LPG levy seen unlikely to hit petrochemical firms hard

Even PTT Chemical, which sees LPG demand of 400,000 tonnes per year, is likely to face minimal impact from the measure as the planned merger with PTT Aromatics and Refining (PTTAR), one of the suppliers of LPG to PTTCH, will allow the company to use LPG as feedstock internally without purchasing it.
Meanwhile, it is unclear whether users of LPG as feedstock, not as fuel, will be required to pay this contribution to the Oil Fund.
Patiphan Sukhonthaman, vice president of finance and accounting for PTTCH, yesterday said the details of the policy had not been finalised.
The company believes that the Energy Ministry will meet with the petrochemical producers |and discuss the policy in detail before its implementation in January.
He believes producers that use LPG as a raw material, rather than as a fuel, should not have to pay this levy, as its end use would be to create value-added petrochemical products.
PTTCH so far has not evaluated the increased cost from this measure. Currently, it mostly buys LPG from PTT, while some feedstock is from other suppliers, including PTTAR.
The National Energy Policy Council last week resolved that the petrochemical industry had to contribute Bt1 per kilogram to the Oil Fund for LPG trading.
This measure is meant to reduce the burden of importing LPG.
Veerasak Kositpaisal, president and chief executive officer of PTTCH, said the impact to the company would be minimal, |as LPG is not a major raw material. The company mainly relies on ethane for petrochemical |production.
Bowon Vongsinudom, president and CEO of PTTAR, said that once the company and PTTCH merged to form PTT Global Chemical, the LPG purchase transaction would end automatically. Thus PTTCH would not have to contribute this levy to the Oil Fund.
PTTAR also supplies LPG to SCG Chemical, but a lower amount than its supply to PTTCH.
Atikom Terbsiri, senior executive vice president for corporate strategy and planning at IRPC, said LPG was a by-product from its refinery business and was used as a raw material for the petrochemical business, so it should not be required to contribute the levy to the Oil Fund.
Kim Eng Securities (Thailand) said in its research that the levy would cost PTTCH US$33 (Bt990) per tonne. However, the proportion of LPG feedstock is lower than ethane, which is the main raw material of PTTCH. Therefore PTTCH, which buys LPG from PTT, is estimated to contribute Bt300 million per year to the Oil Fund, accounting for 1.2 per cent of its profit next year as estimated by Kim Eng. And if some of the LPG feedstock is purchased from PTTAR, the impact will be lower after the merger is completed.