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PTT aims to explore new energy areas to meet demand

PTT Group's chief, Pailin Chuchottaworn, has reiterated the need to explore new energy fields to cope with increasing demand in the country.

The key, he says, is to balance resources from various locations. Starting with the US$2-billion (Bt61-billion) investment in Cove Energy, for a small stake in a gas field in Mozambique, PTT Group is seeking to establish greater presence in that area. Looking to the north, resources could also come from Russia or through the South China Sea. To the south, resources from Australia are in sight, even though they are becoming more expensive.
"It's difficult to predict oil prices, but I believe that they will increase further," he said at a roundtable discussion on "Regional Opportunities and Risks - Thailand and the AEC" at the Fitch Ratings annual conference.
In Asean, PTT has also expanded into many countries, particularly Myanmar, where it first made its presence felt 20 years ago when sanctions against the military regime were still in place.
Massive investment by PTT Group has raised eyebrows among rating companies, which are concerned about its increasing debt level. PTT Exploration and Production (PTTEP) is being forced to recapitalise, expected to be completed by the end of this year, to maintain its debt-to-equity ratio or risk a credit downgrade.
Lertchai Kochareonrattanakul, senior director and Thailand head of corporate ratings for Fitch, noted that oil and gas companies in the Asia-Pacific region were building up resources aggressively. This is wise, as their ratio of oil reserves to production is the lowest according to global standards, 14 years against the 31-year global average.
In the region, only Petronas and Woodside sit on huge reserves. Others will need to replace depleting oil and gas reserves, mostly through mergers and acquisitions. In the first eight months of this year, Asia-Pacific oil companies' M&A deals worth more than $1 billion exceeded $40 billion in total, or half of global transactions.
Of the $142 billion worth of transactions from January 2010 to August this year, 51 per cent of the value was executed by Chinese companies - Sinopec, CNOOC and CNPC/Petrochina - while Thailand's was only 4 per cent.
Lertchai expects the companies' capital expenditure to remain high, after showing annualised growth of 10-15 per cent in the past three years. So far, there have been limited impacts on these companies' credit outlook.
The impact is moderate on PTTEP, which invested $2.3 billion in 2010 and is on course to complete $3.1 billion worth of deals this year. Its net debt in 2011 stood at 1.7 times.
"If the ratio remains below 2 times, this will not affect the credit rating," Lertchai said.
On the opportunities to be presented by the Asean Economic Community (AEC), Chartsiri Sophonpanich, president of Bangkok Bank, foresees increase in infrastructure funding, particularly in Thailand, Myanmar and Indonesia. Plus, project financing will also rise as Thai companies are investing more in the domestic market and overseas.
"The AEC will change many things for Thai organisations," he said. "I believe that this is the Century of Asia, with many significant changes. In this transition, the situation will be up and down, but output will grow."
For Bangkok Bank, he said that amid great opportunities, it was necessary to maintain healthy financial balances, from debt to equity and loan to deposit ratios to provisioning.
According to Mark Young, Fitch Ratings' head of financial institutions for Asia and the Pacific, the credit outlook of Thai banks remains solid. Loan growth has been expanding fast since 2010, but also asset quality. They have also boosted Tier 1 capital, above 10 per cent of risk assets in the case of Bangkok Bank.
His concern is on tightening liquidity, which suggests the need to mobilise other types of funding besides deposits.
Win Phromphaet, head of global and real-estate investment for the Social Security Office, added that infrastructure development - the rail network in Thailand, mass transit in Jakarta and an airport in Manila - made a country attractive for investors who want inflation-hedging options and stable long-term returns.
At present, 3 per cent of the Social Security Fund's $30 billion is invested in global bonds, while the rest is in Thai bonds and equities.
(Source : The Nation)

PTT Group, Cove Energy, Pailin Chuchottaworn