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Published on July 31, 2007

Rayong Refinery president Chainoi Puankosoom said the variety of fuels posed a problem for refineries to be able to produce all of the different types.

He said this was particularly so in the case of gasohol 91, which requires imports of certain chemicals to meet the required octane and quality levels. Refineries will need to consult closely with the authorities about this problem.

"The most likely solution is that the government further promotes gasohol-95 consumption, so that octane-95 petrol will disappear from the market on a voluntary basis. Once demand for octane-95 petrol shrinks, refineries will be able to produce gasohol 91," he said.

Chainoi said refineries would able to meet the government's requirement that all diesel sold from next April contains 2 per cent B100 biodiesel. However, he urged authorities to ensure that the B100 biodiesel met quality standards.

Following its planned merger with Aromatics (Thailand), Rayong Refinery plans to increase its refining capacity from 280,000 barrels per day to 300,000bpd, Chainoi said.

He said this would require about an extra US$5,000 (Bt169,000) for each barrel of additional capacity, or a total of $100 million.

"Capacity expansion incurs lower cost than does building a new refinery, which demands investment of $20,000 a barrel," he said.

Both Rayong Refinery and Aromatics Thailand are majority-owned by PTT.

During a session with stock analysts last week, PTT executives said the merger of the two companies would allow exchange of raw materials and cut operating costs $360 million per annum. The merged entity, to be called PTT Aromatics, will be the 11th-largest listing on the Stock Exchange of Thailand, with combined market capitalisation of about Bt140 billion.

The merger process is being considered by the executive boards of both Rayong Refinery, Aromatics (Thailand) and PTT before being put to shareholders for approval.

PTT president Prasert Bunsumpun last week said PTT was also negotiating with Chevron to list Star Petroleum Refinery (SPRC) on the stock exchange. Chevron owns 64 per cent of SPRC and PTT the rest.

"After SPRC is listed, PTT will reduce its stake to 25 per cent. Selling the shares in the market means there is a clear reference price and no need for price negotiation. Meanwhile, there is an opportunity to quote a higher price than that for the initial public offering," Prasert said.

He said PTT would later divest its entire stake in SPRC, in order to reduce criticism that PTT is dominating the refining market. After the divestiture, it will become clearer that there are three main players in the Thai refining industry: PTT, Esso (Thailand) and Chevron.