PTT moving to shed subpar downstream assets

TIMETABLE, STEPS FOR PTT PRIVATIZATION [60,757 bytes]

Petroleum Authority of Thailand (PTT) is moving to shed or downsize its petroleum refining and petrochemical assets that offer little or no return on investment. The action will be taken in connection with a major capital restructuring that forms a key part of the overall privatization program of the Thai state-owned energy enterprise. The restructuring and rationalization plan recently unveiled by PTT Deputy Gov. Chitrapongse Kwangsukstith will essentially call for PTT to refocus its capital towards businesses with higher returns over the next few years. So it envisions PTT shedding low-yield petroleum refining and petrochemical assets while boosting capital expenditures for higher-return operations, such as the natural gas sector and petroleum exploration and development through its holding in PTT Exploration & Production plc (Pttep), PTT's upstream affiliate. Under the program-which PTT plans to complete near the turn of the century-the contribution of refining to PTT's total asset allocation would be trimmed from 38% last year to merely 4% in 2000. The contribution of the petrochemical sector in PTT's overall assets will be trimmed from 10% at present to 2% in 2000. And its domestic and foreign oil marketing operations' share will fall from 20% last year to 8%. Meanwhile, the asset share of the gas operations, which have always contributed the biggest share of PTT's earnings, will increase from 23% last year to 66% in 2000. Its equity in upstream E&D ventures through Pttep will rise from 9% last year to 20% in 2000.

Reducing exposure

To meet program objectives, Chitrapongse said PTT is moving to reduce its ownership in several subsidiaries involving refining and petrochemical businesses. PTT is already prepared to dispose of its entire 24% share in Bangchak Petroleum plc's 120,000 b/d refinery, while downsizing its stakes in three other local refining companies: a 49% stake in Thai Oil Co. (TOC) and a 36% share each in Rayong Refinery Co. (RRC) and Star Refining Co. PTT has been talking with a major international oil company to buy its 49% share in TOC, which operates Thailand's largest oil refinery, with capacity of 220,000 b/d. Royal Dutch/Shell and Caltex Petroleum Corp., parents of RRC and Star, respectively, have also taken note of PTT's desire to dilute its stakes in RRC's 145,000 b/d refinery and Star's 140,000 b/d refinery, both in Rayong. PTT's interests in petrochemical concerns such as National Petrochemical plc (37.94%), Aromatics (Thailand) plc (44%), Thai Olefins Co. (49%) and National Fertiliser plc (22.5%) will also undergo "ownership restructuring." The steps and timetable for the privatization of PTT-which have been adjusted in light of Asia's economic crisis-are shown in the table on this page.