Thailand’s PTT mulls $2-B oil refinery in RP

BANGKOK, Thailand – In line with efforts to further expand its operations in Southeast Asia, Thai oil giant PTT Public Co. Ltd. is exploring the possibility of putting up a $2-billion refinery in the Philippines.

PTT executive vice president for commercial and international marketing Artasith Pothiapinyanvisuth told a press briefing here over the weekend that they are still studying whether they would construct a new oil refinery or just expand its existing facility.

"We are thinking of increasing our exposure in the Philippines. We are looking at the possibility of putting up a refinery or expand the existing one to make it bigger," the official said.

At present, there are only two oil refineries in the Philippines. One is controlled by semi-government Petron Corp. while the other is owned by the Royal Dutch Shell Group’s Pilipinas Shell Petroleum Corp.

The PTT official, however, was quick to point out that these plans are still on the drawing board and need to be studied carefully. "On the downstream oil investment, we need to be very cautious. These are all in the planning stages. We want to do it slowly but surely," he said.

But he said should they decide to construct a new petroleum refinery, they would be requiring a minimum investment of between $1.5 billion to $2 billion.

"If we will construct, the size should be a minimum of 150,000 to 200,000 barrels to make it economically feasible. The investment could reach $1.5 billion to $2 billion," he pointed out.

According to the PTT official, the Philippines is one of the promising areas for the company to expand its operations in Asia Pacific region, particularly in the downstream industry.

Initially, he said they see potential growth in the Philippine economy that could warrant an expansion in petroleum demand.

"Though we consider the proposed plan as "very preliminary", we believe that there is a potential demand growth in the Philippines in the future. We want to take advantage of this scenario," he said.

He admitted that while PTT’s oil business has little profit margin, it opens a lot of other business opportunities in the country.

"We don’t assess our oil business in the Philippines as purely to get profit but to be able to enter into the other potential markets like petrochemical and natural gas," he said.

The increase in output either by putting up a new facility or expanding the existing capacity, he said, would also support their five-year oil business program in the Philippines.

PTT Philippines Inc., the local arm of the PTT Group, has committed to pour in P4 billion to P5 billion over the next five years to consistently expand its network by at least 10 to 20 service stations a year.

PTT is the largest company in Thailand, accounting for 20 percent of the entire country’s economy and 26 percent of aggregate stock market capitalization.

With a $40 billion networth, it posted a net income of $2.5 billion or 95 billion baht in end-2006 or an 11 percent growth over the same period in 2005. Its revenues stood at $31.95 billion.

PTT operates a fully integrated gas business with a key role in distribution and international trading of petroleum and petrochemical products, together with investments in domestic petroleum and refining businesses.

In the next five years, PTT Group expects to invest $14.7 billion for various expansion programs including construction of a petroleum refinery, and a gas pipeline project in the Philippines.