THAIOIL GROUP : ULTIMATE SUSTAINABLE GROWTH EXPANSION · CDU-3 project completed ahead of schedule New gas turbine project and second Single Buoy Mooring project Thaioil expanded

T H A I O I L P U B L I C C O M PA N Y L I M I T E DA N N U A L R E P O R T 2 0 0 7

THAIOIL GROUP :DRIVING FORCE SUSTAINABLE GROW THULTIMATE

EXPANSION

Vision Mission Statementfor the Year 2006-2010

MISSION

To excel as PTT's flagship refinery through optimized management of the group's refining portfolio. To expand facilities to better meet domestic demand growth. To enhance the competitive advantage of our power generation operations to further solidify the core refining business. To create a high-performance organization that promotes teamwork, innovation and trust.

VISION

Thaioil seeks to be one of the leading fully integrated refining and petrochemical companies in the region recognized for our sustainable growth, optimum stakeholder value, and commitment to environmental and social well-being

002Financial Highlights

0382007 Achievements

069Related Party Transactions

014Message from the Board of Directors

042Quality, Safety, Health and Environment Performance

073Shareholding andManagement Structure

016Report of the Audit Committee

046Corporate Responsibility& Sustainability

083Risk Management

018Corporate Information

049Industry Over view

085Corporate Governance Policy

022Business Description

056Future Projects

093Internal Controls

025Board of Directors

058Refining and Petrochemical Operations

096Board of Directors’ Responsibility for Financial Reporting

032ManagementOrganization

063Human Resources Management

097Financial Statements

034Management

065Management’s Discussion and Analysis

187Abbreviations and Acronyms

001

C O N T E N T S

150,000

125,000

100,000

75,000

50,000

25,000

0

Total assets 2005 2006 2007 2005 2006 2007

100,000

80,000

60,000

40,000

20,000

0

Shareholders’ equity-net

2005 2006 2007 2005 2006 2007

300,000

250,000

200,000

150,000

100,000

50,000

0

Sales revenue

Million Baht Million BahtMillion Baht Million Baht

35,000

28,000

21,000

14,000

7,000

0

Net profit

002

2007 2006(1) 2005

Operating

Sales revenue million baht 261,051 279,109 2 4 9,1 1 1

EBITDA million baht 29,030 24,577 29,003

Net profit million baht 1 9,1 76 17,659 18,753

Earnings per share baht per share 9.40 8.66 9.19

Financial

Total assets million baht 137,063 110,324 124,169

Total liabilities million baht 65,177 50,158 57,316

Shareholders’ equity - net million baht 71,886 60,166 66,852

FINANCIAL HIGHLIGHTS

F I N A N C I A LH I G H L I G H T S

150,000

125,000

100,000

75,000

50,000

25,000

0

Total assets 2005 2006 2007 2005 2006 2007

100,000

80,000

60,000

40,000

20,000

0

Shareholders’ equity-net

2005 2006 2007 2005 2006 2007

300,000

250,000

200,000

150,000

100,000

50,000

0

Sales revenue

Million Baht Million BahtMillion Baht Million Baht

35,000

28,000

21,000

14,000

7,000

0

Net profit

003

2007 2006(1) 2005

Financial Ratios

Interest coverage times 16.8 12.8 13.5

Total liabilities to equity times 0.4 0.4 0.4

Stock Data

Closing price at end of review period baht per share 86.50 52.50 63.50

Market capitalization million baht 176,462 107,101 129,542

Dividend payment baht 4.50(2) 3.50 3.50

Dividend yield (3) percent 5.3 6.7 5.5

Notes:

1 Adjusted according to amended accounting policy whereby recording of fixed assets is changed from the valuation method to the cost method, recording

of investment in subsidiaries and associates is changed to the cost method, and calculation of the costs of crude oil, petroleum products and oil fuel is

changed from the cost method to the weighted average method.

2 Include the interim dividend payment of the 2007 half year operation result on October 11, 2007 at the rate of baht 1.75 per share. The rest payment

will be proposed to consider and approve in the 2008 Annual General Meeting of Shareholders.

3 Calculated from closing price at end of review period.

F I N A N C I A LH I G H L I G H T S

CDU-3 expands capacityby 50,000 barrels / day

CDU-3 project completed ahead of schedule

New gas turbine projectand second Single Buoy Mooring project

Thaioil expanded the distillation capacity of CDU-3 by about 50,000 barrels / day ( bpd ) resulting in the total refinery capacity increasing from 225,000 to 275,000 bpd. Thaioil Complex no. 3, 4 and 5 were shut down for major turnaround and tie-in between process units of Thaioil and Thai Paraxylene. We also provided support to Thai Paraxylene and Thai Lube Base with improvements to the advance process control systems as well as in other areas of integration. The synergies achieved were instrumental in the excellent performance realized by each business.

Total Refinery Capacity 275,000 bpd

CDU-3 expands capacityby 50,000 barrels / day

CDU-3 project completed ahead of schedule

New gas turbine projectand second Single Buoy Mooring project

Thaioil expanded the distillation capacity of CDU-3 by about 50,000 barrels / day ( bpd ) resulting in the total refinery capacity increasing from 225,000 to 275,000 bpd. Thaioil Complex no. 3, 4 and 5 were shut down for major turnaround and tie-in between process units of Thaioil and Thai Paraxylene. We also provided support to Thai Paraxylene and Thai Lube Base with improvements to the advance process control systems as well as in other areas of integration. The synergies achieved were instrumental in the excellent performance realized by each business.

Total Refinery Capacity 275,000 bpd

In 2007, we registered a record consolidated net profit of 19,176 million baht which was achieved through the integrated management of Thaioil and our subsidiaries.The excellent success in managing the preparation work for the CDU-3 shutdown, which was part of the revamp project, was a testament to the organizational efficiency of the country's leading refinery and the seamless teamwork of Thaioil Group, which contributes to the continual high profitability and maximizes stakeholders' wealth.

Thaioil was ranked 1,354th largest company in Forbes Global 2000 for 2007. In addition, Standard & Poor's, Moody's, and Fitch Ratings have all maintained credit ratings that rank Thaioil among the leading refineries in the region.

In 2007, we registered a record consolidated net profit of 19,176 million baht which was achieved through the integrated management of Thaioil and our subsidiaries.The excellent success in managing the preparation work for the CDU-3 shutdown, which was part of the revamp project, was a testament to the organizational efficiency of the country's leading refinery and the seamless teamwork of Thaioil Group, which contributes to the continual high profitability and maximizes stakeholders' wealth.

Thaioil was ranked 1,354th largest company in Forbes Global 2000 for 2007. In addition, Standard & Poor's, Moody's, and Fitch Ratings have all maintained credit ratings that rank Thaioil among the leading refineries in the region.

We implemented a number of expansion programs as part of our sustainable growth strategies to enhance our business advantage, those proud achievements include the success of the CDU-3 expansion, the investments in the gas turbine project and the second Single Buoy Mooring project to meet expansion requirements, and the project to upgrade oil products to Euro IV standard which will be enforced in a few years. Thaioil subsidiaries also invested in expansion projects such as aromatics production expansion to add value to products by Thai Paraxylene, fleet expansion by Thaioil Marine, and the project to produce specialty products by Thai Lube Base.

Aromatics Expansion -Thai Parax ylene

Euro IV Petroleum Products

Specialty Product -Thai Lube Base

Fleet Expansion -Thaioil Marine

EthanolProduction

We implemented a number of expansion programs as part of our sustainable growth strategies to enhance our business advantage, those proud achievements include the success of the CDU-3 expansion, the investments in the gas turbine project and the second Single Buoy Mooring project to meet expansion requirements, and the project to upgrade oil products to Euro IV standard which will be enforced in a few years. Thaioil subsidiaries also invested in expansion projects such as aromatics production expansion to add value to products by Thai Paraxylene, fleet expansion by Thaioil Marine, and the project to produce specialty products by Thai Lube Base.

Aromatics Expansion -Thai Parax ylene

Euro IV Petroleum Products

Specialty Product -Thai Lube Base

Fleet Expansion -Thaioil Marine

EthanolProduction

PROFESSIONALISM

OWNERSHIP

AND COMMITMENT

SOCIAL

RESPONSIB

ILITY

INTEGRITY

TEAMWORK AND

COLLABORATIO

N

INITIATIVE

VISION FOCUS

EXCELLENCE

STRIVIN

G

Because human resources are integral to the sustainable growth of our organization, we have adopted an integrated approach to human resources management and extended shared services across Thaioil Group. In 2007, we reviewed the macro structure design to increase the potential in developing human capital. The performance management system was introduced for executives to uniformly convey the corporate vision, mission and strategies. We have arranged to inaugurate a system to effectively capture and share knowledge, skills and experiences. Moreover, we also focus on developing leadership skills in high-potential, well-qualified employees with vision and drive.

PROFESSIONALISM

OWNERSHIP

AND COMMITMENT

SOCIAL

RESPONSIB

ILITY

INTEGRITY

TEAMWORK AND

COLLABORATIO

N

INITIATIVE

VISION FOCUS

EXCELLENCE

STRIVIN

G

Because human resources are integral to the sustainable growth of our organization, we have adopted an integrated approach to human resources management and extended shared services across Thaioil Group. In 2007, we reviewed the macro structure design to increase the potential in developing human capital. The performance management system was introduced for executives to uniformly convey the corporate vision, mission and strategies. We have arranged to inaugurate a system to effectively capture and share knowledge, skills and experiences. Moreover, we also focus on developing leadership skills in high-potential, well-qualified employees with vision and drive.

Caring For The Environment

Responsible forever y production process

Reducing environmental impact

Continuing religious and traditional values

Improving quality of life

Creating knowledge

Growing together

Treating stakeholders equitably

For over four decades, Thaioil has been committed to being a responsible corporate citizen with genuine concerns for the community and the environment. We take responsibility for every process in our operations, making sure that all our business affairs and management activities have been subject to social and environmental risk mitigation measures. All our stakeholders are treated equally. We advocate and practice the sharing of knowledge, particularly in education, and the betterment of life in the community, as well as the protection of the environment, which are fundamental to our mutual sustainable growth.

