PTT Plc, the national oil and gas conglomerate, has decided to scrap its 10-billion-baht investment plan for the second unit of the depot facility for imported liquefied petroleum gas (LPG) in Chon Buri due to falling domestic demand.
Chief executive and president Pailin Chuchottaworn said demand for imported LPG in July dropped as much as 50% to 80,000 tonnes per month, from 160,000 tonnes a year ago. This was due largely to the government's policy to float the price of LPG last year to reflect real market prices.
The retail price of LPG was fixed at 18.13 baht per kilogramme for almost a decade before the government started floating the price in October 2014, causing the price to rise to 22.96 baht per kg and prompting motorists who used LPG for the transport segment to switch back to oil.
Besides, global oil prices plummeted more than 50% to nearly US$50 per barrel, encouraging motorists to resume using petrol and diesel instead of LPG.
However, PTT will maintain its plan to develop the first phase of the depot, which is now under construction and is expected to start commercial operation by the end of the year.
The cancellation of the second phase of the LPG depot is part of the plan to cut overall capital expenditure this year to 55.7 billion baht, from the previous 77.3 billion baht, Mr Pailin said.
He added that other plans will be scrapped or delayed, including an overseas coal mine project as well as petroleum exploration and production projects abroad.
Mr Pailin said PTT's total revenue dropped 21.8% to 1.05 trillion baht in the first half of this year, from 1.34 trillion baht in the same period last year.
Net profit also fell 20% to 46.3 billion baht in the first half, from 57.9 billion baht a year ago due to the 25% fall in net profit of its gas business, while exploration and production profit declined by 68%.
However, the 235% rise in net profit of its oil refinery business and 197% increase in profit from liquefied natural gas (LNG) facilities and trading business have helped offset losses.
Chief finance officer Wirat Uanarumit said the drop in global oil prices was the right time for PTT to merge and acquire more assets, particularly LNG-related facilities.
Mr Wirat said only PTTEP has cash on hand of about 100 billion baht.
PTT expects losses from the compressed natural gas (CNG) business in the second half of the year to be less than in the first half, when it had losses of 5.5 billion baht.
PTT saw losses from CNG each year of around 20 billion baht due to fixing the retail price at 8.5 baht for more than six years, before the price was raised to 13 baht last October.