Bangkok: Thai Oil is expediting its Clean Fuel Project (CFP) to achieve completion ahead of schedule. Thai Oil is confident in its revised CFP project management plan, which is expected to conclude faster than the originally planned commercial operation date in the third quarter of 2028. The company aims to improve financial management, cutting costs by billions of baht while preserving its investment-grade credit rating. Additionally, the company forecasts a surge in refining margins to at least $5-6 per barrel in the early part of this year.
According to Thai News Agency, Mr. Bandhit Thammaprajit, Chief Executive Officer and President of Thai Oil Public Company Limited (TOP), announced the company's successful management of both its CFP investment project and its Clean Fuel Project. This efficient management has bolstered confidence among investors and credit rating agencies amid the global energy industry's volatility.
The CFP project encountered initial setbacks with original contractors due to protests halting construction and the subsequent cancellation of the EPC contract with the original main contractors (UJV: Samsung, Petrofac, and Saipem) in April 2025. The project transitioned to an ECPM (Engineering, Procurement, and Construction Management) model, allowing direct management by subcontractors. This change has increased flexibility, controlled costs, and accelerated construction to meet the planned schedule. Currently, the project is over 97% complete, and if no further delays occur, completion could be achieved up to a quarter ahead of schedule.
Mr. Bandhit highlighted adjustments to work methods to better control quality, timelines, and investment budgets. The construction workforce on the projects is set to increase to 15,000-18,000 people this year, aiming for faster-than-planned completion while managing financial costs. The company anticipates saving billions of baht in investment.
Moreover, Thai Oil issued US dollar-denominated perpetual bonds totaling US$600 million, which saw overwhelming demand from global investors, oversubscribed by 10.33 times the offered amount. This issuance served as a risk management tool, resulting in a lower net interest cost when converted to Thai baht compared to typical borrowing costs. The company hedged the risk through currency swaps, leading to a net interest cost of approximately 3.875% - 4% per annum. The funds, recognized as "shareholder equity," strengthen the company's financial position and facilitate further borrowing. Additionally, the repurchase offer of US dollar-denominated notes totaling up to US$550 million, at an average discount of approximately 14%, allowed Thai Oil to reduce its debt by over US$1.5 billion, or more than 50 billion baht, from 2025 to the present. This has lowered the net debt-to-EBITDA ratio from 5.8 times to 4.8 times, bolstering the capital structure and maintaining its Investment Grade credit rating.
The CFP project will expand crude oil refining capacity from 275,000 barrels per day to 400,000 barrels per day, upgrade product quality, transform low-value products into higher-value products, and increase diesel and jet fuel production. It also allows for refining cheaper heavy crude oil from global sources, including Venezuela, Canada, and the Middle East. This will significantly enhance refining margins and add value to CFP, potentially boosting the refining margin by approximately US$4-5 per barrel.
Regarding PTT's policy of seeking business partners in the refinery and petrochemical sectors, Mr. Bandhit stated that Thai Oil is open to collaboration based on the principle of Value Creation, enhancing capabilities and generating good returns for shareholders. The company is prepared to consider partnerships carefully, with PTT currently studying the details thoroughly.
The year's performance is expected to improve with no major refinery shutdowns for maintenance, allowing full refining capacity. The global situation with rising oil prices, resulting in the closure of several refineries in the US and Europe, has not significantly increased new refining capacity, leading to higher refining margins. Currently, these margins are at 5-6 dollars per barrel, with contributions from the petrochemical business and the completion of the SBM (Simple Barrel Mooring Buoy) pipeline management system this year, pushing overall refining margins to 7-8 dollars per barrel.