The Search for Petroleum in Thailand

In 1921, the search for petroleum in Thailand began at Fang Basin, Fang District, Chiang

Mai Provice in northern Thailand. Prince Kamphaengphet Akara Yothin, Royal State

Railways Department Chief employed an American geologist to search for oil and coal to

substitute firewood for steam engines in trains. However, it was concluded that the area was

not a major oil deposit.

In 1954, the first oil discovery was made at Chai Prakarn in the Fang Basin by the

Department of Mines (currently Department of Mineral Resources). The small quantities

extracted were used for making asphalt.

In 1968 the government invited foreign oil companies to explore for petroleum. Union Oil

(which later became Unocal Thailand) was the first to discover a natural gas field in the Gulf

of Thailand, Erawan, in 1973. In 1971, with the intention to attract major international oil companies’ investment in

exploration under a proper system of benefits sharing, the government promulgated

Thailand’s first Petroleum Act and Petroleum Income Tax Act.

In 1981, “Sirikit Oilfield”, Thailand’s first commercial oilfield, was discovered by Thai Shell, in

Lan Krabue sub-district, Kamphaengphet Provice.

In 1985, Petroleum Authority of Thailand (currently PTT Plc.) established PTT Exploration

and Production Public Company Limited or PTTEP on 20th June 1985 . PTTEP’s goals are to

explore, develop, and produce Thailand’s petroleum reserves to maximize the benefits from

indigeneous energy resources in accordance with the Thai government’s resolution to

strengthen Thailand’s energy stability as well as to minimize petroleum imports.

Sirikit Oilfield

Thailand’s Prestigious Oilfield

Sirikit Oilfield was discovered in 1981 by the then concession owner, Thai Shell

Exploration and Production Co., Ltd. or Thai Shell. Exploration activities started in April 1981, and in December of

the same year oil was discovered in commercial volumes in exploration well “Lan Krabue A01” (LKU-A01) in Lan

Krabue subdistrict, Kamphaengphet province. Production from the oilfield started in December 1982. It was the

first time in Thailand’s history that oil was produced for commercial purpose. To date, Sirikit Oilfield remains the

country’s largest onshore oilfield.

On 12th January 1983, Her Majesty Queen Sirikit graciously presided over the opening ceremony of the oilfield,

upon which the name “Sirikit Oilfield” has been bestowed by Her Majesty

In October 1985, PTT Exploration and Production Public Co., Ltd. or PTTEP entered into a joint venture with Thai

Shell in this onshore concession block with 25% share holding while Thai Shell held the remaining75%. In January

2004, PTTEP acquired all of Thai Shell’s shares, and become the S1 concession owner as well as the operator of

Sirikit Oilfield, Thailand’s prestigious oilfield.

Today, the S1 onshore concession block covers an area of 1,138 square kilometers in Kamphaengphet,

Phitsanulok and Sukhothai province. The discovery of Sirikit Oilfield spurred additional exploration in the

concession area that led to discoveries of more but smaller oilfields. Up to the first quarter of 2006, approved

production areas in the S1 concession covers an area of 289 square kilometers, with Sirikit Oilfield being the

largest.

Products from Sirikit oilfield include “Phet” crude oil, which is named after Kamphaengphet province, natural gas

and liquefied petroleum gas (LPG or cooking gas).

Petroleum Exploration & Production

GEOLOGICAL SURVEY

Petroleum exploration normally begins with geological surveys which involve use of remote

sensing techniques, such as aerial photography and satellite imaging, ground surveys by

geologists and laboratory analyses of rock samples. Study of

outcrops, which are underground rock layers pushed up above surface level by

earthquakes, is a good source of information on the environments of sediment precipitation

in pre-historic time and therefore a good indication of existence of petroleum reservoirs in

the area. Any positive indication of petroleum existence from a geological survey will

normally lead to a decision to carry out a seismic survey in the area.

SEISMIC SURVEY A seismic survey is the most utilized method of Geophysical Surveys, which include magnetic

survey and gravity survey, in the exploration for petroleum. Sharp seismic, or sound, waves are

initiated at ground level and measurements of reflected sound waves from underground rocks

are made. Differences in underground rock density will yield different shapes and sizes of the

reflected waves. Thousands of these reflected waves are then stacked side by side to form a

“picture” of the underground rock layers. These pictures provide a good evidence whether the

structure of the underground rocks is conducive to forming a “trap” for

petroleum.