Caring For The Environment

Responsible forever y production process

Reducing environmental impact

Continuing religious and traditional values

Improving quality of life

Creating knowledge

Growing together

Treating stakeholders equitably

For over four decades, Thaioil has been committed to being a responsible corporate citizen with genuine concerns for the community and the environment. We take responsibility for every process in our operations, making sure that all our business affairs and management activities have been subject to social and environmental risk mitigation measures. All our stakeholders are treated equally. We advocate and practice the sharing of knowledge, particularly in education, and the betterment of life in the community, as well as the protection of the environment, which are fundamental to our mutual sustainable growth.

014 M E S S AG E F R O MT H E B OA R D O F D I R ECTO R S

2007 was yet another auspicious year for Thailand as the nation celebrated the 80th birthday anniversary of His Majesty the King on December 5th. The momentous occasion was marked by Thai people from all walks of life performing good deeds as a gift to His Majesty in a show of devotion and gratitude. At Thaioil, a number of projects were launched as tribute to His Majesty. This included, for instance, the Thaioil Group Health and Learning Center for the Local Community, the tribute documentary “Royal Private Trip to the Highlands”, and the Brushstrokes of Dreams in Father’s Footstep Project catering to children.

MESSAGE FROMTHE BOARD OF DIRECTORS

In the backdrop, the latter part of 2007 saw oil prices climb

as high as US$ 90 a barrel in the world market. A

combination of factors contributed to these increases :

tension in the Middle East, global outbreak of natural

disasters, and the declining value of the US dollar.

Thailand faced further difficulties as a result of the

uncertain political climate. Our successful performance

in 2007 is, therefore, the direct result of the hard work of

our staff at Thaioil as well as at all the companies within

our Group. At the helm of this success, was the active

involvement of our Board of Directors in setting the

strategic direction of the Company, and the guidance of

a strong management team committed to vigorously

pursuing growth for the Company.

Viroj Mavichak Managing Director Thai Oil Public Company Limited

Cherdpong Siriwit Chairman of the Board Thai Oil Public Company Limited

015M E S S AG E F R O MT H E B OA R D O F D I R ECTO R S

Our achievements in 2007 are evidenced by a net profit for

the Group of 19,176 million baht, a 9% increase from last year.

Favorable operating results for the first half of 2007 allowed

the Company to pay shareholders an interim dividend of

1.75 baht per share.

A major achievement which we are most proud is the

completion of the Crude Distillation Unit 3 (CDU-3) revamp

project and major turnaround of a number of processing

units on December 5, 2007, one week earlier than planned.

Operating successfully at full design capacity, the total

refining capacity is now increased by 22 percent from

225,000 to 275,000 barrels per day (bpd).

One of the areas we continue to focus on is developing our

human resources at Thaioil and across Group companies

in order to support the Group’s long-term sustainable

growth. During 2007, we offered a series of purposeful

training and development programs, launched activities

that fostered corporate values known as POSITIVE and

encouraged our personnel to apply these values in their

daily work. The Company remains committed to cultivating

work ethics consistent with Good Corporate Governance

practice. To this end, we introduced an E-Learning program

(CG E-Learning) since July 1, 2007 that allowed employees

at all levels to arrange their self-learning on Corporate

Governance through the Company’s intranet.

At the board level, Good Corporate Governance standards

are strictly observed by directors. This discipline earned

Thaioil the Board of the Year for Distinctive Practices

Award 2006/07 on December 11, 2007 from the Thai Institute

of Directors Association (IOD), organized in collaboration

with The Stock Exchange of Thailand and other organizations

from the private sector. The award honors top-performing

boards of directors for effective and efficient management

with high standards of competence and integrity that

maximize long-term shareholder returns.

Our commitment to human resources development extends

to people in the community at large which forms part of our

corporate social responsibility. Apart from scholarships

awarded through the Thaioil Fund under the Ananda Mahidol

Foundation and other educational sponsorships, in 2007,

we created the “Professor Dr. Pramoj Chaivej’s Scholarship

Fund” to provide development opportunity to chemical

engineering students. Thaioil Group Health and Learning

Center for the Local Community is yet another example

that underlines our responsibility to the wider community.

The foundation stone laying ceremony was performed

in 2007 and the center will provide basic public health

services. It is planned to expand the center to provide

knowledge and skills to members of the community at a

later juncture.

Thaioil and Independent Power (Thailand) received the

EIA Monitoring Awards 2007 from the Office of Natural

Resources and Environmental Policy and Planning for our

outstanding conformance with mitigating measures of

environmental impacts identified in the assessment reports

and for our outstanding environmental management.

Our solid performance in 2007 that withstood fluctuating

economic conditions earned Thaioil the right to retain the

credit ratings awarded by Moody’s, S&P’s, and Fitch Ratings

in 2006.

In the name of Thaioil and the Board of Directors, we extend

our appreciation to all our valuable partners who continue

to place your trust in Thaioil Group – our shareholders,

investors, customers, financiers, and all our staff. In return,

we promise to guide the organization forward on a platform

of transparency and commitment to ethical conduct and

good governance. We dedicate ourselves to ensuring that

the health and strength of Thaioil Group is forged to its full

potential as it grows to become one of the leading refining

and petrochemical corporations.

016 R E P O RT O F T H E AU D I T C O M M I T T E E

The Board of Directors of Thaioil appointed a t h re e - m e m b e r A u d i t C o m m i t t e e ( t h e “Committee”) comprising Mr. Manu Leopairote (Chairman), Mr. Nit Chantramonklasri, and Mr. Norkun Sittiphong. All three directors are qualified in the fields of economic s, accounting, financing, and law, as well as experienced in petroleum, petrochemical and energy businesses.

The Committee performed its oversight duties in accordance

with the authority, duties and responsibilities assigned by

the Board. In 2007, the Committee met seven times with

relevant members of Thaioil’s management, the Internal

Systems Audit Manager, and independent auditors on

relevant issues. Key activities by the Committee can be

summarized as follows:

Manu Leopairote Chairman of Audit Committee Thai Oil Public Company Limited

REPORT OF THE AUDIT COMMITTEE

017R E P O RT O F T H E AU D I T C O M M I T T E E

Financial Statements: The Committee reviewed quarterly

and 2007 financial statements with management and

independent auditors. Financial reports of Thaioil and

subsidiaries were found to have been prepared in conformity

with generally accepted accounting principles without any

significant changes that materially affect the financial

statements. Information disclosure was adequate, complete

and fair, and presented with a timeliness that met the

requirements of the Stock Exchange of Thailand (“SET”), and

the Securities Exchange Commission (“SEC”).

Related Party Transactions: The Committee reviewed the

disclosure of related party transactions that could lead to

conflicts of interest between the relevant stakeholders and

the Company. The review concluded that the transactions

were performed in the normal course of business and in

compliance with applicable SET principles.

Risk Management: The Committee reviewed policies and

guidelines for risk management, risk management plans,

and developments in risk management in 2007 to ensure

the Company reduced risk exposure to an acceptable level.

The review concluded that risks were adequately controlled

and reduced to an acceptable level.

Internal Control System: The Committee reviewed the

adequacy of the internal control system from reports

prepared by Thaioil and its subsidiaries in 2007. The review

concluded that the internal controls were adequate in

safeguarding against and reducing possible risks and there

were no significant weaknesses in the system.

Additionally, the Committee recognized the relevance of

reviewing to ensure management of business conformed to

the Company’s corporate governance manual. The review

concluded that the Company had strictly performed according

to announcements by SET and SEC and laws governing

business operation to achieve optimum efficiency and

effectiveness. The review included the treatment of

stakeholders with equality, transparency and integrity to

enhance the confidence of investors and stakeholders in

the Company.

The Audit Committee, therefore, proposes that the Board of

Directors seeks the approval of the 2008 Annual General

Meeting of Shareholders to appoint (1) Mr. Winid

Silamongkol, certified public accountant registration no.

3378, or (2) Mr. Thirdthong Thepmongkorn, certified

public accountant registration no. 3787, or (3) Ms. Wilai

Buranakittisopon, certified public accountant registration

no. 3920 of KPMG Phoomchai Audit Ltd. as independent

auditors of the Company in 2008.

January 23, 2008

On behalf of the Audit Committee

018 C O R P O R AT EI N F O R M AT I O N

Thai Oil Public Company Limited

Company Name Thai Oil Public Company Limited

Symbol TOP

Registration Number 01075747000711

Business Operates a highly complex refinery utilizing modern processing technologies

to produce petroleum products primarily for domestic distribution.

Registered Capital 20,400,278,730 baht

Comprising 2,040,027,873 fully paid-up common shares of 10 baht per share.

Address

Bangkok Office 123 Suntowers Building B, 16th Floor, Vibhavadi Rangsit Road, Chomphon, Chatuchak,

Bangkok 10900

Telephone: 0-2299-0000, 0-2617-8300

Facsimile: 0-2299-0024

Telex: 85802 THAIOIL TH

Refinery 42/1 Moo 1, Sukhumvit Road Km. 124, Tungsukla, Sriracha, Cholburi 20230

Telephone: 0-3840-8500, 0-3835-9000

Facsimile: 0-3835-1554, 0-3835-1444

Website www.thaioil.co.th

Investor Relations Telephone: 0-2299-0124

E-mail: [email protected]

CORPORATEINFORMATION

019C O R P O R AT EI N F O R M AT I O N

Subsidiaries

Company Name and Address Registration No. BusinessRegistered

Capital in baht

Share TypeIssued Shares

(10 baht per share) *

Share-holding

Thai Lube Base Public Company Limited

123 Suntowers Building B, 16th Floor,

Vibhavadi Rangsit Road, Chomphon,

Chatuchak, Bangkok 10900

Tel: 0-2299-0000, 0-2617-8300

Fax: 0-2299-0024

0107539000090Lube base oil

manufacturer1,757,890,730 Common 175,789,073 100%

Thai Paraxylene Company Limited

105/12 Moo 2 Sukhumvit Road,

Tungsukla, Sriracha, Cholburi 20230

Tel: 0-3835-1317, 0-3835-1878

Fax: 0-3835-1320

0105539103288

Upstream

petrochemical

manufacturer

2,572,414,160 Common 257,241,416 100%

Thaioil Marine Company Limited

2/84 Moo 15, Old Railway Road, Bangchak,

Phrakanong, Bangkok 10260

Tel: 0-2331-0080-5

Fax: 0-2331-0086

0105541047578

Marine

transportation of

petroleum and

petrochemical

products

630,000,000 Common 63,000,000 100%

Thaioil Energy Company Limited




Tel: 0-2299-0000, 0-2617-8300

Fax: 0-2299-0024

0105550078006

To support

power

generation

business in

the future

40,000,000 Common 4,000,000 100%

Thaioil Power Company Limited




Tel: 0-2299-0000, 0-2617- 8300

Fax: 0-2299-0024

0105539103296SPP power

generation2,810,000,000 Common 281,000,000 55%

Maesod Clean Energy Company Limited

191/18-25 CTI Tower, 26th-27th Floors,

Ratchadapisek Road, Klongteoy,

Klongtoey, Bangkok 10110

Tel: 0-2656-8488

Fax: 0-2251-1138

0105549129891

Ethanol

production from

sugarcane

100,000,000 Common 10,000,000 30%

020

Company Name and Address Registration No. BusinessRegistered

Capital in baht

Share TypeIssued Shares

(10 baht per share) *

Share-holding

Independent Power (Thailand)

