A5.4 Thailand III fiscal regime
Oil and gas production activities in Thailand are currently governed by the terms in the Thailand III fiscal regime. The next section contains an account of the fiscal terms for the Thailand I fiscal regime, under which many existing gas developments operate.
The key components of Thailand III fiscal regime for oil and natural gas development include Royalty, Special Remuneratory Benefit (SRB) and Income Tax.
Royalty is payable monthly out of Gross Revenue on a sliding scale depending on production rates. The incremental sliding scale is shown in Table 43 below.
Table 43 – Royalty rates in Thailand fiscal regime
|Oil production (Mbbl/d)||Gas production (MMscf/d)||Royalty rate shallow water areas (<200m)|
|0 – 2||0 – 20||5.00%|
|2 – 5||20 – 50||6.25%|
|5 – 10||50 – 100||10.00%|
|10 – 20||100 – 200||12.50%|
|over 20||over 200||15.00%|
Special Remuneratory Benefit (SRB)
SRB is payable on Profit Petroleum once all prior losses are offset. The SRB payment equals the profit petroleum multiplied by the SRB rate. The steps of the derivation of Profit Petroleum and SRB rate are illustrated as follows.
The profit petroleum is calculated by deducting the following from the gross revenue: capital costs, operating costs, royalty payments, any losses carried forward and a special reduction, if any. The special reduction is defined as the "amount of money the government prescribes from time to time when awarding concessions". The special reduction rate for Gulf of Thailand is 25%.
The SRB rate payable depends on the "annual revenue per one metre depth of well" (in Baht per metres). It also takes into account the geology and geological risk which is reflected by a geological stability factor (GSF). The annual revenue used in the calculation is adjusted by an inflation factor and a currency exchange factor. The annual revenue per one metre depth of well is calculated using the equation below.
Reve (Baht) = adjusted annual revenue that reflects the dollar value of any year's annual revenue at the time the concession was granted.
M (metres) = cumulative metres of wells drilled on the concession area. This includes dry holes, as well as water and gas injection wells, but excludes abandoned production wells which have produced over 100,000 barrels of oil.
GSF (metres) = geological stability factor. GSF is 600,000 for Gulf of Thailand.
Reve is calculated as follows –
Revm = current year's revenue in Baht
Ie = the exchange rate in the year the concession was awarded
Im = the exchange rate in the accounting (i.e. current) period
Ce = the consumer price index in the year the concession was awarded
Im = the consumer price index in the accounting (i.e. current) period
Pe = the producer price index* in the year the concession was awarded
Pm = the producer price index* in the accounting (i.e. current) period
Once the annual revenue per metre is derived, the SRB rate can be looked up in Table 44. The SRB rate is calculated every year and is rounded up to the nearest percent. Once the profit petroleum and the SRB rate are known, the SRB payment can be calculated.
Table 44 – SRB rates in Thailand fiscal regime
|Annual revenue per one metre depth of well (Baht/metre)||SRB rate|
|4,800 – 14,400||0% plus 1% per 240 Baht/metre|
|14,400 – 33,600||40% plus 1% per 960 Baht/metre|
|33,600 – 91,200||60% plus 1% per 3,840 Baht/metre|
The current income tax rate is 50%.