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PTTEP – Outlook and Future Plan

January 24, 2010 36 comments

PTTEP, a petroleum exploration and production arm of PTT – Thailand largest energy firm, has recently announced its boldest plan to expand its production capacity to 900,000 barrel of oil equivalent per day (BOED) by 2020 from its 2009 capacity level of 234,000 BOED. This year, 2010, it plans to increase its output to 250,000 BOED. Before delving into its future plan, let’s take a look at its past.

From 2003 to 2009

PTTEP has established itself as a proven domestic operator in Thailand in the past decade. Its production output increased more than two folds from 107,000 BOED in 2003 to an estimate of 234,000 BOED in 2009.

Its revenue from petroleum sales and pipeline operation was approximately 35,000 MB in 2003. In 2008 that figure rose to 137,000 MB thanks to an increase in petroleum production and a record petroleum price. Similarly, its net profit record is also remarkable, rising from 12,000 MB in 2003 to 41,000 MB in 2008. However, revenue and net profit in 2009 is anticipated to be significantly lower than 2008 due to the collapse in oil price in the first half of 2009 and rising operating cost.

Despite an increase in oil price, its net profit does not rise as much as anticipated. This is due to the fact that both Lifting Cost and 3-year average Finding and Development Cost are also surging in tandem with oil price. The upward trend in lifting and F&D cost is likely to be persistent as a result of rising service and equipment costs. The prolonged high oil price also lifts up the value of petroleum assets PTTEP wishes to acquire.

As for its proved reserve, PTTEP has consistently been able to replace its reserve even though it has churned out more production every year since 2003. Its proved reserve at 2008 year end stood at 944 MMBOE (million barrel of oil equivalent).

Table below presents past interesting statistics.

Year End Sales Volume
  BOED MMBOE
2003 107 39.1
2004 134 48.9
2005 154 56.0
2006 169 61.8
2007 180 65.6
2008 219 80.0
2009f 234 85.4

 

Year End Lifting Cost 3yr Avg F&D
  USD/BOE USD/BOE
2003 1.10 2.03
2004 1.25 2.97
2005 1.82 4.76
2006 2.13 10.11
2007 2.33 12.11
2008 2.46 15.67

 

Year End Proved Reserve
  MMBOE
2003 882
2004 899
2005 950
2006 923
2007 946
2008 944

 

The Next Decade (2010-2020)

At the onset of the new decade, PTTEP has set its sight to become a truly international E&P company with annual production of 900,000 BOED in 2020, an equivalent to 13.7% compounded average growth rate. Note that it forecasts that its output will be 250,000 BOED in 2010. It plans to achieve 640,000 BOED through organic growth (circa 10% CAGR) while the remaining 260,000 BOED will come from future acquisition and FLNG project in Australia.

In the next few years, a couple of ongoing development projects will come on stream. These include:

  • MTJDA (50%). First gas production is expected within Q1 of 2010 with sales volume of 270 MMSCFD by mid 2010, then ramped up to 335 MMSCFD by end of 2010.
  • Vietnam Block 16-1 (28.5%). First oil production will come on line in 2011 with production capacity of 40,000 BBLD.
  • Montara Field, Australia (100%). First oil production will be delayed to second half of 2011 due to a fire incident which took place last year.
  • Algeria (35%). First oil production is expected in 2012 with initial production rate of 20,000 BBLD.
  • Block M9, Myanmar (100%). First gas production is planned for second half of 2013 at 300 MMSCFD. This project is still pending approval from Myanmar government.

As mentioned earlier, in addition to organic growth, PTTEP will drive its expansion plan through acquisitions and hopeful FLNG projects. PTTEP is eyeing to South America and Africa for acquisition deals with asset size of 100 million barrels in reserve. PTTEP expects to finalize 1-2 deals this year.

For FLNG floating, PTTEP joins force with Norwegian Golar LNG, one of the world’s largest independent owners and operators of LNG carriers, to study the possibility of bringing stranded gas in Australia water to market via LNG. It aims to achieve its first production by 2014 with initial capacity of 1.0-1.5 million tonne per annum (mtpa). Given several huge LNG development projects in Australia scheduled to be on line between 2014 and 2016, this proves to be a difficult task for PTTEP and Golar LNG to market its product to end consumer like Japan and China.

Summary

In retrospect, PTTEP’s achievement in the last decade is quite impressive. Now it has set a new ambitious goal for the next. If it can deliver, the long term shareholders would reap profit by several folds.

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