Company Limited




Tel: 0-2299-0000, 0-2617-8300

Fax: 0-2299-0024

0105539126962IPP power

generation1,771,000,000 Common 177,100,000 24%

PTT ICT Solutions Company Limited

13th and 21st Floors, PTT Office Building,

555 Vibhavadi Rangsit Road, Chatuchak,


Tel: 0-2537-0200

Fax: 0-2537-0234

0105549076496

IT and

communication

service

150,000,000 Common 15,000,000 20%

Thai Petroleum Pipeline Company Limited

2/8 Moo 11, Lumlukka Road, Ladsawai,

Lumlukka, Pathumthani 12150

Tel: 0-2991-9130

Fax: 0-2533-2186, 0-2991-9160-2

0105534002696

Product

pipeline

transportation

8,479,000,000 Common 84,790,000 9%

* Thai Petroleum Pipeline is the only company with a share value of 100 baht.

C O R P O R AT EI N F O R M AT I O N

021

Number of employees of Thaioil, subsidiaries and affiliated companies as at December 31, 2007

• Thai Oil Public Company Limited 825

• Thai Lube Base Public Company Limited 134

• Thai Paraxylene Company Limited 67

• Independent Power (Thailand) Company Limited 45

• Thaioil Energy Company Limited * -

• Thaioil Power Company Limited ** -

• Thaioil Marine Company Limited 107

• Maesod Clean Energy Company Limited * 2

• PTT ICT Solutions Company Limited 255

• Thai Petroleum Pipeline Company Limited 204

* No employees because there is no commercial business, only representatives performing activities on its behalf.** No employees because support is provided by Thaioil personnel under the Related Party Service and Supply Agreement.

References

Securities Registrar Thailand Securities Depository Company Limited

The Stock Exchange of Thailand Building, 62 Ratchadapisek Road,

Klongtoey, Bangkok 10110

Telephone: 0-2229-2888 (Call Center)

Debenture Registrar and Thai Military Bank Public Company Limited

Principal Paying Agent Head of Marketing & Sales Investor Services

393 Silom Road, Bangrak, Bangkok 10500

Telephone: 0-2230-6295, 0-2230-5647


Auditors KPMG Phoomchai Audit Limited

22nd Floor, Empire Tower, 195 South Sathorn Road, Bangkok 10120

Telephone: 0-2677-2000


Other Services Counter Service, 1st Floor, The Stock Exchange of Thailand Building

(Loss of share certificate, Telephone: 0-2229-2888 (Call Center)

change of particulars in or

Securities Register, and Office of Registration Services

other shareholder services) Thailand Securities Depository Company Limited

2/7 Moo 7 (North Park), Vibhavadi Rangsit Road,

Thung Song Hong, Laksi, Bangkok 10210

Telephone: 0-2596-9302-10

Facsimile: 0-2832-4994-6

C O R P O R AT EI N F O R M AT I O N

022

PTT Group 80%

PTT 33%Others 58%

Thaioil, being the largest refinery with the most advanced technologies in Thailand, never ceases to stop capitalizing on opportunities to expand into other relevant businesses which are consistent with our core production. Our commitment to further improve our competitive advantage, expand our revenue base and enhance our sustainable growth can be reflected in our broadening operation and investment in businesses such as petrochemicals, lube base, power generation, marine and pipeline transportation of oil and petrochemical products, as well as alternative fuels such as ethanol production from crops.

OIL REFINING PETROCHEMICALS & LUBE BASE POWER GENERATION TRANSPORTATION & OTHERS

Thaioil(TOP)

Thai Paraxylene(TPX)

Thai Lube Base(TLB)

Thaioil Power(TP)

Thaioil Marine(TM)

Capacity : 275,000 bpd

Present Capacity : Paraxylene : 348,000 tons/annum Mixed Xylene : 72,000 tons/annum

Capacity Lube base Oil : 270,000 tons/annum

SPP Program 3-on-1 combined cycle Electricity : 118 MW Steam : 168 tons/hour

Oil / Petrochemical tankers Total capacity : 61,000 deadweight tons

Multi-product Pipeline Capacity : 26,000 million liters/year

Platformate : 1.8 million tons/annum

Sells electricity andsteam to Group

Independent Power(Thailand) (IPT)

PTT ICT Solutions(PTT ICT)

Core Business Added Revenue Revenue Stability Marketing Support and Efficiencyimprovement

IPP Program 2-on-1 Gas-fired combined cycle Electricity : 700 MW

PTT 20%

Thaioil 24%

56%

20%

PTT 26%J-Power 19%

100% 100%

Thappline

30%

Thaioil Energy

Maesod CleanEnergy100%

55% 9%

Mitr Phol Group 35%

Padaeng 35%

Ethanol production from sugarcane

2009 : 200,000 liters/day

100%

Thaioil’s Shareholding Structure and its Shareholding Structure in the Subsidiary Companies

BUSINESSDESCRIPTION

B U S I N E S SD E S C R I PT I O N

Paraxylene : 489,000 tons/annum Benzene : 177,000 tons/annum Toluene : 144,000 tons/annum Mixed Xylenes : 90,000 tons/annum Total : 900,000 tons/annum

Post expansion Q1/2008 :

Revenue Structure

Our core revenue is earned from refining. Other revenue earners are the businesses of lube base, paraxylene, power generation,

and oil and petrochemical product transportation.

Operator (1)

% ofThaioilStake

Fiscal year ending December 31

2005 Adjusted (2)

2006 Adjusted (2)

2007

millionbaht % million

baht % millionbaht %

A. Net Sales

1. Oil refining TOP - 246,213 97 280,148 99 253,959 96

2. Lube base oil TLB 100 14,206 6 17,647 6 21,582 8

3. Paraxylene TPX 100 32,127 13 41,604 15 33,247 13

4. Power generation TP/IPT 55/24 11,141 5 11,820 4 12,203 5

5. Oil & petrochemicals transportation TM 100 691 - 518 - 731 -

Less: Related party transactions (55,267) (22) (72,628) (26) (60,671) (23)

Total 249,111 99 279,109 98 261,051 99

B. Profit from Foreign Exchange Hedging Contract

1. Oil refining TOP - - - 81 - 515 -

2. Paraxylene TPX 100 - - - - 114 -

Total - - 81 - 629 -

C. Foreign Exchange Gains (3)

1. Oil refining TOP - - - 2,887 1 1,433 1

2. Lube base oil TLB 100 - - (18) - (23) -

3. Paraxylene TPX 100 - - 98 - (80) -

4. Power generation TP/IPT 55/24 - - 523 - 191 -

5. Oil & petrochemicals transportation TM 100 - - - - (1) -

Total - - 3,490 1 1,520 1

D. Net Insurance Claim

1. Power generation TP/IPT 55/24 - - 393 - - -

E. Impairment Loss on Assets

1. Lube base oil TLB 100 2,894 1 - - - -

023B U S I N E S SD E S C R I PT I O N

Operator (1)

% ofThaioilStake

Fiscal year ending December 31

2005 Adjusted (2)

2006 Adjusted (2)

2007

millionbaht % million

baht % millionbaht %

F. Gain/(Loss) from Asset Disposal

1. Oil refining TOP - (305) - - - - -

2. Lube base oil TLB 100 154 - - - - -

3. Paraxylene TPX 100 134 - - - - -

4. Oil & petrochemicals transportation TM 100 55 - - - - -

Total 190 - - - - -

G. Other Revenues (4)

1. Oil refining TOP - 1,711 1 3,143 1 4,826 2

2. Lube base oil TLB 100 343 - 131 - 178 -

3. Paraxylene TPX 100 110 - 206 - 151 -

4. Power generation TP/IPT 55/24 44 - 70 - 205 -

5. Oil & petrochemicals transportation TM 100 7 - 4 - 4 -

Less: Related party transactions (1,512) (1) (2,919) (1) (4,731) (2)

Total 703 - 635 - 633 -

Total Revenue (A-G) 252,898 100 283,708 100 263,833 100

Notes :

(1) TOP is Thai Oil Public Company Limited

TLB is Thai Lube Base Public Company Limited

TPX is Thai Paraxylene Company Limited

TP is Thaioil Power Company Limited

IPT is Independent Power (Thailand) Company Limited, in which the shareholding of

Thaioil is 56% through Thaioil Power and 24% held directly by Thaioil.

TM is Thaioil Marine Company Limited

(2) Federation of Accounting Profession announced amendment of accounting principles with effect from January 1, 2007. The financial statements for

2005 and 2006, presented here for comparison, have therefore been adjusted.

(3) Foreign exchange net loss in 2005.

(4) Comprises received interests, export tax subsidy, revenues from services provided to subsidiaries, land lease, Single Buoy Mooring service charge,

oil tank lease, service charge for use of oil filling station for vehicles, etc.

