Friday, September 28, 2007

Thai Oil expects record profits in 2008

Global supply constraints persist

ARANEE JAIIMSIN

Thai Oil Plc, the country's largest oil refinery, expects record profits in 2008, with sales up by 35% from this year, thanks to its additional capacity squeezed from existing facilities, according to managing director Viroj Mavichak. ''We recorded the highest net profit of 16 billion baht in 2006, and now we look forward to seeing a better figure next year, but I can't give you the number,'' Mr Viroj said yesterday.

He said the optimistic projection depended on an average refining margin of US$6 per barrel in 2008.

''As you know, refinery capacity across the world expanded more slowly than demand, and we faced constraints on oil supply. [We expect] this to continue throughout next year,'' he said.

Thaioil targeted net profits in 2007 at 13 billion baht and average gross refining margins of $6 per barrel.

The company plans to upgrade its crude distillation unit, which is scheduled to be completed by year-end. The revamp would help it increase refinery capacity.

Thaioil plans to begin the final revamp of its crude distillation unit 3 (CDU-3) from Oct 6 to Dec 10, now 87% complete.

After the programme finishes, its distillation capacity would increase to 165,000 barrels per day from 115,000 barrels per day. This would enable Thaioil to lift its combined distillation capacity to 275,000 barrels per day from 220,000 barrels currently.

However, during the final upgrading programme, the company would need to shut down operations of CDU-3, which would reduce crude distillation output by 30% this year.

To achieve a 67% utilisation rate last month, the company ran at 110% capacity to produce 100 million litres of diesel, 40 million litres of jet fuel and 540,000 litres of residue. The facilities were undergoing maintenance last month.

Another TOP subsidiary, Thai Lube Base Plc, will also operate at a higher intake to supply additional feedstock to Thaioil during the bottleneck period.

Some production units would need to revamp operations including the continuous catalyst regeneration platform unit and the hydrocracking unit.

Other facilities up for renovation include mixed xylenes, which would boost production to 1,600 tonnes per day from 1,300 tonnes at present.

The company also hopes to earn higher income in 2008 by increasing capacity in Thai Paraxylene, its petrochemical unit to 489,000 tonnes a year in 2008 from 350,000 tonnes currently.

TPX also produced byproducts including 177,000 tonnes per year of benzene and 144,000 tonnes per year of toluene. The price of PX and byproducts would likely rise to between $800 and $1,000 a tonne.

Thaioil already has agreements to secure its sales of paraxylenes with three clients: Siam Mitsui PTA Co Ltd, Indorama Plc and British Petroleum.

According to Phatra Securities research, due to its competitive costs, Thaioil's earnings before interest, tax, depreciation and amortisation (EBITDA) margin would be about 13.2% versus the global average of 7.6%, with next year's earnings at around 11.2%.

The refiner's net profit 2008 is projected by the brokerage to reach 19.87 billion baht.

Shares of Thaioil (TOP) closed yesterday on the Stock Exchange of Thailand at 86.50 baht, down 1.50 baht, in trade worth 1.75 billion baht.

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