OBG talks to Veerasak Kositpaisal, CEO and President, Thai Oil

Interview: Veerasak Kositpaisal

Is there scope for investment in Thailand’s downstream petrochemicals and refining industry?

VEERASAK KOSITPAISAL: In the refining industry, I do not expect anyone to build large refining facilities in the near term, but there may be capacity creeping online in the coming years. The cause will largely be the increase in demand for petroleum products from first-time buyer schemes and the stabilising pump price of diesel. In the petrochemicals sector, however, capacity needs to increase. Many Thai refineries, for example, are expanding their capacity in value-added products. It will be mostly the chemical business that benefits from investment as demand keeps growing, and as Thailand’s output, on trend, is insufficient in the long term.

What are the long-term benefits of investing in upgrades to Myanmar’s petrochemicals sector?

VEERASAK: Demand in Myanmar remains small but it is growing. The country’s population is close to 55m people and looks set to grow. Thai Oil is doing a study on how to engage the downstream sector in Myanmar over the near, medium and long term. At present, output at the country’s few refineries is not enough for domestic demand, so they will need to increase capacity or import finished products. It is now just a matter of when this investment can take place. Demand in Myanmar is less than 100,000 barrels per day compared to Thailand’s 850,000. As such, the potential for foreign investors to develop this market is vast. Such investment will also bring long-term benefits to the development of the country’s economy.

How important is investment in research and development to managing the cost of production and boosting the competitiveness of Thai oil refineries?

VEERASAK: In a cyclical business like oil, it is very important to manage costs well. Many of Thailand’s refineries were built using equipment at least 20 years old. We try to control costs through many different strategies. One is by controlling energy consumption: every year we reduce per-unit consumption at each of our refineries, typically aiming for a decrease of 1-2% per annum. To keep energy consumption at target, technology and knowledge are crucial, and Thailand’s refineries need to make changes every year to their processes, equipment and planning. The latest programme in the refining market is a computer simulation designed to enhance operational efficiency at various facilities, such as by optimising energy use. That is how one uses knowledge and innovation to cut costs.

What do you consider the strengths and weaknesses of Thailand’s policy on biofuels? Do you see opportunities for private investment?

VEERASAK: There are a number of issues here that need to be improved. On the one hand, the upside is that biofuels can be produced domestically in abundance and have less carbon emissions than fossil fuels. The downside, on the other hand, is that this process is very costly and can sometimes even conflict with the development of the country’s food chain. We have to work on these points and improve efficiency and reduce costs, particularly by enhancing the productivity of making biofuels. There is still much room for improvement, particularly in getting better yield from farms and a bigger ethanol yield from feedstock. I think there will be significant progress over the long term.

As for the food chain, we will have to make a choice between producing food or biofuels. This point is generally understood, but there remains a need for a more coherent policy. Given the prices, I think the private sector will be drawn to develop new techniques that will benefit both the industry and the nation. Biofuels, for instance, can be used as feedstock for chemical products, an area in which Thailand can be more active in future. Some fuels can be made into higher-value products, for example by converting ethanol into ethylene, then into polyethylene, then into bioplastics. This is something Thailand should look to develop further. We have the raw materials and the demand is also here.