024 B U S I N E S SD E S C R I PT I O N

025

EDUCATION AND TRAINING• B.Sc. in Economics (Hons), Thammasat University, Thailand• M.A. in Economics, Georgetown University, USA• National Defence College, Class 40, Thailand• Certificate in Democratic Politics and Governance, Class 5, King Prajadhipok’s Institute, Thailand• Capital Market Academy Leadership Program, Class 5• Certificate in Director Accreditation Program (DAP), Certificate in The Role of Chairman Program (RCP), Certificate in Finance for Non-Finance Director, Thai Institute of Directors Association (IOD), Thailand• The Civil Service Executive Development Program 1 (Class 13), the Civil Service Training Institute

CURRENT POSITIONS• Chairman, PTT Exploration and Production Public Company Limited• Director, PTT Chemical Public Company Limited• Director, Thaioil Power Company Limited

EXPERIENCE• 2000 - 2001 - Director-General, Department of Mineral Resources, Ministry of Industry • 2001 - 2002 - Secretary General, Thai Industrial Standards Institute, Ministry of Industry• 2002 - 2002 - Deputy Permanent Secretary, Ministry of Industry• 2002 - 2006 - Permanent Secretary, Ministry of Energy • 2003 - 2004 - Chairman, Electricity Generating Authority of Thailand• 2003 – 2007 - Chairman, Ratchaburi Electricity Generating Holding Public Company Limited• 2004 - 2007 - Chairman, PTT Public Company Limited• 2006 - 2007 - Chairman, Rayong Refinery Public Company Limited

Dispute -none-Conflict of interest -none-

EDUCATION AND TRAINING• B.Sc. in Economics (Hons), Thammasat University, Thailand• M.Sc. in Economics, University of Kentucky, USA• Diploma for Industrial Development, Nagoya Training Center, Japan• National Defence College, Class 34, Thailand• Certificate in Role of Chairman Program (RCP 2000, class 3/2001), Certificate in Director Certification Program, Thai Institute of Directors Association (IOD), Thailand

CURRENT POSITIONS• Executive Chairman, Neighbouring Countries Economic Development Cooperation Agency (Public Organization)• Member of the Council of State, Group 5 (Trade and Industry Law)• Director, PTT Chemical Public Company Limited

EXPERIENCE• 1999 - 2003 - Chairman, Sugar Cane and Sugar Committee• 1999 - 2004 - Permanent Secretary, Ministry of Industry• 2001 - 2003 - Chairman, PTT Public Company Limited• 2001 - 2005 - Chairman, PTT Exploration and Production Public Company Limited• 2004 - 2005 - Director, PTT Public Company Limited• 2005 - 2007 - Director, PTT Exploration and Production Public Company Limited


MR. CHERDPONG SIRIWIT

Independent Director andChairman of the Board

Shareholding (%)None

MR. MANU LEOPAIROTE

Independent Director andChairman of the Audit Committee


BOARD OF DIRECTORS

B OA R DO F D I R ECTO R S

026

MR. PALA SOOKAWESH

Independent Director andChairman of the Nomination and Remuneration Committee

Shareholding (%)0.01645

EDUCATION AND TRAINING• B.Sc. in Civil Engineering, Chulalongkorn University, Thailand• MBA, Utah State University, USA• Honorary Doctoral in Engineering, Chulalongkorn University, Thailand• Honorary Doctoral in Management, National Institute of Development Administration (NIDA), Thailand• National Defence College, Joint Public-Private Sector, Class 10, Thailand• Certificate in Advanced Management Program, Harvard Business School, Harvard University, USA• Certificate in Democratic Politics and Governance, Class 6, King Prajadhipok’s Institute, Thailand• Certificate in Director Accreditation Program (DAP) Certificate in Role of Chairman Program (RCP) Thai Institute of Directors Association (IOD), Thailand• Certificate in Capital Market Academy Leadership Program, Class 3, Thailand

CURRENT POSITIONS• Director and President, PTT Public Company Limited • Vice Chairman, PTT Chemical Public Company Limited • Vice Chairman, IRPC Public Company Limited • Director, PTT Exploration and Production Public Company Limited• Director, PTT Aromatics and Refining Public Company Limited

EXPERIENCE• 1996 - 1999 - President, PTT Oil, Petroleum Authority of Thailand• 2000 - 2001 - President, PTT Natural Gas, Petroleum Authority of Thailand• 2001 - 2003 - Senior Executive Vice President, Gas Business Group, PTT Public Company Limited


MR. PRASERT BUNSUMPUN

Director and Member of the Nomination and Remuneration Committee


EDUCATION AND TRAINING• B.Sc. (Hons) in Engineering, Chulalongkorn University, Thailand• M.Sc. in Industrial Engineering (Operation Research), Oregon State University, USA• National Defence College, Joint Public-Private Sector, Class 3, Thailand• Certificate in Advanced Management Program, Harvard Business School, Harvard University, USA• Honorary Doctorate of Engineering, Chulalongkorn University, Thailand• Certificate in Director Accreditation Program (DAP), Certificate in Role of Chairman Program (RCP), Certificate in Role of the Compensation Committee (RCC), Thai Institute of Directors Association (IOD), Thailand

CURRENT POSITIONS• Director, PTT Exploration and Production Public Company Limited• Director, PTT Chemical Public Company Limited• Director, PTT Aromatics and Refining Public Company Limited • Director, IRPC Public Company Limited • Director, Thaioil Power Company Limited• Director and Audit Committee Member, CPPC Public Company Limited• Chairman, Thai Resources and Environmental Management Foundation

EXPERIENCE• 1995 - 1999 - Governor, Petroleum Authority of Thailand• 1999 - 2001 - Director, Petroleum Authority of Thailand• 2003 - 2005 - Director, PTT Public Company Limited• 1995 - 2007 - Chairman of the Board, The Aromatics (Thailand) Public Company Limited



027

EDUCATION AND TRAINING• B.A. in Economics, Chulalongkorn University, Thailand• M.A. in Economics, California State University in Northridge, USA• Certificate of Senior Executive Development Program, Class 12, Thailand• National Defence College, Class 39, Thailand• Certificate in Finance for Non-Finance Director Program, Certificate in Audit Committee Program (ACP), Class 14, Certificate in Directors Certification Program (DCP), Class 71, Thai Institute of Directors (IOD), Thailand

CURRENT POSITIONS• Permanant Secretary, Ministry of Industry• Member of the National Legislative Committee• Member, Civil Service Commission• Member, Monetary Policy Committee, Bank of Thailand• Member of the Council of State, (Group 5)• Director, Thai Asset Management Corporation• Member, Board of Investment• Director, Board of Small and Medium Enterprises Promotion• Chairman, Board of Directors Small and Medium Enterprise Development Bank of Thailand• Director, Office of Knowledge Management and Development• Chairman, Thailand Productivity Institute• Chairman, Thailand Automotive Institute• Chairman, Electrical and Electronics Institute• Chairman, Thailand Textile Institute• Independent Director, PTT Public Company Limited

EXPERIENCE• 2001 - 2002 - Secretary General, Board of Investment• 2002 - 2004 - Secretary General, National Economic and Social Development Board


MR. CHAKRAMON PHASUKAVANICH

Independent Director and Member of the Nomination and Remuneration Committee


EDUCATION AND TRAINING• B.Sc. in Economics, University of Hawaii, USA• M.A. (Political Science), University of Hawaii, USA• National Defence College, Class 35, Thailand• Certificate in Role of Chairman Program (RCP 2005), Certificate in Director Accreditation Program (DAP), Thai Institute of Directors Association (IOD), Thailand• Capital Market Academy leadership program, Capital market Academy, Class 5

CURRENT POSITIONS• Chairman, Capital Market Development Fund Foundation • Chairman, TCJ Asia Public Company Limited• Advisor, The Stock Exchange of Thailand• Advisor, Unithai Line Public Company Limited

EXPERIENCE• 1990 - 1992 - Director - General Fiscal Policy Office• 1992 - 1996 - Director - General, Treasury Department, Ministry of Finance• 1995 - 1996 - Chairman, World Saving Bank Group• 1996 - 1997 - Comptroller General, Ministry of Finance• 1997 - 1998 - Deputy Permanent Secretary, Ministry of Finance• 2003 - 2004 - Advisor Tax Policy to the Ministry of finance• 2005 – 2007 - Deputy Director, GFMIS Office of the Prime Minister


MR. NIBHAT BHUKKANASUT

Independent Director



028

EDUCATION AND TRAINING • B.Sc. in Civil Engineering, Chulalongkorn University, Thailand• M.Sc. in Civil Engineering, Stanford University, USA• Ph.D. in Civil Engineering, University of Texas at Austin, USA• Diploma, The National Defense Course for the Joint Public-Private Sector, The National Defense College• Certificate in Director Certification Program (DCP) , Thai Institute of Directors Association (IOD), Thailand

CURRENT POSITIONS• Chief Operating Officer, Downstream Business Group, PTT Public Company Limited (1 January, 2008)• Director, PTT Aromatics and Refining Public Company Limited• Director, PTT Chemical Public Company Limited• Director, IRPC Public Company Limited• Director, Thai Lube Base Public Company Limited• Director, Thai Paraxylene Company Limited

EXPERIENCE• 1994 - 1996 - President, Natural Gas Business, Petroleum Authority of Thailand• 1996 - 2000 - President, PTT Exploration and Production Public Company Limited• 2000 - 2001 - Deputy Governor, Corporate Plan and Development, Petroleum Authority of Thailand • 2001 - 2002 - Deputy Governor, Corporate Strategy and Development, Petroleum Authority of Thailand• 2002 - 2003 - Senior Executive Vice President, Corporate Strategy and Development, PTT Public Company Limited• 2003 - 2004 - Senior Executive Vice President, Corporate Support, PTT Public Company Limited• 2004 - 2007 - Senior Executive Vice President, Petrochemicals and Refining Business Group, PTT Public Company Limited


MR. PRAJYA PHINYAWAT

Director and Member of the Corporate Governance Committee


EDUCATION AND TRAINING• B.Sc. in Electrical Engineering, Chulalongkorn University, Thailand• M.Sc. and Ph.D. in Industrial and Energy Technology Policy and Technology Management, Science Policy Research Unit, University of Sussex, United Kingdom• Certificate in Director Accreditation Program (DAP), Certificate in Director Certification Program (DCP), Certificate in Audit Committee Program (ACP), Thai Institute of Directors Association (IOD), Thailand

CURRENT POSITIONS• Advisor, MFC Asset Management Public Company Limited• Advisor, SME Venture Capital Fund• Advisor, National Innovation Fund• Independent Director, Energy Fund, MFC Asset Management Public Company Limited

EXPERIENCE• 1992 - 1993 - Deputy Director, National Science and Technology Development Agency (NSTDA)• 1993 - 1996 - Director, Science and Technology Development (TDRI)• 1994 - 2006 - Trustee, New International School of Thailand• 1996 - 2000 - Vice President, Thailand Development Research Institute (TDRI)• 2003 - 2006 - Independent Director, National Energy Fund Administration• 2004 - 2006 - Director, National Science and Technology Committee (Board of NSTDA)• 2003 - 2007 - Director and Nominating Committee member, The Aromatics (Thailand) Public Company Limited


