What is the energy sector’s contribution to the GDP of Thailand?
CHUCHOTTAWORN: At the moment, the rough estimate is about 20% of the whole Thai GDP, which is a bit on the high side compared to other ASEAN countries.
What are your projections for the future?
CHUCHOTTAWORN: Our projections are getting higher. We have to admit that our efficiency in this country is not very good in comparison to others. Our energy elasticity figure is greater than 1. Energy elasticity ratio is the increase in energy consumption, divided by the increase in GDP, which is supposed to be below 1 for European countries. In our case, it is a bit higher than 1. So that means the more we grow economically, the demand will increase exponentially.
What is the reason for the high energy elasticity figure?
CHUCHOTTAWORN: Most of the energy items in this country are floated, but there are a few energy items that are still being subsidized by the government. This is the main reason why the energy efficiency for the country as a whole is not as efficient as we want it to be. Given the fact that we are joining the ASEAN Economic Community (AEC) in the next few years, we need to liberalize the sectors that are still under the government protection of subsidies. We can subsidize about 60m people, but we do not have deep enough pockets to subsidize 600m people in the entire ASEAN community. So this is an issue that needs resolution in the coming few years.
What steps are being taken to ensure that the future demand for natural gas in Thailand will be met?
CHUCHOTTAWORN: Thailand needs more exploration on-shore. The government has not released the new bidding rounds yet for the next few years, and we know that the reserves are depleting at a really rapid rate. Thailand needs new rounds for bidding. We also must try to secure more reserves in other countries and in other areas. That is the main duty of PTT.
What countries do you see as being partners in this endeavor?
CHUCHOTTAWORN: Actually, we are doing business in all parts of the world. We have some activities in North America, Australia, ASEAN, the Middle East, and North Africa. We are entering East Africa, where we believe there will be a very substantial reserve of gas waiting for exploration. You may notice that we are working with the UK, who owns a portion of the gas in Mozambique and in Kenya. This is what we are doing at the moment.
What kinds of E&P activity can we expect in the coming years in Thailand?
CHUCHOTTAWORN: We are trying to maximize the production of the existing reserves that we have. We have one reserve in the Northeastern area, and we also have production in the Gulf of Thailand that we are trying to maximize. We are looking for opportunities for new blocks. We are also pursuing exploration in the Andaman Sea. We are not expecting to find any substantial reserves in this country so we are just trying to maintain our level of production.
What kinds of downstream investments is PTT looking at? What kinds of numbers do these investments represent?
CHUCHOTTAWORN: We plan to invest about 400bn Baht ($13bn) in the next five years. Half of the investment will go to upstream, while the other half will be shared among our four or five downstream businesses: oil refining, oil trading services, petrochemicals, coal and plantation, and renewable energy. So these downstream businesses will share half of the investment. This is how we plan to put importance on the upstream and maintain reasonable service to the country. I believe the oil business in this country is more or less saturated, so we are trying to keep our status and maintain our brand.
We plan to invest about 400bn Baht ($13bn) in the next five years. Half of the investment will go to upstream, while the other half will be shared among our four or five downstream businesses: oil refining, oil trading services, petrochemicals, coal and plantation, and renewable energy.
How do you balance the need to provide affordable energy with the need to produce the highest possible returns for your shareholders?
CHUCHOTTAWORN: I think we are working against some KPIs (Key Performance Indicators), which are measurable metrics. When we talk about energy security, we are trying to provide half of the energy for the Thai people. We are not trying to provide 100%. We want a R/P (Reserve per Production) ratio of 10. The R/P ratio of 10 means we want to have sufficient reserves for ten years. This is our target for security. Our target for the prosperity is that we must achieve first quartile performance. We have three measures for prosperity. Firstly, we want to be listed in the top 100 of Fortune Global 500. We missed it last year but we were listed this year. Secondly, we want to be listed in the DJSI (Dow Jones Sustainability Indexes). We were listed two months ago. Third, our return must be in the first quartile. We have not yet achieved this but we are working hard to achieve it. We are trying to balance between security and prosperity by meeting the targets for both.
Industry insiders contend that since the oil price spike of 2008, ASEAN governments have looked at oil production more from a security of supply perspective than an economic perspective. Do you agree with this assessment?
CHUCHOTTAWORN: Yes. We used to treat the energy sector lightly before and take it for granted, but we learned the lesson the hard way, that energy is the prime driver for the economic growth. The increase and fall of the energy price in 2008 had a very big impact on our government’s balance sheet. We are starting to look at energy from different angles because it is the basis for the security of the nation. Quite a few countries are trying to adopt petroleum reserves and trying to develop a mechanism to stabilize the energy price. We are also looking to diversify. The world is moving away from liquid energy to gaseous energy or natural gas. That is how most of the countries are trying to cope with the spike in the energy that hurt everybody, and is still haunting Europe at the moment. The United States seemed able to get away with it, but there is no solution for Europe at the moment.
What is your future outlook for Thailand’s energy sector? Which indicators are showing the most positive trends and which remain challenges?
CHUCHOTTAWORN: The energy sector in Thailand is not actually a very sexy business. Of course it is a big business. Our PTT Group of companies, along with our four listed companies, account for one quarter of Thai market capitalization. So the energy sector is a big business sector. Part of the price is dictated by the world market and part of the price is dictated by the government, so the business by itself is not a money making business. However, the fact that PTT is doing business end to end, from the resource to the consumer, including oil, gas, trading, and coal, we are able to capture the benefit of each step, and balance ourselves in the times of economic turmoil. Our strength lies in the fact that we are able to do all of the business, even though it is a very slim margin business.
What is the most important goal you wish to achieve in the coming years?
CHUCHOTTAWORN: We are now more or less delivering security and reasonable prosperity to our nation. The last thing we need to do is inform our people that this is a sustainable organization. During my term, we are trying to create the condition that PTT, as an organization, will be able to sustain high growth, high performance, and be a success in the next 30 years. If you walk through the entrance to PTT you will see our guiding principle, that is PTT will be a TAGNOC company. That stands for Technologically Advanced and Green National Oil Company. We are still a national oil company, but we want to move away from relying purely on the natural resource to technologies. PTT will start generating our own technologies. The benefit we will earn is not from the margin of buying and selling, but from the technology portion that we add into the products. Another thing is that we want to be a green company. PTT has come up with a comprehensive green roadmap that we will set as a guideline for our operation in the next many years.