PTT group raises stakes with $11-billion budget

Chief financial officer Pichai Chunhavajira said the exploration and operations budget, undertaken by its subsidiary PTT Exploration and Production (PTTEP), was earlier put at $9 billion.

Others in the group - chemical and refining in particular - will not make huge investments as they were told to add value to existing properties such as de-bottlenecking.

"We don't know what will happen in five years but we are financially ready for any potential investment. This will allow us to expand when opportunity knocks," he said in an interview.

Overseas expansion is the key to expand PTT's global positioning.

Given the economic growth forecasts of 5-6 per cent a year and falling energy consumption, the group could not rely solely on the local market or the size of its business may contract.

President Prasert Bunsumpun said from now to 2020, PTT would invest $126 billion. About 61 per cent of this was earmarked for overseas projects.

About $76 billion would go to upstream projects such as exploration and production, and $20 billion to natural gas and related businesses.

Supplying 30 per cent of oil and 60 per cent of gas, PTT is committed to boost its capacity, Pichai said.

On the supply side, PTTEP is looking for large oil fields along the West-South corridor, under a plan to boost production capacity 4 and a half times within 2012, from 179,000 barrels a day in 2007.

Of the total, 30 per cent is oil and

70 per cent is natural gas.

This year alone, capacity will be boosted by 20 per cent to 220,000 barrels.

To provide more gas, PTTEP has also launched floating platforms to drill the last remaining natural gas fields in existing blocks in the Gulf.

PTT would also invest Bt173 billion during the next five years on natural gas, primarily on pipelines to accommodate higher domestic consumption.

A natural gas terminal is also needed to support imports. At present, 30 per cent of gas consumption comes from the fields in Burma.

For petrochemicals, as the sixth gas separation plant is about to complete, PTT is also considering building a seventh plant to supply feedstock to petrochemical plants. But Pichai did not think now was a good time to erect a new refinery.

"If the refining margin is below $12-$15 per barrel, this investment is not worthwhile. New refineries emerge only in the countries of high oil demand such as China and India," he said, adding that PTT Group's profits from the refining industry is high now because of low investment cost.

Pichai said the weakening baht had not impacted PTT's finances by much as product prices are based on global prices that are quoted in US dollars.

However, the trend of rising interest rates amid inflation has posted some difficulties in raising long-term funds.

Without a plan to issue bonds this year, PTT is relying on its cash flow. While total debts stood at $11 billion, its earnings before interest and other expense items is $8 billion.

Dividends will also be kept low to build up financial resources. PTT's policy is to pay out at least 25 per cent of net income.

 "Our duty is to be more diligent and being better invested. We only focus on sound projects," Pichai noted.