InfoQuest (April 9, 2020) -- PTT President and Chief Executive Chansin Treenuchagron said PTT has ordered its subsidiaries to prepare response plans for the COVID-19 outbreak. As the outbreak has battered the global economy, and slashed global oil consumption by 25 million to 30 million barrels a day, PTT has required its subsidiaries to submit their plans within a month, earlier than the previous mid-year deadline.
The first step is to cut back on unnecessary spending, but there were no pay cuts or layoffs, and the long-term investment budget went as planned, such as that for the Clean Fuel Project of Thai Oil Public Company Limited (TOP), the Ultra Clean Fuel Project of the IRPC Public Company Limited (IRPC), which is designed to produce gasoline meeting Euro 5 emission standard, and the Map Ta Phut Retrofit Project of the PTT Global Chemical Public Company Limited (PTTGC).
PTT has also adjusted the proportion of oil it refines, largely because of the global shutdown of commercial airlines, leaving only a handful of flights on national security and humanitarian grounds, which has resulted in a reduction in the use of jet fuel. Therefore, PTT switched to increasing the proportion of diesel production, as fuel oil is still needed to transport consumer goods despite lockdown in many regions. This has also left diesel sales less affected, while gasoline use has declined slightly. The production of PTT refinery currently consists of 35-40 percent diesel, 15-20 percent gasoline and 12-15 percent jet fuel.
Mr. Chansin said the current worldwide plunge in oil consumption was mainly caused by the COVID-19 outbreak and the oil price war, which has weighed on oil prices to fall as low as 20- 30 U.S. dollars a barrel, and many oil producers cannot bear such prices, as the cost is higher than the selling price. The OPEC, the OPEC-plus alliance including Russia and the United States have decided to resume negotiation. The deal to cut oil production was going to be discussed at the OPEC-plus meeting on April 9.
PTT's businesses in the first quarter of 2020 has been severely affected. However, the epidemic situation is expected to turn better by the end of the second quarter of this year due to improved medical level. It is believed that after this, the Asian economy will shore up the global economy. China has removed lockdown, resuming production and beginning stockpiling oil, causing the price of petrochemicals to rise slightly. Meanwhile, governments around the world, including Thailand, are pumping money into their economies. Crude oil prices are expected to rise to 35-45 U.S. dollars per barrel in the next three to six months, compared with the current Dubai Crude (Fateh) oil price of 24 U.S. dollars per barrel. All in all, PTT will an eye on the OPEC-plus meeting to see if a deal to reduce production to bolster crude prices can be reached.
Mr. Chansin said it was good that the Thai government had taken several steps to cushion the impact of the outbreak. Private and state-owned enterprises are also collaborating in many fields, such as joint production of medical devices. PTT's subsidiaries have also participated in the joint project, including developing medical equipment and donating alcohol-based gels. PTT recently partnered with the Ministry of Energy to procure more alcohol for general distribution to villages across the country. The project is a complement to the previous project, after PTT set a target of purchasing 160,000 liters of alcohol to assist Thailand's medical and public health sectors.
In addition, PTT International Trading USA Inc. (PTTT USA), which is wholly owned by PTT and has an initial registered capital of 5,000 U.S. dollars, is planned to be established in the United States to act as a representative office in the United States for business contacts. The United States is now the world's leading exporter of oil and liquefied natural gas (LNG), and Thailand's demand for imported LNG is growing, with the proportion of LNG imported as high as 80 percent. The establishment of the representative office will therefore facilitate timely business contacts, strengthen national energy security, and expand the trading network globally. It will also help generate revenue, increase the added value of products, and support transactions of PTT's branch companies.
As yet, PTT has established international trading companies in Singapore, the United Arab Emirates, and the United Kingdom, and representative offices in China (Shanghai) and Indonesia (Jakarta).
Source: InfoQuest, by Arda/ Wilawan / Sasithorn, translated by Xinhua Silk Road.
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