Ptt asked to cut its margins

The Energy Ministry is pressuring the PTT Group's oil refiners - PTT Aromatics and Refining, Thai Oil, IRPC and Bangchak Petroleum - to sacrifice some profit after the global crude oil price shot pass US$130 (Bt4,200 )a barrel.

Energy Minister Poonpirom Liptapanlop told reporters yesterday after meeting with executives from the four firms that they agreed to spend the weekend determining how much their refining margins would be cut and for how long and would present their proposal at another meeting on Monday.

Meanwhile the ministry plans to hold similar talks with other refiners.

"Elsewhere, at times of crisis like this, all units involved in the oil trade would come under consideration, to find out who can do what for more fairness," Poonpirom said.

The four companies account for 60 per cent of the country's total refining capacity. The refining margin has been escalating along with the surge in crude oil prices. In particular, the diesel refining margin has climbed from $35 per barrel in April and $36 in May to $44 as of Thursday, against the average of $20 from 2006-07.

However, a source from the refining industry said the government was being unreasonable if it made only the four PTT refiners squeeze their margins. It's not practical as all four are listed and the decision to join the campaign requires approvals from the board of directors and shareholders.

The other refiners operating here are Esso (Thailand), Star Petroleum Refining and Rayong Purifier.

"It's difficult for executives to allocate hundreds of millions or a billion baht from their companies, which are governed by the boards of directors and shareholders. If other refiners are not coming under the same rules, it would be an unfair practice," he said.

In some countries, refiners face special taxes if the refining margin exceeds $25 per barrel. The margin is in practice cut for oil-price subsidies, but all refiners are subject to the same rules, which ensures fairness and transparency.

Poonpirom also asked refiners to produce more liquefied petroleum gas (LPG) to ease shortages. She promised the ministry would consider measures to help them shoulder the spread between foreign and domestic prices. Last month, while LPG output was 327.1 million kilograms, consumption was 339.4 million.

The source said there was no incentive to refine more LPG, given the subsidised price of $330 per tonne against the global price of over $800. As LPG is the cheapest product, refiners are encouraged to use LPG as fuel and sell higher-value products.

The National Energy Policy Council yesterday agreed after enforcing two-tier LPG pricing in July, PTT would be the first to benefit, as it imports expensive LPG for sale at the cheap price. Last month, PTT shouldered Bt323 million in differential for the import of 22,000 tonnes of LPG. It must import 13,500 tonnes this month and 20,000 tonnes next month.