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Published on March 7, 2008

This responsibility is crucial during times of continued increases in oil prices and tight petroleum supply from the Gulf of Thailand. The present circumstances have forced PTT Group to seek foreign partners, who will be part of the answer for additional petroleum supply for domestic consumption as well as a new source of income for the group.

Prasert Bunsumpun, chief executive officer and president of PTT, predicted some time ago that in the five-year period 2007-2011, PTT's business would double with revenue reaching between 1 trillion baht and 2 trillion baht. Revenue of that magnitude, approximately US$50 billion, would place it on par with the national oil company of Brazil. Of the total, about 20 per cent will come from domestic operations and between 70 and 80 per cent from overseas business.

Dr Chitrapongse Kwangsukstith, PTT chief operating officer for the upstream petroleum and gas business group and senior executive vice president of the gas business unit, believes that equity participation in overseas petroleum enterprises would increase the firm's bargaining power and pave the way for a cut in domestic energy prices.

It would also be in line

with PTT's goal to become

a multinational petroleum

enterprise with the natural-gas business at the heart of the

operation.

This policy inspired PTT

to host Gastech 2008, an

event to demonstrate advances

in world-class technology

from 50 countries. Gastech

2008 will also be an opportunity for people in international natural-gas circles to learn about Thailand's readiness to develop in the natural-gas industry. It is also sure to raise confidence among people in the industry, facilitating PTT's quest for partners in overseas and domestic petroleum exploration and production.

For instance, in the natural gas for vehicles (NGV) business - in which PTT aims to be the regional leader - foreign companies will be invited to invest in NGV production centres in Thailand for knowledge transfer and development.

Chitrapongse pointed out that Thailand has made strong advances in natural-gas development over the past 20 years. Thailand was once known as the country with the longest offshore natural-gas pipeline. Now a fourth pipeline is under construction and it will increase Thailand's petroleum self-dependence to 30 per cent.

This does not include the small pipelines extending to 20 industrial estates nationwide for use by industry in gas-separation plants, petrochemical plants, power plants and related activities.

However, despite its impressive track record, PTT Group remains attractive to foreign companies only for joint investments in medium-scale projects. In large-scale projects, PTT Group has been overlooked.

This would change if PTT found international partners and the firm is already earmarked to be technically involved in a large project valued at between $2 billion and $3 billion.

"We have churned out 50,000 to 100,000 barrels a day in an operation in the Middle East. This is a common figure in the domestic area and we're comfortable with it. However, we want to embark on projects that we have never been involved with before, such as the production of 3 million tonnes of liquefied natural gas (LNG).

We have never been nominated as the core operator of a large-scale project such as this. Nor have we been involved in exploration and production in a very deep-sea area," Chitrapongse said.

The executive added that most foreign companies know PTT through global awards which reflect its strong financial performance and good governance. PTT's aim is to make itself known more in terms of competence in the operational side of the business.

PTT's natural-gas network will therefore be exhibited at the PTT display during Gastech 2008, which will take place at the Bangkok International Trade and Exhibition Centre, Bangna, during March 10-13. The booth will also portray developments in the petrochemical industry, from the introduction to the production of NGV. Though only recently introduced, the evolution has been impressive, similar to the way small-scale LNG is being used as natural gas.

"PTT will show the design of the planned LNG depot. This will  demonstrate to the world our readiness for this business. Until now, LNG suppliers have been reluctant to sell us the gas without seeing the depot," Chitrapongse said.

Meanwhile, PTT Exploration and Production (PTTEP) will evaluate and compare the problems experienced and the solutions applied during petroleum exploration and production in joint-development areas in various countries.

Apart from the exhibitions, the highlight of Gastech 2008 will be the presentation of academic research by natural-gas experts. Their work involves issues familiar to users such as the trend of natural-gas prices and the correlation of oil and natural-gas prices which tends to narrow at times of rising petroleum demand. Shortages of petroleum supply are anticipated on the back of excessive global economic growth. Research into LNG prices in various parts of the world will also be presented to indicate different pricing criteria. Top of these is an exhibition of technology used by multinational oil companies in their quest to bring down production costs.

There will also be a booth dedicated to His Majesty the King's personal projects on alternative energy.

Above all, the event will be a business-matching venue for global energy players.

Chitrapongse added that PTT is in the middle of strengthening itself to support rising involvement in overseas exploration and production as well as mid-stream businesses such as natural-gas pipelines and downstream businesses like refineries and petrochemical plants. More activities are being planned for neighbouring countries.

"For instance, we are formulating an investment model for the Thai-Cambodia joint-development area. This event, to be attended by our neighbours, should provide a great opportunity to sit down and finalise details, raise awareness and spur joint investment in an area which has one third of the petroleum reserves in the Gulf of Thailand."

PTT is also interested in investing in a natural-gas pipeline in Indonesia, so the new supply will support expansion of its domestic NGV business. It is also casting an eye on investments in refining and petrochemical plants in Vietnam now that the government there has relaxed rules for foreign investment.

"PTT's key message on natural gas is the desire to become a well-respected player, having been promoted from a national oil company to a small-scale global player," Chitrapongse said.

"In the past few years, PTTEP has established joint ventures in more than 10 countries in the Middle East, Australia and New Zealand. Overseas revenue is tiny but five years from now the portion will be sizeable. The magnitude of PTT's business is less than that of many companies like Petronas in Malaysia, which has a petroleum business network covering various countries as it invested in the LNG business when the demand for gas was low.

"However, PTT has accumulated the experience to respond to domestic needs and support overseas investment in various businesses, with a strong mission to satisfy the growing domestic demand. Thailand's demand for natural gas will remain high unless the country chooses other options like the construction of power plants overseas or more imports of coal.

"We need to be serious on this issue as no additional gas reserves have been found in the fields in the Gulf of Thailand outside the joint-development area. Reserves are confirmed only at some fields like the joint-development area, South Bongkot and extended parts of Pailin and Athit," he said.

In the next three to four years, natural-gas demand is expected to rise from between 3,500 million and 3,600 million cubic feet per day (mcfpd) to between 4,000 mcfpd and 5,000 mcfpd. If an additional supply of 2,000 mcfpd can be sourced, Thailand will achieve energy security with energy cheaper than diesel.

"Today PTT has secured deals for the supply of 5,000 mcfpd. This ensures sufficient supply in the next three to four years. However, we will need to rush on additional supply for the years after that.

"Insufficient gas supply or high costs would add to the burden for consumers. This requires efficient management, which includes participation in overseas LNG projects, and a new supply at a reasonable price will replace gas from the Gulf of Thailand.

"PTT wants to take part in LNG projects like the one in Qatar which sits on huge reserves. Giant oil companies have flocked there for concessions and PTT is working on this. PTT has also dispatched a team to Nigeria for a concession. We also express our interest to everyone we meet as business connections count when doing business in the Middle East," Chitrapongse said.

In the final chapter of Thailand's natural-gas development, PTT envisions sufficient natural gas supply, an extensive network of pipelines to reduce fuel consumption and the conversion of a sizeable number of vehicles - though not all - to natural gas.

PTT's overseas business potential will then be strengthened and it will be recognised as a multinational company with all the qualifications needed for involvement in the overseas gas industry. Besides bringing new business opportunities for higher bargaining power, this will allow Thai consumers to enjoy energy at a lower price.