DR. NIT CHANTRAMONKLASRI

Independent Director and Member of the Audit Committee



029

EDUCATION AND TRAINING• B.A. in Accounting, Thammasat University, Thailand• M.Sc. in Business Administration, Indiana University of Pennsylvania, USA• Honorary Doctorate of Accounting, Thammasat University, Thailand• National Defence College, Joint Public-Private Sector, Class 13, Thailand• Certified Public Accountant, Registration No. 2918• Certificate in Director Accreditation Program (DAP 49/2005)• Capital Market Academy (Class No.5)

CURRENT POSITIONS• Chief Financial Officer, PTT Public Company Limited• Chairman, Investment Administration Sub-Committee, Social Security Fund• Chairman, Executive Accounting Profession Committee, Federation of Accounting Professions• Director and Executive Director, Thai Airways International Public Company Limited• Director and Audit Committee Member, Siam Commercial Bank Public Company Limited• Director, PTT Exploration and Production Public Company Limited• Director, PTT Chemical Public Company Limited• Director, PTT Aromatics and Refining Public Company Limited• Chairman, Thai Petroleum Pipeline Company Limited• Director, Thaioil Power Company Limited• Director, Bangchak Petroleum Public Company Limited• Director, Dhipaya Insurance Public Company Limited• Director, Thai Lube Base Public Company Limited

EXPERIENCE• 1996 - 1999 - Deputy Governor, Corporate Finance and Accounting, Petroleum Authority of Thailand• 2000 - 2001 - President, PTT Oil, Petroleum Authority of Thailand - Acting Managing Director, PTT International Trading Private Limited - Acting Deputy Governor, Corporate Finance and Accounting, Petroleum Authority of Thailand• 2001 - Deputy Governor, Corporate Finance and Accounting, Petroleum Authority of Thailand• 2003 - 2004 - Acting President, Bangchak Petroleum Public Company Limited • 2001 - 2007 - Senior Executive Vice President, Corporate Finance & Accounting, PTT Public Company Limited


MR. PICHAI CHUNHAVAJIRA

Director


EDUCATION AND TRAINING• B.Sc. in Chemical Engineering, Chulalongkorn University• MBA Industrial Management, University of Tennessee, USA.• Certificate in Director Certification Program (DCP), Thai Institute of Directors Association, Thailand (IOD)

CURRENT POSITIONS• Director and President, Krung Thai Bank Public Company Limited• Chairman, Thai Bankers’ Association• Director, Thai-German Ceramic Industry Public Co., Ltd.• Director, Indorama Polymers Public Co., Ltd.• Director, Thai Asset Management Corporation (TAMC)

EXPERIENCE• 1994 – 1997 - President, IFCT Finance and Security Public Co., Ltd.• 1997 - 1998 - Senior Executive Vice President, Bangkok Bank of Commerce Public Co., Ltd.• 1999 - President, Bangkok Commercial Asset Management Co., Ltd.• 1 April - 4 July 2001 - Senior Executive Vice President, The Industrial Finance Corporation of Thailand (IFCT)• 2001 - 2004 - President, Siam City Bank Public Company Limited


MR. APISAK TANTIVORAWONG

Independent Director andMember of the Corporate Governance Committee



030

EDUCATION AND TRAINING • 1972 - Armed Forces Academies Preparatory School (AFAPS) Class 12• 1976 - Chulachomklao Royal Military Academy (CRMA) Class 23• 1976 - Infantry Officer Basic Course Class 51• 1981 - Infantry Officer Advanced Course Class 38• 1984 - Command and General Staff College (CGSC) Class 63

CURRENT POSITIONS• Commanding General, 1st Army Area• Member of the National Legislative Assembly• Metropolitan Electricity Authority‘s Board of Director

EXPERIENCE• 1990 - 2nd Infantry Battalion Commander, 21st Infantry Regiment, Queen’s Guard • 1998 - 21st Infantry Regiment Commander, Queen’s Guard• 2002 - Deputy Commanding General, 2nd Infantry Division, Queen’s Guard• 2003 - Commanding General, 2nd Infantry Division, Queen’s Guard• 2005 - Deputy Commanding General, 1st Army Area

DECORATIONS • 1990 - The Rama Medal for Gallantry in Action of the Honourable Order of Rama • 1999 - The Grand Companion (Third Class, Higher Grande) of the Most Illustrious Order of Chula Chom Klao • 2002 - Knight Grand Cross (First Class) of the Most Noble Order of the Crown of Thailand• 2005 - Knight Grand Cross (First Class) of the Most Exalted Order of the White Elephant


LIEUTENANT GENERAL PRAYUT CHAN-O-CHA

Independent Director and Chairman of the Corporate Governance Committee


EDUCATION AND TRAINING• B.Sc. in Civil Engineering (Hons), Chulalongkorn University, Thailand• M.Sc. and Ph.D. in Civil Engineering, University of Texas at Austin, USA• Certificate in Director Accreditation Program (DAP), Certificate in Director Certification Program (DCP), Thai Institute of Directors Association (IOD), Thailand

CURRENT POSITIONS• Managing Director, Thai Oil Public Company Limited• Senior Executive Vice President, President’s Office, PTT Public Company Limited• Director, Thai Paraxylene Company Limited• Director, Independent Power (Thailand) Company Limited• Director, Thaioil Marine Company Limited• Director, Thai Lube Base Public Company Limited• Director, Thaioil Power Company Limited• Director, Thailand Business Council for Sustainable Development• Director, Offshore Technology and Management, Asian Institute of Technology• Member of Council of Trustees, Petroleum Institute of Thailand (PTIT)

EXPERIENCE• 1994 - Deputy Governor, Corporate Finance, Petroleum Authority of Thailand (PTT)• 1996 - Executive Director, Petrochemicals Sector Group• 1999 -2005 - Managing Director, National Petrochemical Public Company Limited - Chairman, NPTC Maintenance and Engineering Services Company Limited - Director, Thai Tank Terminal Company Limited - Director, PTT Phenol Company Limited - Director, PTT Utility Company Limited - Director, PTT Polymer Marketing Company Limited


MR. VIROJ MAVICHAK

Director and Secretary to the Board



031

EDUCATION AND TRAINING• B.S. (Magna Cum Laude), Economics, Wharton School, University of Pennsylvania, USA• Ph.D. Economics, Massachusetts Institute of Technology (M.I.T.), USA• Certificate in Director Accreditation Program (DAP), Certificate in The Role of Chairman Program (RCP), Thai Institute of Directors Association (IOD), Thailand

CURRENT POSITIONS• Honorary Advisor, Fiscal Policy Research Institute Foundation• Independent Director, PTT Public Company Limited• Director, PTT Chemical Public Company Limited• Council Member, Shinawatra University• Vice Chairman, Suksapattana Foundation• Chairman, TSFC Securities Limited• Chairman, Thai Asset Management Corporation• Executive Chairman, Office for National Education Standards and Quality Assessment• Director, Chiangmai Frozen Foods Public Company Limited

EXPERIENCE• 1982 - 2001 - President and CEO, The Siam Commercial Bank Public Company Limited• 2007 - Director and Chairman of the Corporate Governance Committee, Thai Oil Public Company Limited


MR. OLARN CHAIPRAVAT

Independent Director, Chairman of the Corporate Governance Committee


EDUCATION AND TRAINING• 1975 - B.Sc. in Mechanical Engineering, Chulalongkorn University, Thailand• 1978 - M.Sc. in Mechanical Engineering, Oregon State University, USA• 1980 - Ph.D. in Mechanical Engineering, Oregon State University, USA• 2004 - 2005 - National Defense College, Class 47, Thailand• 2007 - Capital Market Academy, Class 4

CURRENT POSITIONS• Deputy Permanant, Ministry of Energy• Chairman, PTT Public Company Limited (18 January, 2008)

EXPERIENCE• 1998 - 2001 - Director, Thai Asset Fund 1• 2001 - 2002 - Director, Electricity Generating Authority of Thailand• 2002 - 2003 - Director, Ratchaburi Electricity Generating Holding Public Company Limited• 2004 - 2006 - Director, Electricity Generating Authority of Thailand - Director, Metropolitan Electricity Authority• 2007 - Director and Member of the Audit Committee, Thai Oil Public Company Limited


MR. NORKUN SITTIPHONG

Independent Director and Member of the Audit Committee



Directors who Completed the Term and Resigned During 2007

032

Managing Director

Viroj Mavichak

Board of Directors

Risk Management Committee

Audit Committee

Deputy Managing DirectorBusiness

Somkeirt Hudthagosol

Deputy Managing DirectorRefinery

Somkeirt Hudthagosol (Act.)

Deputy Managing DirectorFinance

Viroj Mavichak (Act.)

Assistant Managing DirectorFinance

Wirat Uanarumit

Assistant Managing DirectorCorporate Affairs

Narongrit Tavornvisitporn

Management - Special Assignment

Chaiwat DamrongmongkolgulPramin PhantawesakBowon VongsinudomSomchai WongwattanasanKlahan TochamnanvitAthavuth VikitsrethViroj MeenaphantCherdchai SuankaewDuangporn Teerapabpaisit

Manager - CorporateManagement Office

Nitas Krongvanitchayakul

Human Resources Manager

Sadudee Suriyakham

Organization & SystemsDevelopment Manager

Sirimas Chinkarn

Accounting Manager

Prapin Thongnium

Treasurer

Siriporn Mahajchariyawong (Act.)

Assistant Managing DirectorRefinery

Abhinant Supatrabutra

Products & Quality Manager

Kosol Pimthanothai

Engineering Manager

Yuthana Pasurapunya

Project Development Manager

Mitri Reodacha

Technology Manager

Bhawana Suphavilai

Operations Manager I

Feiko W. Snuif

Operations Manager II

Santi Wasanasiri

Managing Director - TLBManaging Director - TPXManaging Director - TMManaging Director - IPTManaging Director - TP

Internal Systems Audit Manager &Secretary to Audit Committee

Assistant Managing DirectorBusiness

Sukrit Surabotsopon

Strategic Planning Manager

Pattaralada Sa-ngasang

Business Development Manager

Sukrit Surabotsopon (Act.)

