While global oil prices are expected to rise in the coming years, PTT Plc says it will continue its cost-cutting programme to raise operation efficiency in order to earn more cash, with the expectation of gaining an additional 10 billion baht in cash next year.
Chief executive Tevin Vongvanich said yesterday that the national oil and gas conglomerate is entering a lean operations phase of cutting costs and enhancing efficiency.
The plan is aimed at raising earnings before interest, tax, depreciation and amortisation (ebitda) to 28 billion baht next year, up from 18 billion baht this year.
The programme is expected to last more than one year to help increase ebitda to 43 billion baht in 2018, Mr Tevin said.
"It's just a frugal spending scheme that will help cut losses and waste, since PTT has dedicated a huge budget for several programmes over the past several years," he said.
The lean operations scheme is derived from lessons the company has learned during the previous decade of global oil price fluctuations.
PTT has found that cost-cutting and increasing efficiency are the best methods to maintain competitiveness.
Apart from the expectation of rising ebitda in the coming years, the company also revised up its capital expenditure (capex) for the next five years (2017-21) to 338.85 billion baht, up 11 billion baht from the previous capex (for 2011-16) of 327 billion baht.
Some 55% of the total capex will be used to enhance the country's energy security, particularly natural gas infrastructure, including liquefied natural gas (LNG) terminals and gas pipelines.
The remaining 45% of the capex will be allocated to increase the value of existing businesses such as plastic polymers, biopetrochemicals, lube oil and new products in the oil business.
The revised capex approval was based on political changes in the US and the EU, the assumption of higher global oil prices led by the agreement of Opec and non-Opec countries to cut oil production to shore up prices, as well as the liberalisation of the cooking gas industry in Thailand from January next year.
The rising capex excludes the joint venture between PTT and PTT Exploration and Production Plc (PTTEP), in which the two companies are due to research and develop project details and business models by next year.
The joint venture will include gas production resources and LNG plants.
The exact location of the project is yet to be finalised. The options include PTTEP's Australia gas block or Mozambique Area 1, among other new areas.
The joint venture was formed as a response to the expectation that Thai energy operators will import up to 34 million tonnes of LNG in 2036, up from 4 million tonnes this year.
Also, PTT's executive board yesterday approved a plan for exploring business opportunities in power storage.
A PTT subsidiary, GPSC Plc, recently acquired a 17% share in Massachusetts-based startup 24M Technologies, a research and development firm for lithium batteries.