With the advancement of computer technology and power, 3-dimensional

seismic surveys have become more commonly used for petroleum

exploration than the old-style 2-dimensional surveys due to their superior

quality and accuracy in identifying possible petroleum reservoir rock structures.

EXPLORATION DRILLING

Well path

Target

2km

1.5km

Well path

Target

2km

1.5km

Once a possible petroleum reservoir structure has been identified by a seismic survey,

the only way to prove whether the underground rock layers contain any petroleum is to

drill an exploration well. Selection of exploration drilling target based on 3-dimensional

seismic data today provides a much improved chance of success in petroleum

exploration. Exploration wells are usually drilled straight down from a surface location

on the ground directly into the target rock structure below, in order to minimize costs

and complication of the drilling. Underground information gathering using electronic

equipments called “logging tools” lowered into the drilled well will provide firmed evidences of petroleum

existence and location. Once the existence of petroleum is confirmed, tests of petroleum flow capacity from the

reservoir, as well as drilling more wells in the vicinity to appraise the extent of the reservoir, will be undertaken to

determine the commerciality of the new petroleum discovery.

The Origin of Sirikit Oilfield

Paleontological evidences from geological surveys and exploration drilling in the S1

Concession area indicated that some 22 million years ago the area that is now known

as Phitsanulok Basin, which spans the present-day provinces of Kamphaeng Phet,

Phitsanulok and Sukhothai, used to be covered by a big fresh-water lake. This lake

was fed by water from rivers and streams from the north and the west. During millions

of years, the lake regressed and progressed in cycles.

The progression and regression cycles of the lake during the period 22 – 15 million years ago were responsible

for the formation of rock layers known as Lan Krabue formations today.

When the lake covers the land, fine silt and clay particles slowly precipitated to the bottom of the lake together

with the remains of algae that were abundant in the lake environment, forming a layer of fine sediments mixed with

organic remains. When the lake regressed, the numerous rivers and tributary streams traversed the land. The high

energy of the river flows and the cyclic flooding left layers of coarse-grained sand sediments covering the land.

These cycles of lake-then-river domination of land created hundreds of thin, alternating layers of fine particles and

coarse sediments throughout the time. Evidences indicated that there were two major periods, 22 million years

ago and 17 million years ago, when the lake covered the land for a long time, leaving two thick layers of fine

particles mixed with organic remains. The lake was believed to have regressed completely from the area some 15

million years ago.

Millions of years had passed and the layers of fine and coarse sediments were

buried deeper and deeper under the weight of thousands of meters of other

sediment layers. Under tremendous pressure, the fine particle layers turned into

very tight rocks called “shale”, and the course sediment layers turned into

“sandstones”. Very thin sandstone and shale layers alternated in sequences

forming the rock bodies of the Lan Krabue formations. Two thick layers of shale, formed 22 and 17 million years

ago, served as caps that delimited the bottom and top of Lan Krabue formations. These two thick shale layers

were named “Chum Saeng” shale.

The great pressure and temperature imposed on bottom Chum Saeng shale caused the organic (algae) remains in

the rock to transform into hydrocarbon substance and later to petroleum (i.e. crude oil). As Chum Saeng shale was

very tight with virtually no porous space in it to contain anything, the crude oil was eventually squeezed out of the

rock by the overburden pressure. The oil moved upwards into the more porous sandstone of Lan Krabue formations

and continued to move upwards. Because the Chum Saeng shale in the north (present-day Sukhothai area) had

been buried deeper through time compared to the south (Kampaeng Phet), the direction of crude oil “migration”

was then upwards to the south. The upper Chum Saeng shale served as a top cap to prevent further migration of oil

above Lan Krabue formation, allowing only a migration path along the sandstone formations below it.

Historic movements of the earth crust (e.g. earthquakes) caused the Lan

Krabue rock formations to break up in pieces and slide against each other,

creating the vast number of faults in the formations. These faults formed traps

that stopped further movement upwards of the oil, creating petroleum

reservoirs that are know as the Sirikit Oilfield today.

