PTT hits back amid social media storm

PTT hits back amid social media storm

CEO Tevin defends prices in Facebook post

PTT Plc Chief executive Tevin Vongvanich of oil conglomerate PTT, seen here at a meeting of the Anti-Corruption Organisation of Thailand, has taken to Facebook to defend his company against a strong social media campaign. (Post Today file photo)
PTT Plc Chief executive Tevin Vongvanich of oil conglomerate PTT, seen here at a meeting of the Anti-Corruption Organisation of Thailand, has taken to Facebook to defend his company against a strong social media campaign. (Post Today file photo)

As oil prices surge to their highest in close to a decade, the public is rising against PTT Plc and demanding an answer to the age-old question: why are retail fuel prices higher in Thailand than in some other Asean countries?

PTT is holding fast to its 1.80-baht-per-litre "marketing margin", while scrambling to defuse motorists' anger over high petrol prices in social media.

PTT controls 38% of the Thai petrol retail market, according to a report by the Energy Business Department, putting the national oil and gas conglomerate front and centre in the debate.

The group has endured multiple attacks in social media, including claims that the company has a monopolistic hold on the market.

PTT has controls big stakes in five SET-listed companies: PTT Exploration and Production (PTTEP), PTT Global Chemical (PTTGC), Thaioil (TOP), IRPC and Global Power Synergy (GPSC).

PTT chief executive Tevin Vongvanich posted on his Facebook page that Thailand's retail fuel prices are different from those in several Asean countries because local prices are subject to taxes and marketing margins.

"Malaysia gains massive revenue from its oil exports, so it can subsidise its domestic retail prices," Mr Tevin said. "Singapore, on the contrary, has the highest retail prices in the region, since the city state collects high petrol taxes designed to control the vehicle fleet size."

In Thailand, the government collects levies for the state Oil Fund and Energy Conservation Fund, including excise, interior and value-added taxes, all of which factor into the retail price, which also includes a marketing margin.

Mr Tevin said the retail price generally follows global prices, which have shot up by more than 20% in the past two months.

PTT has had to adjust its retail fuel prices to maintain the marketing margin of 1.60-1.80 baht per litre, the company said, which has forced it to increase prices six times.

Nonetheless, Manoon Siriwan, a well-known energy expert, said Thailand's fuel prices are expected to increase gradually, noting that global crude oil prices rose from US$50 a barrel to $80 this month because of many negative factors such as geopolitical tension and tightening global supplies.

"Venezuela's petroleum production plunged to 1.4 million barrels per day from 1.5 million barrels per day last month, hitting the lowest level in three decades, because of its ongoing economic crisis, and the United States moved to sanction Iran," Mr Manoon said. "So the Thai government and the oil and gas company cannot control rising or declining global oil prices, as it is a market mechanism."

Imports outstrip exports

Mr Manoon said the government cannot subsidise all taxes to make retail fuel prices cheaper, as the country will lose massive income from taxation.

According to Mr Manoon, one litre of petrol normally consists of 60% actual price derived from production and refinery costs and 40% that goes to taxes.

He said Thailand is the second-largest importer of overseas oil in Asean, at about 800,000 barrels per day, while Indonesia is the top oil importer.

Thailand's biggest on-land petroleum supply is located in Lan Krabue district, Kamphaeng Phet province. The Sirikit oilfield can produce crude oil at a rate of 20,000 barrels per day.

Mr Manoon said Thailand is not a huge oil exporter, unlike Malaysia and Indonesia, two countries that have massive energy resources and whose governments can subsidise prices to the benefit of motorists.

"As a matter of fact, Thailand has imported petroleum from overseas countries, representing more than 80% of the total, so we cannot compare to these two Asean countries with their huge resources," he said.

E&P can't subsidise

On his Facebook page, Mr Tevin said PTTEP's exploration and production (E&P) activity adds up to 10% of Thailand's petroleum usage. Therefore, PTT revenue from E&P activity cannot subsidise prices.

"Moreover, PTTEP has to make such a high provision to expand its E&P investment to maintain the country's energy security," Mr Tevin said.

According to the International Energy Agency, Brent crude oil will not reach $100 a barrel and there is no worrying upcycle price trend.

Auttapol Rerkpiboon, PTT's chief operating officer for downstream petroleum business, forecasts that global crude prices throughout 2018 will hover around $70-80 because shale oil development in the US will largely offset declines in conventional oil production worldwide.

"The US shale oil is reflected in the global oil prices now, so PTT is confident that the global oil price will become stable," Mr Auttapol said.

Mr Manoon said global oil prices are increasing more slowly.

"In 2018, global oil prices should be $65-70 per barrel, so domestic retail prices should not be higher than 30 baht per litre for diesel," he said.

Meanwhile, Mr Tevin said the global price trend is expected to show a slight descent in the next few weeks once Opec and non-Opec countries, led by Saudi Arabia and Russia, seek to increase their crude oil output.

B20 alternative

Amid the increase in retail fuel prices, diesel seems to have seen a greater impact, mostly because the fuel is normally used in vehicles for the logistics network.

Many transport operators want the diesel price to stay below 30 baht per litre, though policymakers have not capped the current price as was done in the past.

Furthermore, the Energy Ministry is encouraging local motorists in the transport sector to use B20 biodiesel instead of pure diesel, since the B20 price is three baht lower than that of regular diesel.

Local petrol stations are also selling B7 biodiesel, a 7% palm-based biodiesel blended with 93% diesel, but policymakers plan to increase the content of methyl ester made from crude palm oil to 10% soon.

PTT and Bangchak petrol stations plan to offer B20 biodiesel to operators of buses and large trucks in a bid to adhere to the government's policy of relief from high and unstable diesel prices.

Federation's concern

Thongyu Khongkhan, chairman of the Land Transport Federation of Thailand, said his group wants more guarantees from the many related parties that B20 biodiesel will have no harmful effect on the engines of buses and large trucks.

"We agree with the policymakers, but B20 will be available only at outlets of bus and truck fleets, which I think is not convenient for logistics operators," Mr Thongyu said.

He said B20 has a high viscosity when compared with pure diesel and could cause problems for the engines.

On the issue of fuel prices, the federation announced last week that it would increase transport fees by 5%, but the group said the hike would have no impact on the cost of goods.

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