New Life for Thai Base Oil Refiner?

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With an agreement that would write down its debt and restructure its ownership, Thai Lube Base Co. plans to reopen its base oil refinery in April or May of this year.

Under the plan, which requires approval by creditors and the Thai Central Bankruptcy Court, co-owner PTT Plc would put up more than U.S. $30 million to replace Thai Oil Co. as Thai Lubes biggest shareholder. PTT was forced to import when Thai Lube halted operations 17 months ago and is anxious for the business to reopen.

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With a large amount of debt written off, the company is expected to recover rapidly, with profit expected within the first year of operations after the resumption of production, PTT president Viset Choopiban told the Bangkok Post.

Located next to a Thai Oil refinery complex in Sriracha, Cholburi Province, Thai Lubes base oil refinery is one of two in Thailand. It has capacity to produce 5,100 barrels per day of Group I base oil and 5,900 b/d of asphalt. The plant was idled in August 2001 due to Thai Lubes rising debt.

Thai Oil has been Thai Lubes biggest shareholder, with a 38 percent stake, followed by PTT and MOC Holding Co., with stakes of 30 percent and 22 percent, respectively. Thai Oil, however, does not want to spend any more money on the lubricant business. Under the restructuring plan, its stake would decrease to 1 percent. PTTs holding would increase to approximately 49 percent, thanks to its contribution, which would help pay off creditors.

PTT is the former Petroleum Authority of Thailand, which was privatized in 2001. It owns a 49.9 percent stake in Thai Oil, the countrys biggest oil company.

More important than PTTs infusion to Thai Lube is the tentative agreement of creditors to forgive $140 million of the $200 million they are now owed. After PTTs contribution, the remaining debt would be paid from cash flows.

Thai Lube General Manager Dul Thondpakdi told Lube Report that the company plans to focus on the domestic market, where prices are most attractive, but will also have to export. Asia/Pacific is the most likely export market, he said, although the company is investigating prospects in the United States, which may offer better netbacks.

Base oil demand in Thailand is approximately 40,000 metric tons per month. Thai Lube and Thai Oil have monthly capacity of 22,000 metric tons and 27,000 metric tons, respectively.

Thai Lube is also considering upgrading its refinery to produce Group II-plus or Group III stocks from hydrocracked bottoms, Thondpakdi said. Officials have determined that the plant would yield a 5 centiStoke stock but have not yet decided whether to proceed with the plan.

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