Commercial Manager

Pongpun Amornvivat

Remarks :08/01/2005 : Khun Chaiwat - assignment at TLB01/03/2006 : Khun Bowon - assignment at PTT01/07/2006 : Khun Pramin - assignment at TPX01/07/2006 : Khun Somchai - assignment at IPT01/10/2006 : Khun Klahan - assignment at PTT01/10/2006 : Khun Athavuth - assignment at

Ethanol Project22/06/2006 : Khun Viroj - assignment at TM01/07/2006 : Khun Cherdchai - assignment at TP01/09/2006 : Khun Duangporn - assignment at TPX

MANAGEMENTORGANIZATIONAs at December 31, 2007

M A N AG E M E N TO R GA N I Z AT I O N

033

Managing Director

Viroj Mavichak

Board of Directors

Risk Management Committee

Audit Committee

Deputy Managing DirectorBusiness

Somkeirt Hudthagosol

Deputy Managing DirectorRefinery

Somkeirt Hudthagosol (Act.)

Deputy Managing DirectorFinance

Viroj Mavichak (Act.)

Assistant Managing DirectorFinance

Wirat Uanarumit

Assistant Managing DirectorCorporate Affairs

Narongrit Tavornvisitporn

Management - Special Assignment

Chaiwat DamrongmongkolgulPramin PhantawesakBowon VongsinudomSomchai WongwattanasanKlahan TochamnanvitAthavuth VikitsrethViroj MeenaphantCherdchai SuankaewDuangporn Teerapabpaisit

Manager - CorporateManagement Office

Nitas Krongvanitchayakul


Sadudee Suriyakham

Organization & SystemsDevelopment Manager

Sirimas Chinkarn

Accounting Manager

Prapin Thongnium

Treasurer

Siriporn Mahajchariyawong (Act.)

Assistant Managing DirectorRefinery

Abhinant Supatrabutra


Kosol Pimthanothai

Engineering Manager

Yuthana Pasurapunya

Project Development Manager

Mitri Reodacha

Technology Manager

Bhawana Suphavilai


Feiko W. Snuif


Santi Wasanasiri

Managing Director - TLBManaging Director - TPXManaging Director - TMManaging Director - IPTManaging Director - TP

Internal Systems Audit Manager &Secretary to Audit Committee

Assistant Managing DirectorBusiness

Sukrit Surabotsopon


Pattaralada Sa-ngasang

Business Development Manager

Sukrit Surabotsopon (Act.)

Commercial Manager

Pongpun Amornvivat

Remarks :08/01/2005 : Khun Chaiwat - assignment at TLB01/03/2006 : Khun Bowon - assignment at PTT01/07/2006 : Khun Pramin - assignment at TPX01/07/2006 : Khun Somchai - assignment at IPT01/10/2006 : Khun Klahan - assignment at PTT01/10/2006 : Khun Athavuth - assignment at

Ethanol Project22/06/2006 : Khun Viroj - assignment at TM01/07/2006 : Khun Cherdchai - assignment at TP01/09/2006 : Khun Duangporn - assignment at TPX

M A N AG E M E N TO R GA N I Z AT I O N

034

MR. SUKRIT SUR ABOTSOPON

Assistant Managing Director – Business / Acting Business Development Manager

MR. ABHINANT SUPATR ABUTR A

Assistant Managing Director – Refinery

MR. NARONGRIT TAVORNVISITPORN

Assistant Managing Director – Corporate Affairs

MR. VIROJMEENAPHANT

Management–Special Assignment / Managing Director Thaioil Marine Co., Ltd.

MR. SOMCHAI WONGWAT TANA SAN

Management-Special Assignment / Managing Director Independent Power (Thailand) Co., Ltd.

MR. PR AMIN PHANTAWESAK

Management–Special Assignment / Managing Director Thai Paraxylene Co., Ltd.

MR. FEIKO W. SNUIF


MR. PONGPUN AMORNVIVAT

Commercial Manager

MS. PR APIN THONGNIUM

Accounting Manager

MR. YUTHANA PA SUR APUNYA

Engineering Manager

MS. SIRIPORN MAHA JCHARIYAWONG

Acting - Treasurer

MS. SADUDEE SURIYAKHAM


M A N AG E M E N T

MANAGEMENT

035

MS. BHAWANA SUPHAVIL AI

Technology Manager

MR. SANTIWA SANA SIRI


MS. PAT TAR AL ADA SA-NGA SANG


MR. KOSOL PIMTHANOTHAI


MR. CHERDCHAI SUANK AE W

Management-Special Assignment / Managing Director Thaioil Power Co., Ltd.

MR. WIR ATUANARUMIT

Assistant Managing Director – Finance

MR. CHAIWAT DAMRONGMONGKOLGUL

Management–Special Assignment / Managing Director Thai Lube Base Public Co., Ltd.

MS. DUANGPORN TEER APABPAISIT

Management-Special Assignment / Manufacturing Manager - Thai Paraxylene Co., Ltd.

MR. SOMKEIRT HUDTHAGOSOL

Deputy Managing Director – Business / Acting Deputy Managing Director – Refinery

MS. SIRIMA S CHINK ARN

Organization & Systems Development Manager

MR. ATHAVUTH VIKITSRE TH

Management – Special Assignment

MR. MITRI REODACHA

Project & Development Manager

MR. NITA S KRONGVANITCHAYAKUL

Manager – Corporate Management Office

MR. VIROJ MAVICHAK

M A N AG E M E N T

Managing Director/ Acting Deputy Managing Director - Finance

X = Chairman P = Director / = Managing Director // = Executive Officer

036

Information on Directors and Executive Officers and Control Executives as at December 31, 2007

Name Thaioil

Subsidiaries Affiliates

ThaiPara-

xylene

ThaiLubeBase

ThaioilPower

Independent Power

(Thailand)

Thaioil Marine

ThaioilEnergy

ThapplinePTTICT

Solu-tions

Maesod

1 Cherdpong Siriwit Œ P

2 Manu Leopairote P Œ

3 Pala Sookawesh P P

4 Prasert Bunsumpum P Œ P Œ Œ(1) Œ(2)

5 Chakramon Phasukavanich P

6 Nibhat Bhukkanasut P

7 Prajya Phinyawat P P P

8 Nit Chantramonklasri P

9 Pichai Chunhavajira P P P Œ

10 Norkun Sittiphong (3) P

11 Apisak Tantivorawong P(4)

12 Lt. Gen. Prayut Chan-O-Cha P(4)

13 Viroj Mavichak P/ P P P P P P

14 Somkeirt Hudthagosol // P P P P P(5) P

15 Narongrit Tavornvisitporn // P(6)

16 Abhinant Supatrabutra // P P(7)

17 Sukrit Surabotsopon // P P P

18 Wirat Uanarumit // P

19 Cherdchai Suankaew // P/

20 Chaiwat Damrongmonkolgul // P/

21 Pramin Phantawesak // P/

22 Somchai Wongwattanasan // P(8) P/ P P(9)

23 Viroj Meenaphant // / (10)

24 Kosol Pimthanothai //

25 Klahan Tochamnanvit (11) //

26 Duangporn Teerapabpaisit

27 Nitas Krongvanitchayakul //

28 Bowon Vongsinudom (12) //

29 Prapin Thongnium //

M A N AG E M E N T

037

X = Chairman P = Director / = Managing Director // = Executive Officer

Remarks :

(1) Resigned as Chairman of the Board of Director of Thappline Co., Ltd. on October 1, 2007

(2) Resigned as Chairman of the Board of Director of PTTICT Solutions Co., Ltd. on January 10, 2007

(3) Resigned as Director and Member of the Audit Committee on December 20, 2007

(4) Appointed as Director of Thai Oil Pcl. at the 2007 Annual General Shareholder Meeting on April 10, 2007

(5) Appointed as Director of Thaioil Energy Co., Ltd. on July 25, 2007


(7) Appointed as Director of Thappline Co., Ltd. on February 26, 2007, replacing Mr. Dhawatchai Hengrasme who resigned on February 26, 2007

(8) Appointed as Director of Thaioil Power Co., Ltd. on April 27, 2007


(10) Appointed as Managing Director of Thaioil Marine Co., Ltd. on June 22, 2007

(11) Assigned to PTT Plc. From October 1, 2006

(12) Assigned to PTT Plc. From March 1, 2006

(13) Apponited as Acting Treasurer on September 5, 2007

None of our management members has a criminal record over the past 10 years with regard to: (i) conviction for a criminal

offence or pending trial except for traffic offence, misdemeanor, or other similar offences; (ii) being declared bankrupt or having

assests frozen; and (iii) not being an executive or controlling officer in a company or partnership declared bankrupt or having

assests frozen

Name Thaioil

Subsidiaries Affiliates

ThaiPara-

xylene

ThaiLubeBase

ThaioilPower

Independent Power

(Thailand)

Thaioil Marine

ThaioilEnergy

ThapplinePTTICT

Solu-tions

Maesod

30 Pongpun Amornvivat // P

31 Feiko W. Snuif //

32 Pattaralada Sa-ngasang //

33 Bhawana Suphavilai //

34 Mitri Reodacha //

35 Yuthana Pasurapunya // P //

36 Sadudee Suriyakham //

37 Santi Wasanasiri //

38 Sirimas Chinkarn //

39 Siriporn Mahajchariyawong // (13)

40 Athavuth Vikitsreth //

M A N AG E M E N T

038

Thaioil and our subsidiaries made successful improvements to the performance and pro-ductivity of the refining and petrochemical operations in 2007 and successfully added values to the integrated portfolio. The challenge of achieving operational success was addressed while continuously advancing human resources development and efficiency in management systems. By the same token, Thaioil Group remained totally committed to corporate social responsibility, including responsibility to stake-holders, which is an integral element influen-cing the sustainable growth of our business. The major achievements in 2007 are :

Sustained success in managing integrated operations

Thaioil is recognized as a refining and distribution company

with one of the most modern and efficient manufacturing

complexes in the Asia Pacific region. Its operation is fully

integrated with the downstream production of aromatics and

lube base oil, as well as the power generation and marine and

pipeline oil transportation businesses. This integrated model

has continuously produced solid performances since Thaioil

was first listed on The Stock Exchange of Thailand in 2004.

2 0 0 7AC H I E V E M E N T S

For the year 2007, in spite of the CDU-3 shutdown in the

fourth quarter for expansion tie-in and major turnaround

activities, Thaioil and our subsidiaries maintained a focused

management of operations and achieved a consolidated

net profit of 19,176 million baht. This is an increase of 9%

from the 2006 results and is a record-high in our 46 years

of operations. As at December 31, 2007, Thaioil holds

investments in a total of 10 companies with assets totaling

137,047 million baht.

