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NEWS UPDATES Asean Affairs        11  February 2011

PTT losing money on natural gas

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PTT Plc expects to lose more money on sales of compressed natural gas (CNG) as more motorists, attracted by government subsidies, switch to the fuel to help cut rising transport costs.

CNG consumption volume rose 18 percent year-on-year in February to 5,900 tons per day, said Prasert Bunsumpun, the CEO and president of the majority state-owned energy conglomerate. New CNG vehicle production also rose 40 Percent to 300 units per day from 215 units a year ago, he said. "The more CNG sales volume rises, the more losses the company is going to face." Mr. Prasert forecast the company's losses on CNG sales at more than 10 billion baht this year compared with an estimated 9 billion last year.

Thai governments have fixed the prices of CNG and liquefied petroleum gas (LPG) for more than a decade.

PTT subsidizes CNG prices at 4.50 baht per kilogramme on the top of two-baht subsidy by the state Oil Fund as part of the government's plan to keep the price of CNG at 8.50 baht per kilogramme.

CNG, marketed locally as NGV or natural gas for vehicles, has become popular among motorists since 2008 but price caps have led the company to accumulate losses of 26 billion baht. It says the fuel should sell for 14.50 baht.

PTT recently asked the National Energy Policy Committee to raise the price of CNG to 10.50 baht per kg but received no response.

Despite the operating loss, Mr. Prasert said the company remained committed to expanding its investment in CNG to comply with the government's alternative fuel development plan. It plans to add 70 pumps to bring its total to 500 this year.

Chief financial officer Tevin Vongvanich said PTT expected overall 2011 revenue would continue its growth from the past year with all of the group's businesses showing sound performance.

Thanks to high oil prices, the company's gross refining margin has improved it an "appropriate" level of $5 per barrel at present while demand for natural gas has risen considerably. Crude prices are expected to average $80-90 a barrel this year although cold weather and protests in Egypt have pushed up the price to $100 recently.

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