PTT Public Company Ltd. History
Lard Yao, Chatuchak
Telephone: (66) 537-2000
Fax: (66) 537-3499
Sales: THB 409.335 trillion ($9.87 billion)(2002)
Stock Exchanges: Thailand
Ticker Symbol: PTT
NAIC: 213111 Drilling Oil and Gas Wells; 213112 Support Activities for Oil and Gas Field Exploration; 324110 Petroleum Refineries; 324191 Petroleum Lubricating Oil and Grease Manufacturing
Vision and Mission: to be the preeminent Thai energy corporation, operating a fully integrated oil and gas business, which encompasses gas-based petrochemicals and total energy services, confident of being a regional leader and a high performance organization with accountability, integrity, and optimum stakeholder returns within a value-driven corporate culture.
- Thai government begins its first oil exploration efforts in Fang basin.
- Defense Energy Department commissions a small refinery to process Fang basin oil reserves; Summit Industrial Corporation begins importing crude oil for Thai government.
- Construction begins on Bangchak oil refinery near Bangkok.
- Summit acquires a long-term lease and operating contract for Bangchak refinery; Thai Oil Refinery is created.
- Legislation creates a new Petroleum Authority of Thailand (PTT), which takes over from the Oil Fuel Organization and the Natural Gas Organization of Thailand.
- The PTT acquires Thai Oil Refinery and takes over Bangchak refinery.
- The company opens its first gas separation plant and enters the petrochemicals industry.
- The PTT establishes its own petroleum and gas exploration arm, PTT Exploration and Production Company (PTTEP).
- With increase in natural gas production, the PTT begins exporting excess fuel oil capacity.
- The PTT signs an agreement for natural gas production in Yadana field in Myanmar.
- PTTEP is spun off as a public company in preparation for the PTT's privatization.
- PTT Public Company is created and listed on the Thai Stock Exchange; Thai government sells 30 percent of the company.
- The company launches international exploration operations, through PTTEP, in Algeria and Oman.
PTT Public Company Ltd., formerly the state-owned Petroleum Authority of Thailand before its privatization and public offering at the end of 2001, is that country's largest corporation, with revenues of more than THB409 trillion ($9.8 billion). The PTT is also one of the ASEAN (Association of Southeast Asian Nations) region's top 50 corporations. The PTT bills itself as a fully integrated oil and gas business combining upstream, transmission, and downstream operations in the domestic oil and natural gas market as well as the international oil trade markets. The PTT's Gas Business Group, which retains its former monopoly on Thailand's natural gas market, handles a gas supply capacity of 2,475 million standard cubic feet per day--more than 78 percent of which goes to fuel the country's state-controlled power sector. The company is also involved in exploration and production, as well as transmission through a pipeline network of 2,700 kilometers. PTT Oil is the group's oil marketing and oil trading arm, through which the company operates more than 1,400 service stations throughout Thailand. The company also operates a network of 1,015 LPG (liquified petroleum gas) retail outlets supported by 113 LPG bottling plants. The company's International Trading processes more than 12,000 million liters of crude oil, 2,400 million liters of condensates, and 4,300 million liters of finished oil products each year. The PTT is also involved in petroleum exploration activities in Thailand and abroad through its majority control of publicly listed PTT Exploration and Production Company (PTTEP). The PTT's final business group is its Petrochemicals and Refining wing, which consolidates the company's shareholdings in such companies as Thai Oil, Rayong, Star Oil, and Bangchak. Listed on the Thai Stock Exchange, the PTT remains controlled at 70 percent by the Thai government, which is unlikely to reduce its holding below 51 percent. The PTT is led by Chairman Manu Leopairote and President Viset Choopiban.
Developing a Domestic Oil Industry in the 1950s
As petroleum became increasingly important for building a modern state after World War II, the Thai government sought to lessen its country's reliance on imported oil, gasoline, and other finished petroleum products by creating the Defense Energy Department, which was attached to the Ministry of Defense and placed in charge of developing the country's own energy reserves. The country began drilling for oil in 1921 in the Fang basin in the north of Thailand, but by the early 1950s had found only small petroleum reserves. Because of the lack of good roads, the government, through the Ministry of Defense, commissioned a small, 1,000 barrel-per-day refinery to be built near the Fang basin wells in 1956.
For the most part, however, Thailand, like most of the developing world, remained dependent into the 1960s on a small group of dominant U.S. oil companies for their petroleum fuel supplies. The oil companies' dominance of the world market extended from exploration and drilling to the refining of the finished product. The discovery of vast oil reserves in the Middle East and the appearance of a number of new players in the market forced the major oil companies to begin shipping crude oil as more countries began building and operating their own refineries.
The Thai government had established the Oil Fuel Organization (OFO) in order to allocate the limited finished petroleum imports in that country. At the time, Thailand's import market was dominated by Esso, Caltex, and Shell, which also controlled fuel storage in the region, a position that helped keep fuel prices high. The OFO sought alternative fuel sources and began accepting bids from foreign companies.