Success in refinery capacity expansion and CDU-3

turnaround to enhance growth potential

Thaioil completed the CDU-3 expansion project within the

approved budget and one week earlier than scheduled.

Crude distillation capacity was boosted from 100,000 to

150,000 bpd, and the refinery’s total capacity increased

from 225,000 to 275,000 bpd as of December 16, 2007.

The CDU-3 and related process units were taken out of

operation from October 6, 2007 as the major turnaround

and tie-in activities, which covered almost the entire

refinery as well as the Mixed Xylenes unit operated by

Thai Paraxylene, were undertaken.

The success of the expansion and turnaround was a major

achievement for Thaioil. The project was complex and very

challenging as the expansion tie-in and the maintenance

turnaround took place while other process units were

operating as normal. In particular, during the fourth

quarter of 2007, more than 7,300 contract workers were

working on-site each day. Through effective management,

the project was safely and efficiently executed as normal

refinery production and product supply to customers went

undisrupted with good advanced planning.

In addition to the CDU-3 revamp project, which was

completed ahead of schedule, Thaioil also completed the

installation of a new gas turbine at the end of 2007 and

the construction of the second Single Buoy Mooring in

February 2008. The latter are infrastructure facilities to

support the refining capacity expansion.

2007ACHIEVEMENTS

0392 0 0 7AC H I E V E M E N T S

Success in sustainable financial management of

Thaioil Group

Thaioil has adopted the integrated approach to internal

financial management in order to minimize financial risks

and achieve reduction in financial expenses. We also

recognize the need to secure new channels to raise capital

and have focused on fostering good relationship with

institutional investors to induce their confidence and trust

in our operations. This would serve our interests in the

event Thaioil needs to raise large amounts of working

capital in tight oil market conditions or mobilize funds for

investment in capital projects.

Thaioil Group manages exposure to fluctuations in foreign

exchange rates by denominating the majority of our debt

obligations in US dollars consistent with our revenue

structure. Partial loan repayments are made during times

of the strengthening baht. In managing interest rate risks,

Thaioil and our subsidiaries negotiate with lenders for

interest rate reductions when market conditions change.

We also participated with PTT Group companies in group

insurance coverage which increased the bargaining power

of the policyholder in reducing the insurance premium.

Human Resources Development

Thaioil continued to stay committed in developing our

human resources management in 2007. Over the past few

years, we had been implementing a number of plans aiming

at strengthening the management of human capital in

order to build a high performance organization capable of

meeting the demands of our stakeholders, and increasing

organization capabilities. We also adopted the Balanced

Scorecard and Performance Management System as

strategic management tools to uniformly measure staff

performance. At the same time, we carried on with the

program to instill POSITIVE corporate values in our

employees’ mind. During 2007, we focused more on

achieving tangible results to help enhance Thaioil’s

corporate branding and reputation as a responsible and

sustainable enterprise grounded in Good Corporate

Governance practices on which a strong foundation of

systematic knowledge management was built to create

value through leveraging knowledge, which is key to

realizing competitive advantage and sustainable growth.

Thaioil Group Quality and Environment Management

Systems

We utilize Quality, Safety, Health and Environment

management systems as a framework for continuous

development and improvement while quality control and

practice at our laboratories strictly meet the international

standards of ISO/IEC 17025. Our efforts in this area

attained Thaioil the Good Laboratory Practice certifi-

cation from the Department of Industrial Works, Ministry

of Industry. At the same time, we have implemented a

safety management system that meets the international

standard as well as the TIS 18001 standards for occupational

health and safety.

Both Thaioil and Independent Power (Thailand) are proud

recipients of the EIA Monitoring Awards 2007 presented

by the Office of Natural Resources and Environmental

Policy and Planning in recognition of our performance in

environmental management and community relations.

Corporate Social Responsibility Activities

Throughout our 46 years of operation, Thaioil has continually

initiated and implemented countless social projects in

areas of education, religion, customs and traditions, and

environment and health. In the auspicious year of the 80th

birthday anniversary of His Majesty the King, we launched

the Thaioil Group Health and Learning Center for the Local

Communities. Apart from providing basic public health

services, the center will create continuous activities to

promote various dimensions of the quality of life for all

community members.

2007 MILESTONESAND AWARDS

040

JA N UA RYThaioil Recognized as a pleasant and environmental friendly plant by the Department of Industrial Works, Ministry of Industry, under a program to honor the 60th anniversary of His Majesty the King's accession to the throne.

M A R C HThai Paraxylene Received EIA Monitoring Awards 2006 from the Office of Natural Resources and Environmental Policy and Planning.

S E PT E M B E RThaioil Ranked 1,354th largest public company in Forbes Global 2000 for 2007.

ThaioilRanked 5th Best Managed Company, 5th Best in Investor Relations, and 6th Best Corporate Governance for listed companies in Asia in 2006 from FinanceAsia magazine.

J U LYThaioil Standard & Poor’s maintained BBB corporate credit rating, and BBB rating on Thaioil’s US$ 350 million senior unsecured debt.

S E PT E M B E RThaioil Received Good Laboratory Practice Award from Department of Industrial Works, Ministry of Industry.


041

S E PT E M B E RThaioil Ranked 35th in Asia and 154th in the world in Platts Top 250 Global Energy Companies. Also ranked 17th in Platts Fastest Growing Top 250 Asian Energy Companies.

S E PT E M B E RThai Paraxylene Received Zero Accident Award for 10 years of no loss-time injury from Ministry of Labor.

N OV E M B E RThaioil Moody’s maintained Baa1 for senior unsecured debt rating.

D EC E M B E RThaioil Awarded Board of the Year for Distinctive Practices 2006/07 by the Thai Institute of Directors Association.

Thaioil Fitch Ratings (Thailand) Limited affirmed A A-(tha) national long-term rating, and F1+(tha) short-term rating. Further maintained A A-(tha) national long-term rating on Thaioil’s senior unsecured and unsubordinated debentures of 5.5 billion baht.

D EC E M B E RThaioil Completed CDU-3 revamp and majorturnaround one week earlier than planned. Production capacity increased 22% from 225,000 to 275,000 bpd.

Thaioil & Independent Power (Thailand) Received EIA Monitoring Awards 2007 from the Office of Natural Resources and Environmental Policy and Planning.


042

Ever since we began operating in 1996, Thaioil has been consistently dedicated to applying and improving our performance in the critical areas of Quality, Safety, Health and Environment (QSHE) to meet or exceed internationally-accepted standards of the Thai Industrial Standards Institute (TISI) and the International Organization for Standardi-zation (ISO). It is this dedication which drives our efforts in ensuring that all resources are managed and utilized in strict compliance with the Company ’s policies, objec tives and goals, as well as in conformance with

international requirements and principles. Our overriding aim is to implement QSHE management in a manner that best benefits our neighboring communities and the Company both now and in the long run. Toward this end, our performance can be summarized as follows:

1. Water management

We have established a structured approach for managing

the risk associated with water used in the operations of

Thaioil Group. The Company monitors statistics of rainwater

runoff in eastern sources, public and private water allocation

programs and, more importantly, global meteorological and

hydrographical changes in order to estimate the amount

of rainfall and rainwater runoff in Thailand. All the data

collected are factored into our water risk management plan.

2. Air quality management

Thaioil recognizes the impact the air quality around the

refinery has on the quality of life of community members in

the area. Our focus since the refinery was first operated

has, therefore, always been on preventing rather than

problem-solving. We have continuously complied with all

relevant standards required by legislation and implemented,

as best as we could, improvements demanded by prevailing

circumstances and conditions. Presently, the government is

focusing on two issues:

• Air quality monitoring with CEMS

The Ministry of Industry in 2002 legalized the installation

of Continuous Emission Monitoring Systems (CEMS) at

industries in the Map Ta Phut Industrial Estate, Pha Daeng

Industrial Estate, Eastern Industrial Estate, and Asia Industrial

Estate in Rayong Province. Though the law does not affect

Thaioil, we did consider air quality monitoring a high priority.

CEMS were, therefore, installed on stacks which were

immediately accessible for consistent monitoring on volume

of sulfur dioxide and oxide of Nitrogen. Further installation is

planned for expansion projects.

QUALITY, SAFETY, HEALTH AND ENVIRONMENT PERFORMANCE

Q UA L I T Y, S A F E T Y, H E A LT H A N D E N V I R O N M E N T P E R F O R M A N C E

043

• VOC emission prevention

The National Environment Board, concerning the resolution

of volatile organic compounds (VOCs) in the Map Ta Phut

area, has legislated emission standards for nine airborne

VOCs and is in the process of drafting measures specific

to the sources of VOCs, particularly in oil refineries and

petrochemical plants.

Thaioil has always been proactive when it comes to the health

of our personnel and neighboring communities. We specify an

inventory of equipment likely to cause leakage and regularly

inspect for VOC leaks as well as repair or replace the equip-

ment. The Company is planning further actions consistent

with measures to be enforced by the new legislation.

The gravity of Thaioil’s responsibility for energy and

environmental conservation is reflected in our corporate

policies which integrate environmental consideration into

all business functions and activities. This extends to fuel

and energy management and environmental preservation,

such as:

- Monthly monitoring of energy efficiency using the energy

and loss index to analyze and plan for reduction of energy

consumption.

- Appointment of the Energy and Loss Improvement

Committee comprising of representatives from various

departments to communicate policies and procedures

approved by the committee to respective departments.

- Implementation of changes in certain operating procedure

The Company has monitored airborne VOCs related to the

activities of Thaioil and our subsidiaries by undertaking a

program to monitor the air quality whereby environmental

consultants were engaged to measure benzene, toluene,

xylene and other hydrocarbons around the refinery complex

and neighboring communities. Another program regularly

dispatches mobile units to provide health check-ups for

community members, which also serves as an opportunity to

keep in touch with our neighbors.

3. Reduce Global Warming

There are growing concerns about global warming as its

effects became more convincingly apparent. Efficient use of

energy can lower greenhouse gas emission and arrest global

warming.

or equipment, such as reducing the recycle gas rate in the

Continuous Catalyst Regeneration Platformer-1 (CCR-1)

in order to cut down the use of steam and halon fire

extinguishers, the latter which release chemicals harmful

to the ozone and contribute to global warming.

Our continuing efforts to develop and improve QSHE

management systems at Thaioil include, for instance,

identifying the integrated QSHE aspect, online corrective

and preventive reporting, modifying the certification of all

three systems to occur on the same date.

