SET-listed Banpu Plc, Thailand's biggest coal producer, will spend US$513 million (17.3 billion baht) from this year to 2020 on increased production of existing upstream shale gas in the US and development of coal resources in Indonesia, says chief executive Somrudee Chaimongkol.
For the shale gas operation, the company will set aside $293 million for capital expenditure to increase gas production in the Northeast Pennsylvania Area (Nepa) by 70% to 78 million British thermal units by 2020 from the current 46 million, Ms Somrudee said.
Over the past two years, Banpu has bought shares in the Nepa project, to the point that the company now holds a 29.4% stake, or about a $207-million holding in the project that runs a low-cost unconventional operation in Nepa's Marcellus Shale. The Marcellus area is the largest source of natural gas in the US.
Ms Somrudee said the Nepa project earns almost $40 million a year for Banpu. In Indonesia, the company has started drilling a thermal mine to seek coal resources deeper in the ground. The move is aimed at increasing Banpu's coal reserves in Indonesia to 15 years' worth from the current 11-year supply. The cost of digging deeper in the ground for additional coal production is about $9 a tonne, Ms Somrudee said.
Banpu's Indonesian coal mines have combined reserves of 375 million tonnes and an additional amount under the ground of roughly 100 million tonnes. Banpu invests in Indonesia's coal market through a subsidiary, PT Indo Tambangraya Megah Tbk. The company, listed on the Indonesia Stock Exchange, manages six coal mines in Kalimantan. The mines produce about 30 million tonnes of thermal coal a year.
Ms Somrudee said Banpu also plans mergers and acquisitions, with one deal to be finalised this year.
She said the move to increase reserve gas and coal production is part of a company strategy to adjust to a changing world. For the midstream energy business, Banpu is cutting the logistics costs of coal supply to enhance its competitiveness. In the power-generating business, Banpu is revising its long-term plan and is likely to expand its renewable capacity.
The company spun off its power business by setting up a subsidiary, Banpu Power Plc, which listed on the Stock Exchange of Thailand last October. Banpu forecasts total revenue this year to grow by 20% from $2.26 billion in 2016, owing to a surge in global coal prices.
According to the company's forecast, demand for thermal coal will grow steadily over the next two years, with selling prices averaging $63 a tonne this year, up 20% from last year's $51.50. Total sales volume for coal this year is estimated at 45 million tonnes, on a par with last year.
BANPU shares closed yesterday on the SET at 15.80 baht, down 10 satang, in trade worth 357 million baht.