Key Characteristics of a Petroleum Resevoir

Three key characteristics of underground rock formations that can serve as a Petroleum Reservoir are

1. Porosity

2. Permeability

3. A “Trap” structure

POROSITY Rocks formed from solidification of sediments usually have tiny empty spaces between grains of rocks, called

Pores, analogous to tiny spaces in sponge. The sizes of these pores vary with different type of rock, and are

mainly determined by the sizes and the sorting of the sediments that formed the rock. Rocks with large sediment

grains will tend to have larger pore spaces and vice versa. These pore spaces in underground rocks are the

place where fluids (water, oil or gas) in the rock reside. The more pore space, the more fluids are contained

within.

Porosity is the measurement of the volume of pore space in the rock compared to the total volume of the rock, and

is expressed in percentage. Reservoir sandstones in the Sirikit Oilfield have a porosity range from 10% - 30%.

PERMEABILITY Permeability of a rock is a measurement of how easily fluids can flow through the rock. To a large extent, this

represents how well the pore spaces in the rock are interconnected, as well as the size and shape of the pore

spaces. The better the interconnection of pore spaces, the easier fluids can flow through the rock.

The unit of Permeability is “Darcy” which is essentially a measurement of time it takes for a standard volume of a

standard fluid to pass through a piece of rock sample of a standard size when a fixed pressure is applied to it.

Sirikit’s reservoir rocks have permeability in a range of 1 – 2,000 milliDarcy.

.

Production Processes Crude Oil Process

The first stage of the production processes begins when the mixture of oil, gas

and water arrives at the production station via the bulk line systems. The

mixture is routed into separators to separate the gas from the liquids.

Liquids from the separators are injected with a chemical called demulsifier to help accelerate the separation of

water from oil. The liquid mixture is then routed into heated storage tanks where water will be allowed time to

precipitate to the bottom of the tanks. The separated water will be drained and sent to the disposal water

treatment system before being re-injected into the deep underground rock formations via dedicated water

disposal wells. The remaining crude oil in the tanks is checked for quality before being loaded into road tankers to

be transported to the customer.

Gas Process

The separated gas from the separators is compressed to increase its pressure before being used for 3 main

purposes. The first part of the compressed gas is compressed to even a higher pressure and sent back to oil

producing wells to help lift the oil out of the well in a process called “Gas Lift”. A small second portion of gas is

used for generating electricity to be used in the production plants. The majority of the gas is fed into the gas

separation plant to separate LPG out and the remaining gas from the gas plant is then sent to an EGAT power

plant nearby to produce electricity for the power grid. Excessive gas that cannot be handled by the system will be

flared at the flare stack.

LPG Process

At the LPG separation plant, the gas will be compresses further and dried before being refrigerated at the

Cryogenic plant to a temperature of minus 72 degree Celsius. At this temperature all heavier molecules of gas

from Propane upwards will condense into liquid form, leaving only Methane and Ethane in gaseous form. Methane

and Ethane will be extracted at the Absorber Column and sent to EGAT Power Plant for electricity generation. Any

remaining Ethan in the liquefied gas will be stripped off at the De-ethaniser Column. Propane and Butane (LPG)

will be separated out of the liquefied gas at the LPG Splitter Column then sent to the storage spheres awaiting

further transportation. The remaining liquid (Pentane upwards) is routed to be blended with the crude oil.

Refining Process

Different types of crude oil will be blended before refining in order to

obtain the required product characteristics and proportions. The main

process of crude oil refining is called Fractional Distillation where the

crude oil is heated to a very high temperature until vaporized and then the

crude vapour is allowed to cool down in stages in the Distilling Column.

The lightest liquid product from the top of the Distilling column (low

temperature) is Gasoline and the heaviest product from the bottom of the column is Asphalt. In modern refineries,

the heavier product such as Fuel Oil can be further processed through Cracking in order to gain more light

products like gasoline.

Oil and Gas Transportation Operations in Sirikit Oilfield

Oil, gas and water from producing wells are transported to the central production station in Lan Krabue via

pipeline system.

