Thai Oil predicts record margin

SET-listed Thai Oil Plc (TOP), Thailand’s largest oil refiner in terms of capacity, expects gross margin to hit a new high this year.

President and chief executive Atikom Termsiri said the bullish view is largely due to rising gross margin for oil refining and full operations of the linear alkylbenzene (LAB) project.

Other positive factors that would help boost profit are rising feedstock for detergent production unit and its power plant project that has started commercial operations.

Mr Atikom said gross refinery margin (GRM) last week averaged at $8-$9 per barrel, up from an average of $6-$7 a barrel in the second quarter. The company would also benefit from the improving global economy pushing demand for oil and the oil refinery sector.

Thai Oil expects a double-digit GRM growth in the third quarter.

Thai Oil’s LAB project is expected to operate at full capacity this year at 100,000 tonnes from below 50,000 tonnes last year. Meanwhile, the TOP Small Power Producer programme (TOPSPP) could also run at full capacity this year, at around 240 megawatts and another 500 tonnes of steam an hour. Last year, the TOPSPP ran at almost half of capacity.

Net profit of Thai Oil last year came in at 21.2 billion baht, including oil stock gains. This year, for the first time in a decade, it expects performance to hit a new high without any support from oil stock gains.

Thai Oil estimates its oil refiner unit capacity utilisation this year to average at 112%, or 12% above its full capacity of 275,000 barrels per day. Some 89% of refined oil output would be sold to local oil traders and the rest exported to Cambodia, Laos, Myanmar and Vietnam.

The company is considering investing some $4 billion in Clean Fuel Project (CFP), making a final decision in the second quarter next year. The project is expected to start in 2023.

CFP comprises expanding oil refinery capacity to 400,000 barrels per day from the current 275,000 bpd, and raising the production of higher-margin products such as jet fuel, petrol and diesel while cutting down on lower-margin products such as bunker oil.

CFP will also help enhance its refining efficiency, enabling it to accept crude oil from various resources such as South America, which have lower refining costs than crude oil from the Middle East.

Tentatively, the source of capital expenditure would be cash on hand of $1.9-$2 billion and the rest from loan of around $1 billion.

TOP shares closed yesterday on the SET at 91.25 baht, down 25 satang, in trade worth 241 million baht.