Thai Oil acts to redress slump

Surong Bulakul, who became the company's chief executive officer this month, said these measures should boost Thai Oil's profit this year.

Thai Oil's refining margin in the third quarter dropped to zero, compared to US$8 (Bt267) per barrel in the second quarter.

In the quarter, Dubai crude oil hovered near the level of refined oil in Singapore due to an oversupply of refined oil. Refined oil prices moved in a narrow range, as oversupply blocked out most speculators.

The company has devised plans to lock the margin at $3 per barrel in the current quarter.

"The annualised profit should be higher, following the impressive performance in the first half of the year," Surong said.

He said the oversupply of domestic refined oil was a major problem for Thai Oil and other refineries in the PTT Group. At present, the overall oversupply stands at about 200,000 barrels per day, 60-70 per cent of which belongs to PTT's refineries - Thai Oil, PTT Aromatic and Refining (PTTAR) and IRPC.

Executives of the refineries are brainstorming for solutions, one of which could be the exchange of refined products.

For example, PTTAR, whose products do not yet meet the Euro IV emission standard, could receive refined oil from Thai Oil, whose refinery has been upgraded to meet the standard. PTTAR could then delay its refinery upgrade.

Moreover, the executives are discussing ways to prevent cost-cutting among refineries, as well as ways to export more refined oil. For example, IRPC will export oil to Indochina, which could be carried out consistently next year.

According to Surong, cutting the refining capacity would be the last option for the group.

Thai Oil posted Bt8.5 billion in first-half net profit on revenue of Bt128.8 billion. The profit was attributed to the company's flexible management of raw materials among its refinery, paraxylene plant and lubricant plant.

In order to address oversupplies that affect oil prices, some supplies go to the paraxylene and lubricant plants.

Last year, the company suffered considerably from oil price fluctuations, showing a net profit of only Bt223.6 million on Bt401.4 billion in revenue.