SGP using regional spread to climb ranks
Firm aims to be top-5 LNG trader in Asia
SET-listed Siamgas and Petrochemicals Plc (SGP), Thailand’s second-largest liquefied petroleum gas (LPG) trader, has set an ambitious goal to become a top-five LPG trader in Asia.
SGP believes the goal is possible once it branches out into Asean and China.
In Thailand, the LPG market has become saturated and demand has shrunk from 4.73 million tonnes in 2014 to 4.11 million last year.
SGP forecasts local demand to be unpredictable and unfavourable.
Back in October 2014, overall LPG demand posted double-digit growth annually, but energy policymakers decided to partially float LPG prices after three decades of subsidies.
Policy has been set to reduce the subsidy source by levies on motorists through the state Oil Fund.
The new policy can reduce the LPG subsidy price from 10 baht a kilogramme to around two baht.
But global oil prices rose above US$100 per barrel in 2014, resulting in Thai motorists’ preference for LPG instead of petrol or diesel.
When oil prices collapsed to $60 later in 2014, local LPG demand also declined until recently.
SGP chief finance officer Jintana Kingkeaw said the company is looking for new LPG business opportunities across Asia.
She said the region has rapid demand growth, particularly in emerging countries where governments have policies to shift from charcoal in household kitchens to LPG cooking gas.
Moreover, high demand also comes from plastic and synthetic fibre, which use propane and butane in LPG as raw materials.
“Since listing on the stock market in 2008, our plan has been to expand into new markets in other countries,” Ms Jintana said.
Before listing, SGP had restructured its business and reduced operating costs to enhance its work efficiency. Two affiliated logistics firms were also set up: Siam Lucky Marine Co and Lucky Carrier Co.
SGP also expanded LPG storage to cover all parts of Thailand, supporting delivery of LPG, and the company hired more manpower in line with expansion of new facilities.
Although these programmes required a huge capital investment budget, SGP was confident of high investment returns, which were realised with the expansion of the LPG storage unit several years later.
“We have many skilled human resources, and we can control development cost with our staff to oversee overall construction works,” Ms Jintana said.
A year after the listing on the SET, SGP entered Vietnam by taking over Super Gas Co, then further expanded its business presence by acquiring assets in several countries, such as SingGas in Singapore and Sino Siam in China, during 2010-13.
In the same period, SGP also founded a trading business unit in Singapore, Siam Gas Trading, and merged with some existing LPG operations in China, Vietnam and Malaysia.
SGP’s milestone achievement was new LPG storage: two units in China’s Shantou and Zhuhai, with a combined capacity of 300,000 tonnes, and a floating storage unit in Singapore.
“The storage in Singapore, in particular, can help SGP sell LPG to many companies, and it will not limit distribution to the local market alone,” Ms Jintana said.
LPG’s sales contribution from overseas operations to SGP’s revenue rose from 5% in the first year to 10% in 2011 and 50% in 2014.
Last year, overseas revenue represented 64.4% of the total, accounting for 2.144 million tonnes, a 5.9% rise.
Ms Jintana said SGP has an under-developed project for a new 5,000-tonne LPG facility in Myanmar, scheduled to operate in the second half this year.
The company is also seeking to expand the second storage facility in Malaysia to serve rising demand.
Moreover, SGP was granted a licence to develop an LPG storage facility in Indonesia under a joint venture agreement with a local company. The business plan will be disclosed soon.
“We are planning to invest in highpotential growth in any Asian country,” Ms Jintana said.
SGP expects total sales volume in 2018 to grow by 10% to 3.505 million tonnes from 3.187 million last year. There was a 4.7% rise year-on-year in 2017.
At home, SGP is maintaining its projection to grow by 11% to 1.145 million tonnes.
SGP ranks second in the local LPG market with a 24.4% market share, after PTT’s 39.6%.
For SGP’s international prospects, China is expected to grow by 6.6% to 1.3 million tonnes, while Malaysia and Singapore are expected to see a 22% rise to 190,000 tonnes and Vietnam 11% growth to 50,000 tonnes in 2018.
SGP forecasts its international trading volume via Singapore operations to grow by 11.3% to 820,000 tonnes.
Healthy sales volume overseas will contribute to 70% of SGP’s revenue in 2018.
Moreover, SGP plans to diversify its business to import LNG domestically by conducting a feasibility study with EGATi Co, a wholly owned firm under the Electricity Generating Authority of Thailand.
The study will take roughly two years to conclude.