TOTAL EXPLORATION AND PRODUCTION (THAILAND): While retaining its focus on gas ahead of oil, French firm looks at possible investment in privatised state enterprises.

After investing more than US$400 million in Thailand, French oil giant Total wants to expand its presence by bidding for state energy enterprises earmarked for privatisation.

‘If the Electricity Generating Authority of Thailand is privatised, we are more than willing to participate, but it’s difficult to estimate the amount we may commit as it will depend on the cost’
PIERRE DELPONT
General manager

Investment to date has been for a 30% stake in the Bangkok gas fields. Now Total would like to enter the local retail market, said Pierre Delpont, general manager of Total Exploration and Production (Thailand).

Total, which entered Thailand in the late 1980s to tap what is described as technical opportunities, believes the time is right for a wider role.

"We will continue to focus on the Bangkok fields and to look for more opportunities. We will develop the greater Bangkok fields and invest a further $300 million and more in this field," he said.

Total has been looking at buying some retail oil outlets but has not reached any decision. A senior executive of Total's downstream operations in Thailand said the company would
want a certain size of acquisition first.

As it wanted to compete with big retailers such as Shell, Caltex and Esso, it would wait for the right opportunity.

"We have studied the market and established there is an opportunity right now, but we don't want to be a weak force in front of big players. We want to portray ourselves in the up market segment," he said.

"If the situation changes and there are opportunities for us to enter by bidding in the
privatisation process, then we will not hesitate," he said, referring to the government's moves to privatise Bangchak Petroleum.

Total has formed a joint venture with the Petroleum Authority of Thailand (PI-I') to build
a lubricant-blending factory in Si Racha for an estimated US$ 20 million (800 million baht).

This plant would increase Total's share of the downstream market as it would replace costly expensive imports with quality products at lower cost, the executive said.

Mr Delpont said that in evaluating investment possibilities the company looked at the technical value rather than giving preference to certain countries.

"This value emerged when the PTT opened its fields to foreigners. Our long-term plan is still to focus on the Bangkok project as there are a lot of reserves that need to be tapped which form part of our concession.

"For this purpose the company is committed to investing another $300 million. We are keen on exploiting the southern part of the Bangkok project, but all depends on the market."

Total was also looking at opportunities in transport and distribution of gas and its use in power generation.

"If the Electricity Generating Authority of Thailand (Egat) is privatised, we are more than willing to participate, but it's difficult to estimate the cost," Mr Delpoiit said.

Total is the largest gas supplier in Thailand after Unocal Thailand and the PTT, and Mr Delpont aims to lift its position.

Large oil and gas companies always rely heavily on their parent company for financial, technical and other support. Total is no exception.

Mr Delpont said this did not mean that Total (Thailand) was getting its investment money from parent company. It would try to meet demand from its own resources before seeking help.

"For finance, we tend to rely on in-house arrangements. But it will be different in the future when we may get involved in power generations.

Total (Thailand) has struck problems caused by the recession, "The depreciation of the baht has had an impact, but it has not been too big as the formula to calculate the sale price to the PTT is based on a lot of factors and, in some areas, it involves fluctuations in currency.

"Much of the impact on us has been caused by the fall in demand and no rise in the production rate. In most countries, we produce to export, but in Thailand we produce for the domestic market and sell in baht," he said. Power consumption was down and the market looked grim for years to come.

The company had the advantage of a large research and development operation in France, which worked on ways to reduce production costs.

Among the innovations was the introduction of multi-drain drilling in Bangkok field, the first time the technique has been used in Southeast Asia. This method is used for reservoirs that are thin, segmented or fractured.

Mr Delpont said his company was not interested in the onshore oil fields that were for
sale, referring to Shell's Sirikit fields.

"Oil is not what we do in Thailand. We are focused on natural gas and that's where we think the future of this country's energy market lies., We may be wrong, but that's where we want to keep our focus."

Total produces about 550 million cubic feet of gas per day from its fields in Thailand and plans to increase this to 800 million with the development of the greater ' Bangkok region.

"The Thai operation currently accounted for only about 3 % of the total upstream market worldwide and contributed to less than 1 % of the company's total revenue, both upstream and downstream," Mr Delpont said.

The Thai operations were not as big as those in Indonesia but were still significant, he said. According to Mr Delpont, Total group as a whole currently produces 850,000 barrels per day of both oil and gas, of which only 30,000 is contributed by Thai operations.

"The group wants to increase this total to one million, and all countries including Thailand will have to increase their production. But with prices down and lower demand, it seems difficult to achieve this target level in a very short time," Mr Delpont said.

Thailand was different from other countries in the region in that its economy was more prepared for global exposure. But there was room for improvement, especially in tax incentives. Although Total had not received any privileges from the Board of Investment it was still bullish about its prospects.

Under a contract with the PTT, Total had trained i employees for the Bangkok project, bringing its total staff to 500 last June before it transferred them to PTT management. Currently, it has about 70, including French experts and some Thai employees.

"We need a higher number of expatriates because petroleum is not a natural industry for Thailand and, therefore, Thai employees had to be trained in this field before the transfer [of jobs to Thai staff] was completed," he said.

Total is continuing to supply technical assistance to the PTT.