TOKYO -- PTT is a national oil company that refuses to confine itself to that identity. CEO and President Pailin Chuchottaworn says the Thai state enterprise seeks "to grow and operate" like the big international oil players, and having made investments on five continents, PTT may be well on its way. Yet the company has some adjusting to do -- to politics at home, to regional economic integration and to a global movement against fossil fuels.
Pailin spoke with the Nikkei Asian Review about how PTT intends to survive and thrive.
Q: PTT is a state company but has operations around the world. What is your global investment strategy?
A: PTT supplies one-third of Thailand's energy demand. The most important assignment we have, from the government and our shareholders, is to secure energy for our nation. The energy supply in the Gulf of Thailand will be depleted soon, so we need to invest [abroad]. In fact, Thailand is already largely relying on energy imports: Crude oil is 80% imported and [the ratio for] natural gas is 20%.
We are now investing on five continents. We have invested in Africa, North America -- in Canada -- and the Middle East. We are everywhere. But we put the utmost importance on the ASEAN countries. While we are investing in 30 countries around the world, we are in all 10 countries in ASEAN.
Take the case of neighboring Myanmar. We have invested more than $3 billion and have been constantly buying gas from the country. But we project that Myanmar will cut gas supplies to Thailand in the near future as domestic demand increases, so we are expanding investment in LNG receiving terminals in Myanmar to secure supply.
Q: Tell us about PTT's plan to build a large refinery in Vietnam.
A: We once rejected the Vietnamese government's offer as refineries are not always profitable. But they insisted we could build a refinery that would be profitable. So we decided on a megaproject with a capacity of 400,000 barrels per day, combining it with a petrochemical plant.
The $22 billion project will be in central Vietnam near Da Nang, which is the east end of ASEAN's planned East-West Economic Corridor.
Saudi Aramco of Saudi Arabia will be our partner, with each of us controlling 40% stakes in the project. The remaining 20% will be held by a Vietnamese state-owned oil company.
The plan has been approved by the Vietnamese industry ministry and we are now waiting for the prime minister's approval.
The refinery will be completed in four to five years. It will supply not only Vietnam but also other countries in the area that lack refineries, such as Indonesia and the Philippines. China's southern province of Yunnan, which serves a population of 90 million, does not have a refinery either.
Q: In 2012, PTT bought Britain's Cove Energy, thereby acquiring gas assets in Mozambique. Royal Dutch Shell had also pursued Cove. How does PTT compete with larger global rivals?
A: We are a national oil company, or NOC, but are trying to grow and operate like an international oil company, or IOC.
IOCs, like Shell and BP, have been active in the market for many years. They are big and have large networks. We NOCs are newcomers and are rather small. Usually, a bigger company has the advantage, but our strong point is that we are a company with a home base. We have commitments to support the country as a whole, to [sustain] the society and preserve the environment. This gives us competitive power in our home country. IOCs do not have natural home bases. They come and go.
We also buy and invest in other countries. That is the part we play like the IOCs. We have been buying resources from Myanmar over the last 25 years. We are selling crude oil in Indonesia and finished oil products to Laos, Cambodia and Myanmar. This keeps PTT dynamic and agile. Our balance sheet is bigger than [Thailand's] national balance sheet. We need the critical mass to compete evenly with the IOCs.
Q: How will the ASEAN Economic Community change the competitive landscape for you?
A: It will change the landscape a lot. Look at the airlines. [They show] what the ASEAN market will look like in the next few years. Successful ones like AirAsia of Malaysia or Lion Air of Indonesia aim to serve the whole ASEAN while national companies tend to serve only one country.
PTT has investments in all ASEAN countries in a range of businesses. Upstream, we do exploration in many countries. Downstream, we have gas service stations in the Philippines, Laos, Myanmar, Cambodia and Thailand. We have our own convenience stores and coffee shops, too. The kicking off of the AEC [in late 2015] will speed up expansion. The free flow of labor and capital will encourage change.
Q: Thailand's military-backed government, which took power after the May 22 coup, aims to reform the country's oil pricing system. How would that affect PTT?
A: The change in politics is affecting PTT in positive ways. When we had elected governments, most of them practiced so-called populist policy. This means subsidies, fixing prices and all those things that go against the principles of the market economy. We ended up having a distorted energy sector and PTT also had to incur a lot of losses. The new government seems to be trying to move away from subsidies and price-fixing. It has already hiked prices of [liquefied petroleum gas] and natural gas several times. We are going back to the market economy.
Q: Higher fuel prices could prompt a backlash, though. Is there any chance the military government will revert to populism?
A: That, I fear the most. But I think that in terms of energy, it is unavoidable to change. This is because the AEC is starting next year. Currently, nearly all ASEAN countries have subsidies apart from Singapore. If the AEC spurs the free flow of labor and capital, cross-border oil prices will need to be close to market prices. Each country implementing its own subsidy would lead to huge confusion. The Malaysian and Indonesian governments are now hiking prices.
Q: What are your plans for alternative energy?
A: A recent [United Nations] meeting called for phasing out fossil fuels by the end of the century. That means we will lose our business in 70 to 80 years. Knowing that, we have started many programs. We are promoting renewable energy, like bioethanol and biodiesel. We have research that microalgae will be a new source of fuel, [ready for commercialization] in 15 to 20 years.
Not long from now, half of automobiles will be running on electricity, not gas. PTT has been engaging in breakthrough research in batteries, too. We want to promote sales of electric cars. If we don't do it, someone else will. We had better be the one to lead the change.
Interviewed by Nikkei staff writer Yukako Ono