PTT Plc, the country's largest oil and energy conglomerate, is embarking on a five-year plan to restructure its refinery business to improve its competitiveness by merging the group's refinery affiliates.
According to senior vice-president Anon Sirisaengtaksin, massive additional capacity coming onstream in the next two years could lead to a surplus of oil refinery capacity across the world.
In an attempt to mitigate the affects of a cyclical downturn, PTT would pursue an Oil Integration Management (OIM) programme to help share backup resources and facilities among the group, he said.
''The integration among [the refineries] will help create a supply chain inside our group, particularly in oil refining production for vehicles and for petrochemicals, which will be adjustable in coping with market demand instead of [functioning separately],'' he said.
''They will be allowed to share facilities to maximise benefits from resource usage.''
The three areas of co-operation under the OIM scheme include crude co-purchases in order to strengthen bargaining power; joint investments to upgrade product quality in bids to meet Euro-4 regulations effective over the next two years; and exporting excess products overseas.
The OIM scheme will involve only minimal expenses, mainly for improving information technology systems, but co-operation among the affiliates will be essential if all parties and PTT are to reap the full benefits.
PTT is considering setting up a new entity to manage all of its refinery affiliates, in hopes of achieving full synergy among them, Mr Anon said.
Merging the refineries under a single unit is aimed at maximising operational and management efficiency to compete with strong refiners in other countries.
The oil refineries under the PTT group have a total capacity of 340,000 barrels per day, accounting for 34% of the country's refining output of one million barrels per day.
The economies of scale of the PTT group are less than the 500,000 barrels per day of capacity due to start operating in India in 2009.
PTT has set aside a five-year investment budget of 80 billion baht for its oil refinery business, mainly to improve production efficiency. The sum includes 28 billion baht for Thai Oil; 22 billion for Star Petroleum; 10 billion for IRPC Plc, and 12 billion for Bangchak Petroleum Plc. IT also includes 17 billion baht for the new company that PTT will control once it completes the merger of Rayong Refinery and The Aromatics (Thailand) Plc.
PTT shares closed yesterday on the Stock Exchange of Thailand at 290 baht, down four baht, in trade worth 2.54 billion baht.