BIDDING PROCEDURES

Open acreage with petroleum deposition potential will be defined into exploration blocks for the
application of concession for petroleum exploration and production. International invitation to bid will be
announced and data packages be readily prepared for study before submission of the application.
The new invitation (18th Bidding Round) is given on 11
th
July 2000. Interested companies can submit for
rights in petroleum exploration and production for 87 exploration blocks located onshore, in the Gulf of
Thailand and in the Andaman Sea within 3 years from the date of this announcement or the date as may
be specified in further notice.
The Department of Mineral Resources will evaluate the applications for petroleum concessions submitted
within the 15th of each month. The last day of the first submission is 15th August 2000. As the
applications for the blocks which have already been applied for and are still under consideration of the
Department will not be admitted until such consideration is finalized, the Department will make a
monthly announcement of such blocks.
Individual oil companies or joint venture who wish to apply for the concessions must submit evidences
showing their corporate profile, financial strength and petroleum exploration and production capability.
Qualified oil companies will be selected, their proposed exploration program for each exploration period
(which is the major feature for bid assessment) considered, and special advantages offered compared.
The bidders with the exploration program most suitable for the geological condition of the blocks will be
selected to be concessionaires. Proposed exploration programs which consist only of seismic survey for
the first three years exploration period will only be accepted for the areas with limited geological and
geophysical data available.
Eligible applicant shall be a company with sufficient assets machinery, equipment and specialists to
explore for and produce or sell petroleum. A successful bidder shall proceed to register a Thai company
with a paid up capital of not less than 100,000,000 Baht (approximately US $ 2.5 million at US $ = 40
baht) before signing the concession.





Contract type Concession system

Contract period (years)

Exploration 3 + 3 (with 3 years extendable)

Production 20 (with 10 years extendable) starting immediately after the end of the
exploration period.
Contract Area

Exploration Block As defined in the bid announcement. Each concessionaires can hold up to five
exploration blocks with a total area of not exceeding 20,000 square kilometers.
Area relinquishment is 50% at the end of year 4 and another 25% at the end of
year 6.

Production Area With commercial discovery, production area will be delineated and production can
start right away even in the exploration period.

Reserved Area In the case the production area is declared, 12.5% of the original exploration
area can be reserved for further exploration for another period of 5 years after
the end of the exploration period.

Exploration Work Program After careful evaluation of geological data available the bidders will propose an
exploration work program for each period. The work program can be revised to suit
the information acquired from the work performed. Reduction of work commitment
for extra area relinquished or waive of work commitment for area surrendered is
allowed beyond the first three years.

Bonuses & State Participation Voluntary basis.



Contract Terms






Royalty To be paid in a sliding scale rate corresponding with the revenue from
petroleum sold or disposed of as follows :

Monthly Sale Volume (Barrel x 10
3
) Rate (%)

0 - 60 5.00
60 - 150 6.25
150 - 300 10.00
300 - 600 12.50
> 600 15.00

10 million BTU/Barrel is used as conversion factor for natural gas.
Royalty on petroleum produced from deep water Andaman Sea area and some
certain areas selected by the government will be only 70% of the above rate

Petroleum Income Tax 50% of net profit of the company and no ringfence for cost deduction. Royalty
and SRB paid can be treated as tax deductible expenses.

Supplemental Tax Special Remuneratory Benefit (SRB) is designed for extra governments take
from windfall profit which will only be used if:

! all capital cost (plus special reduction) are recovered, and
! annual revenue become drastically high compared with the
investment (i.e. unusual high oil price)

Incentives Exemption of any other corporate taxes, duties and taxes on imported
equipment and materials.

Markets Pricing Petroleum produced can be sold for domestic consumption or overseas. At
present, natural gas is for domestic use only due to readily market and
sufficient infrastructure at fair price.




Example of Investors Profit Share Under Thailand Fiscal Terms

Project Studied : Typical onshore oil field in central Thailand
Cumulative Production : 105 MMbbl & 199 bcf
Project Life : 17 Years (15 years of production)
Avg. daily rate : 19,000 bbl/d & 36 MMscf/d
Avg. Price : 18 US$/bbl & 1.8 US$/MMBTU




Geological constant (K) 150,000 meter
Special reduction (SR) 0 %
Cumulative well depth 470,900 meter

MMbaht % of revenue

Revenue 56,200 100.0
Cost 28,300 50.4
Gross Profit 27,900 49.6
Royalty 7,500 13.3
20,400 36.3
SRB 200 0.4
20,200 35.9
Income Tax 10,100 17.9
Company Profit 10,100 18.0

Company profit
Gross Profit
= 36.2%

The Department of Mineral Resources has re-evaluated the geological data, exploration and production
difficulty of exploration blocks in different areas including the investment climate and competition in the
region and come up with the more incentive for K and SR values for the blocks open for bidding in the
last three and this licensing rounds.
Example
Fiscal Terms
Factors for SRB Calculation
Acreage Map
Revenue
50%
32%
18%
Cost
Government
Company Profit