SET-listed Thai Oil Plc (TOP), Thailand's biggest oil refiner by capacity, aims to proceed with investment in the Clean Fuel Project (CFP) after several years on the drawing board.
The project is set for development spending during 2019-22 at a total cost of US$4.73 billion.
Chatchai Siriwit, Thai Oil's investor relations manager, said the CFP is designed to improve productivity and lean operating costs because several new oil refineries across Asia-Pacific have developed operations over the last few years.
"So Thai Oil has to upgrade its oil refinery facilities," Mr Chatchai said.
The CFP is designed to go on top of Thai Oil's existing oil refinery and utility units in Sri Racha district, Chon Buri province.
After the CFP starts operation, feedstock for the oil refinery can shift from heavy to light crude oil, trimming operating costs.
The range of refined products will shift to higher-margin diesel and jet fuel, while production of lower-priced bunker oil and bitumen will be reduced.
Mr Chatchai said the CFP will increase capacity for oil refining by 45% to 400,000 barrels per day from the current 275,000 bpd.
A power generation plant of 125 megawatts for the CFP project has yet to be finalised.
Financial resources for the CFP will come from debenture issuance and cash from operations, of which Thai Oil has roughly $2 billion.
Most of the CFP budget is to be invested in infrastructure improvement and expansion, including oil tanks, trucks and operating offices.
Mr Chatchai said Thai Oil forecasts crude oil prices in the Dubai market in a range of $70-75 a barrel in 2019.
The estimation is based on the possibility of surplus volume of 700,000 bpd.
The supply of global oil resources in 2019 is expected at 1.6 million bpd, thanks to additional crude production from the US, while demand is still growing because of economic expansion in Asia-Pacific.
Mr Chatchai said petrol prices in 2019 will be lower because of supply gluts across Asia and the Middle East, so the global petrol supply may have a surplus by an additional 500,000 bpd.
Diesel and jet fuel are tipped to remain costly in 2019 because of demand from ocean liners and air carriers.
In 2020, the International Maritime Organization will mandate environmentally friendly standards to cut sulphur content in bunker oil from 3.5% to 0.5%, so several bunker oil traders will demand more diesel to dilute the sulphur content.
Jet fuel prices are expected to increase because of the rise of tourism flows worldwide.
Separately, Thai Oil is planning to shut down its oil refinery Unit 3 by 2049. The unit controls 60% of overall output.
The shutdown schedule has yet to be finalised.
TOP shares closed Tuesday on the Stock Exchange of Thailand at 77 baht, down 75 satang, in trade worth 649.2 million baht.