One of these companies was Summit Industrial Corporation, which had been set up in the United States after World War II by a group of native Chinese who had been students together at MIT. Summit originally operated as a trading company to the Far East that dealt in goods ranging from medicine to locomotive engines to consumer products. In the mid-1950s, Summit became interested in entering the oil trade as well. Backed by American Independent Oil Corporation, which had been granted the right to drill in the newly opened oil fields in Kuwait, Summit won the bid to supply the OFO. The company's initial shipment led to a three-year supply contract with the OFO. Summit then purchased land and established its own storage facilities.
In 1955, Thailand's Defense Energy Department had decided to build a larger multi-purpose refinery at Bangchak, near Bangkok. Although still quite small, at 5,000 barrels per day, the Bangchak facility was slated to produce not only diesel, kerosene, and gasoline but also aviation fuel. The initial contract was awarded to Japan's Niigata, which transferred the contract to a partnership between Fujicar Manufacturing Co., also of Japan, and Commentry Oissel, of France. The turnkey project finally got underway in 1960 but due to a series of delays was not completed until 1964--and failed its initial testing.
To complete the testing of the facility, the Defense Energy Department turned to Summit, which also began competing for the contract to operate the Bangchak site. In 1965, Summit signed an operating agreement with the government that granted the company permission to expand production to 20,000 barrels per day while operating on a tax-free basis. In exchange, Summit agreed to pay off the $20 million construction cost of the facility and turn it over to the government in 1980.
The facility's expansion was completed by 1968. By then, Summit had opened some 200 gasoline stations in Thailand; the company also became the supplier for the OFO's own network of service stations. In addition, Summit had built an asphalt production plant, supplying the government's road-building effort. By the mid-1960s, however, as new road construction slowed, Summit sought to unload the money-losing plant.
Thailand was by now experiencing a rapidly growing demand for fuel products in the country, and its two primary refineries--the Bangchak plant and a second, larger site built by Shell and operated through the Thai Oil Refinery Corporation--could not keep up with demand. The government agreed to the expansion of the refineries, with the Bangchak plant's capacity raised to 65,000 barrels per day. Summit's lease was then extended to 1990. At the same time, Summit sold its asphalt plant to Esso, which rebuilt the site and entered the Thai market with its own refinery.
Natural Gas to the Rescue in the 1970s
Thailand's hopes for finding large-scale domestic oil reserves were dashed by the mid-1970s. While a number of small reserves had been discovered, the country was still to remain heavily dependent on fuel imports. The Arab Oil Embargo and resulting worldwide crisis was especially crushing for Thailand.
Yet the country's exploration efforts had not been entirely in vain, as a number of important natural gas fields had been discovered. In response, the Thai government set up the Natural Gas Organization of Thailand (NGOT), which served as a counterpart to the OFO. With the deepening of the economic crisis, however, the Thai government moved to group all of its fuel operations under a single entity. The government passed legislation in December 1978, creating the Petroleum Authority of Thailand (PTT).
The PTT took over for the NGOT and the OFO and additionally became the nominal owner of the Bangchak refinery, which remained leased to Summit. The PTT began building its first natural gas pipeline, a 415-kilometer underwater pipeline stretching from the Erawan gas field in the Gulf of Thailand to an onshore site at Rayong. The Erawan field, which was exploited by Unocal, began producing gas in 1981.
Also in 1981, the PTT took possession of the Thai Oil Refinery's operations as part of the initial agreement. Another development in that year was the Thai government's direct negotiation of a crude oil supply contract with Saudi Arabia. This in turn led to the sudden termination of Summit's lease of the Bangchak refinery, which had been the site of frequent labor disputes, a rarity in Thailand. The PTT was now in direct control of more than two-thirds of the country's refinery capacity. Over time, the PTT stepped up its refinery capacity, and by 1991 the Bangchak facility alone had neared 250,000 barrels per day.
The PTT opened a second, 169-kilometer natural gas pipeline connecting the Erawan field directly to the state-owned electricity power plant in Bangkok in 1982. The company then constructed a network of six linked LPG terminals nationwide, a project which reached completion in 1985. By then, the PTT had opened its first gas separation plant in order to harvest by-products used in turn to launch a national petrochemicals industry. In 1985, the PTT formed the joint-venture National Petrochemicals Co. Ltd. That same year, the PTT entered the exploration business as well, forming PTT Exploration and Production Co. Ltd. (PTTEP).
In just a few short years, the PTT had grown from a starting capital of THB149 million into a fully integrated gas and petroleum company with revenues of more than THB26 billion. By 1988, the organization had expanded to include four major natural gas fields, including Erawan, and new sites at Baanpot, Satun, and Platong. Unocal remained the primary operator of these fields, which had already produced more than one trillion cubic feet of natural gas by 1988. At that time, The Thai government had already decided to emphasize the use of natural gas for the country's fuel needs, leading the PTT to start exporting its excess fuel oil capacity in 1987.
A fifth Gulf of Thailand field was opened in 1989. The PTT had already contracted for its second gas separation plant, in Rayong Province, and this project was completed in 1991. The PTT, which had inherited the OFO's service station network, meanwhile continued expanding its operations in that area as well, becoming the dominant market player. By 1992, the PTT stations had debuted Thailand's first high-octane unleaded gasoline.
