- State-owned energy company to build LNG facilities and produce EVs, hydrogen
According to Nikkei Asia article published on March 14, 2023, Thailand's state-owned energy company PTT Group is accelerating its shift to an environment-friendly business model.
PTT has a huge presence in the nation's energy market and recently revealed a plan to spend some 100 billion baht ($2.86 billion) in the coming five years to increase liquefied natural gas (LNG) import stations and help produce electric vehicles. PTT's strategic change is indispensable to the Thai government's decarbonization goal.
Of the planned investment in the 2023-2027 period, more than 50% will be spent on LNG-related projects such as pipelines and import stations.
When burned, natural gas emits fewer greenhouse gases than oil or coal, positioning PTT as a key energy supplier as the country undergoes decarbonization. To this end, the company intends to increase procurement of natural gas by improving LNG-related infrastructure.
PTT also hopes to begin EV production in 2024 at Horizon Plus, its joint venture with Taiwan's Foxconn located in the Thai province of Chonburi.
Horizon is expected to make between 150,000 and 200,000 EVs by 2030, while PTT hopes to build 7,000 EV charging stations through a group company by the same year.
In addition, PTT will start producing hydrogen as a next-generation energy source. In partnership with the Saudi Arabian government, it plans to manufacture "green" hydrogen -- whose production and use discharge no carbon dioxide -- and "green" ammonia from it.
PTT is stepping up development of its circular businesses due to the difficulty of sustainable growth under its current earnings structure. Amid growing interest in companies with sound environmental, social and governance principles, investors are keeping a close eye on PTT.
The company also needs to meet its responsibility as a state-owned company. Thailand has adopted a bio-circular-green economic policy as the government targets net zero emissions of greenhouse gasses by 2050. Hence, PTT must adopt business strategies that align with this policy.
At the same time, the company is trying to lessen reliance on its fossil fuel business outside of natural gas. It completely pulled out of coal in mid-February by selling its coal development subsidiary PTT Mining to Indonesian investment company PT Astrindo Nusantara Infrastruktur.
PTT is currently experiencing a drop in net profits. In the business year ended December 2022, it logged 3,367.2 billion baht in consolidated sales, up 49% from the previous year. This was due largely to strong earnings in its main businesses of oil field excavation and development as well as petrochemistry and petroleum refining -- all helped by higher-than-average oil prices.
But net profit decreased 16% to 91.1 billion baht due to the rising cost of buying LNG on the spot market. The decline was also driven by discount sales and other measures taken by PTT to ease the financial burden on customers struggling with the impact of COVID-19 and soaring materials prices.
PTT President and CEO Auttapol Rerkpiboon blamed higher natural gas prices for slumping profits.
Procuring natural gas in Thailand has become difficult amid the global trend toward decarbonization. The company urgently needs to find gas from suppliers farther afield, as doubts have grown over its huge gas project in troubled Myanmar and the likelihood of gas fields running dry in Thailand.
It remains unclear whether PTT will be able to carry out its ambitious energy strategy. In February, the company announced the postponement of a project in Myanmar, which was slated to boost investment to as much as $2 billion, including power generation.
Before the military takeover 2021, the Myanmar government and PTT had agreed to develop an offshore gas drilling area known as the M3 Block, in which the company is the sole shareholder. The project included the building and operation of thermal power plants and pipelines to transport gas to land. In a statement to investors, PTT said the project would be delayed due to the "local situation in Myanmar."
As corporate earnings in the natural resources sector are greatly influenced by markets, the strategic shift to decarbonization is important if PTT is to stabilize earnings. But being a state-run company, PTT is also required to build new supply chains to ensure that Thailand's energy needs are met.
