PTTEP in the buying zone
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PTT Exploration and Production (PTTEP) is now tilting its investment plan towards purchases of petroleum fields and mergers and acquisitions after oil prices sank to a six-year slump. "Our priority is buying producing assets in Thailand and in the regio
Shale assets in the United States are also interesting, as buying producing assets may be cheaper than exploring for new petroleum reserves, he said on Nation Channel’s “Timeline” hosted by Suthichai Yoon.
PTTEP is reviewing five overseas projects in Myanmar, Mozambique, Canada, Australia and Algeria, which are still at the exploration stage.
At US$70 a barrel, 70 per cent of the investment projects in the company’s $24 billion five-year investment plan were firm, but now at less than $55, more projects will be deferred.
Due to the discovery of shale in the US, oil prices may gradually recover or make a “U shaped” instead of a “V-shaped” recovery.
Or in some theories, oil prices could even take an “L-shaped” path, which means staying low for a long period.
“Around year-end, we thought it had already hit bottom. But today, nobody is sure how long [it] will last,” he said.
However, PTTEP could endure the low oil prices, thanks to its average production cost of $42 a barrel. In comparison, the cost to extract shale from a greenfield deposit is believed to be more than $50.
“On an accounting basis, some projects may book a loss if oil prices fall to $30 a barrel, but on a cashflow basis, we can survive,” he said.
PTTEP, which succeeded in raising $1 billion from issuing hybrid bonds last June, a month after the military coup was staged, now has a cash war chest of about $3 billion to finance acquisitions, pay debt and make investments.
The government was on the right track to open the 21st petroleum exploration bidding round because it had been delayed for many years.
“The reserves we’ve found over the last 15 years (during the last three auctions) are less than the petroleum we use in one year,” he said.
Because most of the blocks available in this round are old ones returned by oil and gas companies after they did not find any or only negligible petroleum reserves, the potential of discovery is believed to be not high and it is appropriate to use the existing concession regime to govern the 21st bidding.
“But for a new area such as the overlapping area (between Cambodia and Thailand in the Gulf of Thailand), the production-sharing regime might be suitable,” he said.
Some non-governmental groups have opposed the new petroleum bidding and asked for a change from the concession to a production-sharing regime that is used in some neighbouring countries.
However, there are countries including Indonesia that are considering shifting from production sharing to concessions, which involves less state interference and opens less chance for corruption, he added.