LPG is transported by road tankers to the customer’s depots in the North while the remaining gas is sent to EGAT

Power Plant in Lan Krabue via gas pipeline.

Crude oil is transported by road tankers from Lan Krabue production station to Bung Phra railway station in

Phitsanulok before being transported by rail wagons from Bung Phra to Bang Chak Refinery in Bangkok and Thai

Oil Refinery in Sri Racha.

Separated produced water will be routed via pipeline to be disposed of in dedicated deep disposal wells.

Key Properties of Phet Crude Oil

Density: 39.5 Degree API or equivalent to 0.827 gram/cc

(Light Crude)

Sulphur Content: Less than 0.05% by weight (Sweet Crude)

Wax Content: 13% by weight (Waxy Crude)

Pour-Point Temperature: 36 Degree Celcius (High Pour-point Crude)

Petroleum Development

Once a discovery of a petroleum reservoir is confirmed by exploration and further appraisal wells, the

development planning will begin. This involves determining the optimum number and locations of development

wells to be drilled, the required surface locations, the design of wells and production equipment, the oil and gas

transportation methods, the impacts of such development to the environment and local communities and the

economic returns of such project, etc.

Development planning is always an on-going process, with the new information gathered from more drilled wells

helping refine the plan for the future.

Technology and Petroleum Development

Today, technological advance, especially in the area of computing capability, is playing a major role in optimizing

the petroleum development processes. Fast 3-D visualization technology has made it possible to construct and

study subsurface models in the level of detail and accuracy not achievable before – giving the petroleum

engineers and geologists a much stronger tool to plan the development of petroleum reservoirs.

Development of the Sirikit and Nearby Oilfields

The Sirikit Oilfield was discovered via the exploration well Lan Krabu A-01

in December 1981. Major exploration efforts in the following 4 years had

discovered a few more smaller oilfields nearby. The development of Sirikit

Oilfield began in 1982 with major drilling campaigns during 1982 – 1985

and during 1988 – 1991. By the end of April,2006, 347 wells were drilled in

the Sirikit and nearby oilfields.

The information gathered from all these development wells has been used to update the volumes of oil reserves

(i.e. volumes of oil that can still be produced further) every year.

At 1st quarter of year 2006, over 160 million barrels of oil and about 6.0 billion standard cubic feet of gas from the

Sirikit and nearby oilfields were produced. The volumes of oil and gas reserves at the same date were 60 million

barrels of oil and 2.5 billion standard cubic feet of gas respectively.

Social Responsibility Safety, Security, Health and Environment (SSHE) Management System PTTEP regards good Safety, Security, Health and Environment (SSHE) Management as an integral part of a good

business practice. The Company employs a strict SSHE Management System to ensure compliance with laws and

regulations and to achieve continuous performance improvement.

PTTEP is committed to maintain a healthy workforce and to provide safe working conditions.

Safety consciousness is in the hearts and minds of our workforce in doing every activity.

Environmental protection is always an integral part of all our work plans.

PTTEP is certified with ISO 14001 for Environment Management System in the following assets and major projects,

S1 Asset (Sirikit Oilfield), PTTEP1 in Supanburi Province, PTTEP Office Building in Bangkok, Bongkot Field in the

Gulf of Thailand and Songkhla Logistics Base in Songkhla Province.

Social and Community Development: Towards Better Quality of Life

PTTEP takes pride to play a part in the sustainable development of the society and the rural community by

promoting and supporting projects and activities that enhance the quality of life, education and occupation. This

is a key to self-sufficiency and sustainable growth of the community.

PTTEP is committed to supporting the development of the society and to promote better quality of life in the

community in our operating areas. PTTEP is actively involved in many community development projects in three

main areas. The first area is conservation of nature and environment; for example, preservation of the Songkhla

Lake project in the south of Thailand and the 4Rs Shop Project in S1 concession area. The second area is

improvement of quality of life for the less privileged youth through educational development programs such as

scholarship presentation, provision of computers, books and sport equipment to schools in rural areas. And the

final area is elevation of the levels of knowledge and capabilities of Thai people to further improve their quality of

life; for example, Thai Rice College Project in Burirum Province, Mini Farm for School Lunch Project in S1

concession area and local employment in our operating areas.