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Published on April 5, 2008

Thai Oil is set to invest US$367 million (Bt11.6 billion) over the next five years, mostly on three new projects, including a $150-million ethanol plant with daily capacity of 500,000 litres.

The refiner has also budgeted $61 million for the upgrade of subsidiary Thai Lube Base's plant, expected to start this year.

Another $100 million will be used on new equipment to reduce operating costs for the production of Euro IV-standard oil.

All three projects require the board of directors' approval, said managing director Viroj Mavichak.

The rest will go to capacity expansion of subsidiary Thai Paraxylene, at $10 million; fleet expansion for Thai Oil Marine, at $33 million; and the single-buoy-mooring gas turbine expansion, at $13 million.

Thai Oil expects to run a refining capacity of 275,000 barrels per day this year. It could raise the capacity to 300,000bpd with higher-efficiency technology following the de-bottlenecking last year.

Viroj said from the additional output, 25,000bpd could be fuel oil.

He noted that Thai Oil would look to initiate a new investment project to turn bottom residue into value-added products, which are more expensive than fuel oil.

For the new investment, Thai Oil will probably join with other refiners, including IRPC and PTT Aromatics and Refining - both under the PTT umbrella.

Earlier, PTT said the residue-upgrade project would need $600 million. The investment cost is expected to be finalised at the

end of the year.

Viroj said the gross refining margin (GRM) was expected to be about $6 per barrel this year, close to the average for last year.

"We expect to achieve better business performance thanks to high GRM and more refining capacity," he added.

Four out of six brokerage houses made a "buy" recommendation on the stock, because of a recovery in GRM from $5 a barrel in February to $8 to $9 today and the company's capacity-expansion plan.

The four are Siam City Securities, Kim Eng Securities, ACL Securities and Bank Thai Securities.

United gave a "buy for speculation" rating, while UOB Kay Hian recommended "buy for investment".

Chalida Ekvitthayavechnukul

The Nation