Thai Oil mulls distillation project
Thai Oil Plc is considering constructing another crude oil distillation unit (CDU) to raise refining capacity from 275,000 barrels a day to 400,000 and investing in a bunker oil value-added project that should become clearer in June.
The crude oil price is expected to be about US$55 a barrel, which is very low.
For this year, Thai Oil has allocated Bt30 billion for investment. The company has its initial cash flow worth Bt47 billion, which should be adequate to support its investment plan, Atikom Terbsiri, president and chief executive officer, said yesterday.
Thai Oil needs a third CDU as the first two have been in use for 51 years. CDUs 1 and 2, each of which has a capacity for 50,000 barrels of crude oil distillation refining, will cease operations when the new CDU can commence operations. The third CDU’s distillation refining capacity is 170,000b/d.
Since the increased crude oil refining capacity will also raise the volume of bunker oil, Thai Oil is studying a value-added project to turn bunker oil into diesel fuel.
About 9 per cent of the 275,000b/d production capacity is bunker oil, which provides feedstock for paraxylene. Since it is not feasible to build a paraxylene plant, Thai Oil plans to join IRPC Plc in jointly producing paraxylene.
Thai Oil hopes to complete the two studies this June, then it will proceed with the basic design and investment cost projection before deciding if the investment is worthwhile by this year-end.
If the project is feasible, construction can begin next year and should be completed in three years.
Should Thai Oil decide to proceed with the CDU and the bunker project, the output in excess of domestic demand can be exported to neighbouring countries.
Thai Oil must adopt appropriate technology and the investment must utilise available infrastructure to ensure cost efficiency of crude oil refining operations.
Secure financing
The additional CDU requires an investment of between $2 billion and $2.5 billion. Thai Oil would know by this year-end how much investment needed for this project after the basic design is completed.
Should Thai Oil decide to proceed with this project, the investment will take place next year, for which Thai Oil would have to secure financing.
It is unlikely that the world’s crude oil price will dip below the current $55 a barrel because the US and European economies have improved following stimulus measures. Even with the current economic slowdown in China, demand for oil is not expected to fall in line.
The lower global crude oil prices have raised petroleum consumption in Thailand as more consumers are driving their cars bought under the previous government’s "first car" policy.
Thai Oil’s first-quarter gross profit from crude oil refining improved to $8.50 a barrel from last year’s average of $5.80.
