarding an energy dispute with Thailand. The company said that it would continue negotiating with Thailand as it seeks to resolve the dispute of whop should remove the offshore gas and oil platforms.
The government wants Chevron top pay $2.5 billion
The government of Thailand wants the US Company to pay around $2.5 billion, which is the full cost of decommissioning the energy infrastructure. The conflict also affects other energy companies such as Japan’s Mitsui & Co (OTCMKTS: MITSY) and France’sFrance’s Total SA (NYSE: TOT) that also own offshore energy concessions in Thailand.
A Chevron spokesperson indicated that they had decided to do away with the arbitration process and allow time for negotiations. He added that the desire of the energy minister reach a resolution motivated their move but warned that arbitration is still a possibility if the negotiations stall.
Chevron wants to pay dimensioning cist under 1971 contracts
In July the Energy Minister Sontirat Sontijirawong indicated that they wanted to resolve the matter fast so that they can evade the process of arbitration. He, however, indicated that the issued was rather complex. The conflict began in 2016 when the government introduced a new energy regulation that required companies to foot costs for decommissioning assets they have installed in the country. The regulation required that they will pay cost even for assets they don’t use anymore.
However, Chevron holds that according to the agreement from 1971, it can only be liable for assets that are not usable before it hands to a different operator. The new law requires the company to pay costs of decommissioning infrastructure that is installed at the Erawan field, which includes all usable assets it will hand over to PTTTEP at no cost.
Chevron had objected to a request from the ministry of energy in June requiring the company to pay upfront the entire decommissioning fee for the Erawan filed assets. In July the company hinted that they could possibly consider arbitration provided for in the 1971 contracts.