Privatized for the New Century
Thailand's booming economy stepped up demand for petroleum in the 1990s. In response, the PTT set up two new refinery companies in 1992: Rayong Refinery, in partnership with Shell Thailand, and Star Petroleum Refinery, in partnership with Caltex. The PTT's stake in each of the new ventures was around one-third of shares.
Demand for natural gas grew strongly in the 1990s as well, outstripping Thailand's own relatively small supply. Yet the PTT's expertise in the area made it an attractive partner for neighboring countries, such as Burma (Myanmar), where the PTT joined in the Yadana consortium to exploit the Gulf of Martaban in 1995. That deal involved the construction of the Yadana Natural Gas Pipeline on the Myanmar-Thai border, which began operations in 1998. The PTT opened a new domestic gas field, Tantawan, in the Gulf of Thailand in 1995. In 1997, the company negotiated a second gas supply contract in Myanmar, at the Yetagun field, which began delivery at the beginning of the next decade. In 1996, the PTT added a third gas separation unit, Khanom.
In the meantime, the PTT began preparing for its upcoming privatization, which was originally slated for 1999. Under the original privatization plan, the company was to spin off a number of its business units, a process that started with the public offering of PTTEP in 1996. The privatization stalled, however, amid growing concerns by labor unions over job security. At the same time, the PTT had been hit hard by the collapse of the Thai economy and the drastic devaluation of the baht, sinking the company into losses. At the beginning of 1999, the Thai government suggested its interest in spinning off PTT Gas as a separate company, a move that would have eliminated some 80 percent of the PTT's total revenues. By the end of the year, however, the PTT's privatization plan had been revised, calling for the proposed PTT Public Company Plc to retain all of its existing operations.
The PTT at last went public in November 2001, when the Thai government sold a 30 percent stake. The listing raised some $726 million for the government, which faced deadlines on its $17 billion debt to the International Monetary Fund. The government intended to reduce its stake, while pledging to maintain a minimum of 51 percent in the PTT. At the same time, the government reassured investors of its intention to maintain the PTT's monopoly on the Thai natural gas market.
Already the top corporation in Thailand, and one of the 50 largest in the ASEAN market region, the PTT targeted an increased presence in the international energy market. This effort was already underway during the 1990s, initiated by the purchase of a 35 percent stake in Petroasia, which in 1993 started opening service stations in China. The PTT had also long been in pursuit of expansion into neighboring Malaysia's large natural gas reserves, including the construction of a pipeline linking the two countries, and at the beginning of 2003 an inaugural project appeared imminent. In the meantime, the company's exploration wing had already begun its own international expansion, launching operations in Algeria and Oman.
At the same time, the PTT prepared for the liberalizaton of the country's natural gas market by splitting its natural gas business into two new, wholly owned companies--PTT Transmission Pipeline Co and PTT Distribution Pipeline Co. Backed by one of the region's strongest economies and most stable governments, the PTT had positioned itself to become a prime industry player in Southeast Asia.
Principal Subsidiaries: Clark Pipeline and Depot Company, Inc (Philippines; 50%); PTT Distribution Pipeline Co.; PTT Exploration and Production Plc; PTT International Trading Pte., Ltd.; PTT Mart Co., Ltd. (49%); PTT Natural Gas Distribution Co., Ltd.; PTT Philippines Inc.; PTT Transmission Pipeline Co; Subic Bay Energy Co., Ltd (50%); Subic Bay Fuels Company, Inc. (50%); Thai Lube Blending Co., Ltd (49%); Thai Olefins Company Limited 59.71; Trans Thai-Malaysia (Thailand) Limited (50%); Vietnam LPG Co., Ltd. (Vietnam; 45%).
Principal Competitors: Chevron Texaco; Mitsui and Co. Thailand Ltd.; Siam Makro PCL; Unique Gas and Petrochemicals PCL.
- "Algeria--Spurred by Soaring Profits; Thailand's PTT Exploration & Production Is Looking to Expand Overseas, with New Acreage in the Mideast and North Africa," Petroleum Intelligence Weekly, April 21, 2003, p. 6.
- Greenfield, Sarah, "The Asian Energy Industry Begins to Branch out," Petroleum Economist, September 1995, p. 29.
- Kazmin, Amy, "Thailand Hopes for Boost from Oil Sell-off," Financial Times, November 14, 2001, p. 16.
- "Offload, Downsize and Survive," Business in Thailand, May 1999.
- "Petroleum Authority of Thailand: A Finger in Every Pie," Petroleum Economist, March 1991, p. 17.
- Praiwan, Ythana, "PTT Eyes Postwar Stake Sale," Bangkok Post, April 14, 2003.
- "PTT's Natural Gas Unit to Be Split into Two," Bangkok Post, March 17, 2003.
- "Thailand's Gas Growth Favors State PTT," Petroleum Intelligence Weekly, September 23, 2002, p.4.
Source: International Directory of Company Histories, Vol. 56. St. James Press, 2004.