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In brief

With increasing awareness of carbon capture and storage (CCS) technology as a key enabler for decarbonization, many developments in this area, such as exploration for carbon storage sites and storage of carbon dioxide in carbon storage sites, have been reported. However, presently, in Thailand, there is no legislation specifically governing such CCS-related activities. In this context, the Department of Mineral Fuels (DMF) has been developing a legal framework to accommodate CCS-related activities as can be seen from the recent public hearing of the draft amendment to the Petroleum Act, B.E. 2514 (1971) (“Draft Petroleum Act“), which aims to introduce the concept of “carbon business” as another regulated activity in a similar manner to conventional petroleum concessions.

In this newsletter, we discuss some notable concepts in relation to CCS that are introduced in the Draft Petroleum Act.


Contents

  1. Definition of “carbon business” and “carbon”
  2. Who can conduct carbon business?
  3. Liability of carbon business operators
  4. Others

Definition of “carbon business” and “carbon”

The Draft Petroleum Act defines “carbon business” as “an exploration for a carbon storage site or a storage of carbon in a carbon storage site,” and defines “carbon” as “carbon dioxide in the state of gas or supercritical fluid generated as a by-product or captured from other sources and is transported to store in a carbon storage site”.

While neither current Thai laws nor the Draft Petroleum Act clearly prescribe the status of “carbon” as defined under the Draft Petroleum Act, i.e., whether it should be treated as “waste,” “resource,” or other categories of substances, there has been a study that demonstrates that the different treatment of carbon can lead to a significant impact to the CCS legal framework. Therefore, the developments in this area need to be closely monitored.

Who can conduct carbon business?

In addition to the concessionaires, production-sharing contractors, and service contractors, the Draft Petroleum Act also allows anyone who wishes to conduct carbon business to obtain a carbon business license from the Minister of Energy. The issuance of carbon business licenses in both cases will require approval from the Petroleum Commission.

The issuance of a carbon business license for those who are not the concessionaires, production-sharing contractors, or service contractors mentioned above will be granted through a bidding process for carbon business to be announced by the Minister of Energy.

A carbon business license will impose, among other things, terms and conditions on the following:

  • Revenue and expenses under the carbon business.
  • Allowed quantity and maximum pressure in the carbon storage site.
  • Monitoring plan and conditions to update the monitoring plan.
  • Reporting obligations and remedial measures in the event of carbon leakage, movement or other irregularities.
  • Technical conditions for carbon storage site closure and post-closure plan.
  • Post-closure obligations.

In terms of the project site, under the Draft Petroleum Act, the Minister of Energy may consider prescribing the areas which are appropriate for the CCS project (whether such areas are within the current petroleum concession area or not).

Liability of carbon business operators

The permitted carbon business operators are required to monitor and inspect the carbon storage site and the site facilities to detect any potential issues, including the impact to the surrounding environment. The closure of a carbon storage site can be conducted upon completion of all terms and conditions under the carbon business license, or upon obtaining approval from the Director-General of the DMF, or in the event of revocation of the carbon business license.

After the closure of a carbon storage site, the carbon business operator is still required to conduct monitoring, inspection and surveillance of the carbon storage site until:

  1. The carbon storage in such carbon storage site is fully complete.
  2. The security for liability transfer, covering the period of three years after the closure of the carbon storage site, has been placed to the Director-General of the DMF.
  3. The decommissioning of the facilities for carbon storage purposes is complete.

Upon the completion of the above terms and conditions, the liability of the carbon business operator will be transferred to the DMF. Note that the security for this purpose can be made in cash, Thai government bond, bank guarantees or other types of securities in line with the Ministerial Regulation to be further prescribed.

Others

Some other certain provisions, including those related to general provisions, petroleum exploration and production, and benefits, rights and obligations of concessionaires under the current Petroleum Act will apply to carbon businesses, as long as they do not contradict the Chapter related to carbon business.

We note that while the Draft Petroleum Act briefly addresses legal licensing of carbon businesses, the liabilities of the carbon storage operator, and the authorities of the relevant government agencies, there are some key issues which it is silent on. Some of these issues include the classification of carbon dioxide and the liabilities arising in case of carbon leakage. Furthermore, the carbon businesses may be subject to the Environmental Impact Assessment (EIA) or Environmental Health Impact Assessment (EHIA), to be further prescribed by the notification of the Ministry of Natural Resources and the Environment.

The Draft Petroleum Act will provide a legal framework for conducting carbon business. We will monitor the development of the draft and keep you updated. For details related to CCS, please contact us.

Author

Peerapan is a Corporate and M&A partner and heads the Sustainability Group and Healthcare & Life Sciences Industry Group in Bangkok. She also co-heads the Investigations, Compliance & Ethics Practice Group in Bangkok and is currently a member of the Firm's Global Executive Committee. Peerapan has nearly 40 years of experience advising on transactional and regulatory matters in highly regulated industries. Peerapan is exceptionally fluent in regulatory matters relating to healthcare, consumer protection and product liability.
Peerapan also has extensive experience advising on compliance issues, risks facing companies across various industry sectors, and regularly assists clients in practically managing and mitigating those risks. She has been consistently recognized as 'Leading Individual’ in Corporate M&A by the Asia Pacific Legal 500 for eight consecutive years (2013-2020) and has been inducted into the Asia Pacific Legal 500 Hall of Fame in Corporate M&A in 2020-2023. More recently she has been shortlisted for Corporate and M&A Lawyer of the Year by the Legal 500 Southeast Asia Awards. Peerapan was also awarded ‘Client Choice winner’ for Healthcare & Life Sciences 2019 by Lexology.
In October 2022, Peerapan was elected to join the Global Executive Committee and serve as chair of the Asia Pacific region. In this role, Peerapan works alongside the Firm's leadership to drive forward the Firm’s business strategy and prioritized actions.

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Bulin joined Baker McKenzie in 2000 and became a partner in 2012. He is active in the Corporate and M&A Practice Group and is a lead partner in the Healthcare & Life Sciences Industry Group, the Industrial Manufacturing and Transportation Industry Group, and the Sustainability Group.

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Nam-Ake Lekfuangfu is a partner of the Employment & Compensation Practice Group in Bangkok. He is experienced not only in employment laws but also, corporate and commercial law, mergers and acquisitions, environment and trade regulations. Over the past year, Nam-Ake was lead lawyer for a wide range of employment matters involving high profile clients. With his extensive legal knowledge, combined with insights on industrial knowledge and practices and Supreme Court rulings, Nam-Ake assists clients on employment and immigration works, ranging from day-to-day advice to complex matters, such as advising on employment trends impacting employers globally, including global mobility, the use of modern workforce and gender pay gap.

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Varutt Kittichungchit is a Legal Professional in Baker McKenzie, Bangkok office.

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Narawit Rujanant is a Legal Professional in Baker McKenzie Bangkok office.

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Dhiranantha Rithmanee is an Environmental Specialist in Baker McKenzie Bangkok office.

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Muanjit Chamsilpa is an Environmental Specialist in Baker & McKenzie Limited, Bangkok office.

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