Chevron (CVX) to Churn Out More Natural Gas in Thailand
A Chevron CVX subsidiary, Chevron Thailand Exploration and Production, is spearheading efforts to boost domestic gas supply in Thailand. The idea is to reduce dependency on costly liquefied natural gas (LNG) imports. With a recent approval to explore and produce petroleum at Block G2/65, in the Gulf of Thailand, Chevron aims to ramp up petroleum production and strengthen Thailand's energy security.
Exploration and Production Licenses
The vast area spanning 15,030 square kilometers in the Gulf of Thailand presents a promising opportunity for CVX to bolster natural gas production. Under the production-sharing contract signed with the Department of Mineral Fuels on May 30, the company is set to begin extensive exploration activities in the region.
Additionally, PTT Exploration and Production Plc, another prominent player in Thailand's energy sector, secured licenses for Block G1/65 and G3/65 in the Round 24 bidding held last year. The combined area of these two blocks is a sprawling 20,133 square kilometers. The licenses grant both Chevron and PTT Exploration and Production the authority to explore and extract valuable petroleum resources.
Chevron's Growth Strategy
Chevron Thailand Exploration and Production anticipates significant natural gas production from Block G2/65. It also expects to discover crude oil reserves at the site, which is close to the Pailin gas block where Chevron is already operating.
Chatit Huayhongtong, the president of the Chevron subsidiary, expressed his confidence in the geological potential of the area. He said that the company is planning to conduct a seismic survey to study the region's geological structure and determine the feasibility of petroleum discovery. The results from the survey will help guide future investment decisions.
Over the next six years, Chevron intends to drill two exploration wells, which will play a crucial role in confirming the presence of viable petroleum source. Should the exploration yield positive results, the company is ready to make further investments to develop these wells into production wells.
Strengthening Thailand's Energy Security
The petroleum derived from Block G2/65 holds immense potential in bolstering Thailand's energy security for years to come.
Increasing domestic gas production can mitigate the country's heavy reliance on costly LNG imports. This strategic move aligns with Thailand's commitment to utilizing cleaner energy sources and reducing its carbon footprint. Natural gas, which is widely regarded as the cleanest fossil fuel, offers a more environmentally friendly alternative for energy production.
By decreasing the reliance on LNG, Thailand aims to alleviate the financial burden on consumers due to higher power bills. The shift toward domestic gas production is expected to provide a cost-effective and sustainable energy solution, benefiting both households and businesses.
Chevron's investments and efforts in this field underscore its dedication to supporting Thailand's energy goals while optimizing the nation’s tax and royalty collection.
The Pailin Block and Future Investments
The company’s involvement in the Gulf of Thailand extends beyond Block G2/65. It also operates the Bechamas petroleum field in the region, which is currently undergoing preparations for recommencement of operations. In addition to the ongoing activities, Chevron also plans to make further investments in the Pailin block, where it operates the Pailin and North Pailin fields.
In order to ensure the continuity of petroleum production, the company is seeking an additional 10 years extension of the production period. The production license for the Pailin block is set to expire in 2028, and CVX's proposal for an extension is currently under review by the Department of Mineral Fuels.
With gas production in the 420-450 million cubic feet range, an extended production period would enable the energy corporation to contribute to Thailand's energy security and economic growth.
Collaborative Efforts and Overlapping Claim Area
Chevron is committed to fostering collaboration between Thailand and Cambodia to explore a potential petroleum site in the upper part of the Gulf of Thailand. The area falls within the two countries' overlapping claim area (OCA). Chevron supports negotiations between the two nations to reach an agreement that facilitates joint exploration and development.
The successful resolution of the OCA issue would open up new opportunities for petroleum exploration and production, benefiting both Thailand and Cambodia. CVX stands ready to participate in these efforts, further emphasizing its commitment to driving regional growth and energy independence.
Conclusion
Through strategic investments, exploration activities and potential petroleum discoveries, Chevron aims to support Thailand's goal of achieving cleaner energy and reduced power bills for consumers. As the company continues to operate in the Gulf of Thailand and support collaborative initiatives, the nation moves closer to its goal of achieving sustainable energy solutions.
Zacks Rank and Key Picks
CVX currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum EPM, sporting a Zacks Rank #1 (Strong Buy), and Eni SpA E and Archrock AROC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum: EPM is worth approximately $265.82 million. EPM currently pays a dividend of 48 cents per share, or 6.01% on an annual basis.
The company currently has a forward P/E ratio of 7.23. In comparison, its industry has an average forward P/E of 18.10, which means EPM is trading at a discount to the group.
Eni SpA : E is valued at around $49.97 billion. In the past year, its shares have risen 7.7%.
E currently pays dividends of $1.29 per share, or 4.60% on an annual basis. E's payout ratio currently sits at 21% of earnings.
Archrock: AROC is valued at around $1.56 billion. It delivered an average earnings surprise of 8.34% for the last four quarters and its current dividend yield is 6.02%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
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