In 2008, Thaioil plans to extend certification of the QSHE

management systems to cover the entire refinery complex

consistent with the Company’s vision to be a leading

integrated business with sustainable growth.


044

ISO/IEC 17025

For the past decade, the quality of oil products at Thaioil

has been strictly controlled through tests performed by our

ISO/IEC 17025-certified laboratory prior to delivery to our

customers. This effectively guarantees that our products

meet the legal specifications of the Ministry of Commerce

as well as the requirements of our customers.

Furthermore, we have cooperated with the government in

upgrading our environmental laboratory to meet interna-

tional standards. Thaioil has always been committed to

extending our competitive advantage both in the areas of

product quality and production process while effectively and

consistently managing the environmental issues. One way

of improving is by ensuring our laboratory is competent in

performing environmental tests efficiently and accurately

and are duly recognized at the international level.

The Company participated in the program launched by

the Department of Industrial Works (DIW) to upgrade the

capability of private testing and calibration laboratories

registered with the department. United Analyst and

Engineering Consultant, an expert in environmental

management, was engaged as the consultant. Thaioil was

selected as one of the country’s top 40 laboratories with

the highest capability and efficiency ratings to implement

the upgrade in only short period of time, and became a

model for other private laboratories.

The Company passed the program’s quality assessment and

received the mark to signify being a “Good Laboratory Practice”

facility according to the criteria of the DIW on September 12,

2007. Participation in the program raised the competency of

our laboratory to international level and demonstrates our

commitment to becoming a leading integrated refining and

petrochemical business recognized for sustainable growth

and prioritized environmental and social concerns.

Our laboratory has, in addition, arranged for personnel and

management system development, including the competence

of testing instruments and equipment, to meet government

policy regarding alternative fuels such as gasohol and

biodiesel.

Occupational Health and Safety Management System

Thaioil has applied the enhanced safety management

approach, which is based on international principles, and

the occupational health and safety standard of TIS 18001

to our operations. Key performance indicators (KPIs) are

established to measure our annual occupational health,

safety and fire prevention performance. This ensures

alignment with our corporate policy and serves as a

guideline in performing work. To achieve the KPI targets,

Thaioil has put in place a health, safety and fire prevention

performance plan. After execution, reporting of performance

results against the targets are consistently carried out to

ensure effective monitoring and evaluation.

Advancement of Our Environmental Laboratory

to meet International Standards

The Company passed the assessment of the program

organized to upgrade the capability of private testing and

calibration laboratories registered with the Department

of Industrial Works (DIW), and received the mark to signify

being a “Good Laboratory Practice” facility according to

the criteria of the DIW on September 12, 2007.


045

In the past decade, our safety records have exceeded the

average benchmark of refineries serviced by Shell Global

Solutions (SGS). Evaluation of our performance results

shows that Thaioil is capable of consistently achieving the

set targets according to the performance plan. We have also

developed personnel and improved occupational health,

safety and fire prevention performance in compliance with

appropriate regulations and legislation. These are: modifi-

cation of the permit to work system in support of the CDU-3

revamp operation; implementation of table top exercises,

pre-fire planning for storage tanks, pre-incident planning,

and danger warnings in the process area; review of risk

factors and risk management planning in accordance with

the Ministry of Industry’s announcements, and TIS 18001

occupational health and safety standards; training on safe

working in confined spaces, and incident command, as well as

prompt updates of documents associated with occupational

health, safety and fire prevention management system

controls for the optimum safety of employees, contractors

and community members.

The Company is also a knowledge and technology center for

occupational health, safety and fire prevention management.

The public and private sectors as well as local and inter-

national educational institutions, therefore, regularly visit

our facilities and invite our experts for public lectures

and educational demonstrations. Furthermore, we regularly

participate on a number of legislation drafting committees

with regards to occupational health, safety and fire prevention.

Thailand Quality Award

In 2008, Thaioil will adopt the framework of the Thailand

Quality Award (TQA) to improve our performance and

prepare for our drive toward organizational excellence.

The award will earn Thaioil recognition for attaining world-

class standards of business excellence. This will be proof

of our potential to compete in the world stage and our

knowledge management capability in communicating such

knowledge, and sustaining knowledge sharing within the

organization for the optimum benefit of the Company and

all of our stakeholders.

ISO 26000: Corporate Responsibility and

Sustainability

We have created social projects throughout the past four

decades to promote education, religion, local traditions

and customs, environment and health, and communities.

These efforts reflect Thaioil’s corporate responsibility and

sustainability, which are parts of our POSITIVE corporate

values.

To share our knowledge and experiences with the commu-

nities, Thaioil has consistently participated in the knowledge

sharing program initiated by the Thailand Environment

Institute which centered on social responsibility manage-

ment and business operations. After 46 years, Thaioil

remains committed to conducting business with a sustained

focus on our responsibility for the society and the country

as a whole.


046

At Thaioil, respect and responsibility for all our stakeholders is integral to the way we do business. This has been our firm belief since we first began operation and we have continuously demonstrated our commitment over the years to achieving operational excellence in a manner that reflects our social and enviromental responsibilities. Our focus on providing supports to enhance the quality of life of those who live in the communities around us remains as strong as ever. Each year we sponsor a number of charity p ro g ra m s t h a t b e n e f i t t h o s e w h o a re disadvantaged in the society as well as the community at large. The Company has always been active in projects that enhance the quality of life of the community and of the environment, particularly through scholarship grants and knowledge creation as well as the perpetuation of social values that is fundamental to the shared sustainable growth of the Company and the community that underpins our vision.

In 2007, Thaioil developed a more systematic approach to

social projects as well as redirecting their contents toward

the goals of Thaioil Group and better serving the needs of the

community. On the auspicious occasion of the 80th birthday

anniversary of His Majesty the King, we concentrated primarily

on knowledge creation and innovation toward sustained

development. Our pilot projects will build on returning values

to the community.

1. Projects in honor of His Majesty the King’s 80th Birthday AnniversaryTribute documentary “Royal Private Trip to the Highlands”

In recognition of His Majesty devoting his life to the develop-

ment of Thailand and its people, Thaioil joined in the tribute

on this auspicious occasion by sponsoring a television

program that comprehensively conveyed the King’s ideas and

tireless work through the Royal Projects for the first time on

Channel 9 television in a special documentary. “Royal Private

Trip to the Highlands” reflects the ingenious initiatives and

vision 40 years ahead of time of His Majesty that transformed

the largest opium poppy production source into a garden to

feed the world and make Thailand proud.

“Thaioil Group Health and Learning Center for the Local

Community”

Thaioil Group is following in the royal footsteps in developing

the community to achieve sustainable growth as a royal

tribute by opening the “Thaioil Group Health and Learning

Center for the Local Community.” The primary objective of the

center is to raise the quality of health for those who live

in the neighboring communities more progressively and

comprehensively, without charges. The center will also

CORPORATE RESPONSIBILITY & SUSTAINABILITY

C O R P O R AT E R E S P O N S I B I L I T Y & S U STA I N A B I L I T Y

047

be expanded to provide knowledge and skills development

to the communitie, such as library services, occupational

training, activities to promote mental and physical health, and

youth development.

Brushstrokes of Dreams in Father’s Footsteps

In tribute of His Majesty the King as a national artist,

Thaioil Group and Thai Tokai Carbon Products Co., Ltd. in

collaboration with Khao Kiew Zoo organized the “Brush-

strokes of Dreams in Father’s Footsteps” program to promote

children with painting skills to present their creativity

through art. We believe this can help foster and develop

their imagination and creativity as well as instill awareness

for the preservation of nature and the environment as

advocated by His Majesty.

2. Education ProjectsScholarships

Education is central to the Thai nation achieving sustainable

development and our policies highly prioritize the promotion

of human resources development. We have been a long-time

sponsor of various scholarships, such as:

• Princess Maha Chakri Sirindhorn Fund under royal

patronage from which scholarships will be awarded at the

discretion of Her Royal Highness. Thaioil has continuously

allocated money to the fund since 1991.

• Thai Oil Public Company Limited Fund under the Ananda

Mahidol Foundation which received royal permission to be

set up in 2005.

• Chemical Engineering Practice School Program at King

Mongkut University Technology Thonburi which aims to

produce professional chemical engineers to serve the

needs of Thailand’s industrial sector. This program has

been underway since 1997.

• Thaioil Education Fund to Commemorate Dr. Pramoj

Chaivej from which chemical engineering students

throughout the country are selected. Scholarship

recipients will be sponsored until their graduation.

• Annual scholarship awards to community-based school

and university students.

Knowledge Creation

Thaioil supports the creation of knowledge through direct

experience. We welcome visits to our refinery facilities by

education institutions from across the country to provide

them with first-hand experience and to offer our facilities as

a source of learning. Thaioil Group participates in scientific

culture camps to instill in children the scientific approach to

systematic learning and decision-making on correct data. The

Company has also been a regular provider of fire training drills

to government agencies and the public in the area.

3. Continuation Programs of Religious, Social and Traditional ValuesAs a leading enterprise, Thaioil Group is mindful of our role in

upholding customs and traditions that have been passed on

through the generations. We annually participates in key

festivals and traditions such as Songkran Festival, Kong

Khao Fair, promotion of Mahachati Sermon, candle-offering

ceremony during Buddhist Lent, and Kathin Ceremony as

co-organizers with the community.

4. Health and Quality of Life ProgramsWe believe that good mental and physical health underpins

the country’s successful development. This starts with

providing understanding of nutritional basics, promoting

physical well-being through exercise, and providing health

services. Programs sponsored by Thaioil Group are :

Mobile Public Health Units

To affirm our commitment to care for the community, we

send out mobile medical units to provide healthcare to the


048

community on a regular basis. We also support visits by

medical students to offer health advices to community locals.

Sport Equipment and Personnel Sponsorship

Thaioil Group has consistently supported activities that

promote good health such as sponsoring the training and

participation of the Sriracha football team in professional

football competitions organized by the Football Association

of Thailand, sponsoring Sriracha School football team in

the National Youth League, and sponsoring for activities

that promote exercise within the community, as well as

community sport events.

5. Environmental ProgramsOne of our primary objectives is to make our operations

environmental-friendly. Our commitment to this goal is

reflected in our unremitting care and conservation of the

environment within our premises and in the surrounding

communities through programs that promote and champion

awareness in preserving the environment and natural

resources.

Environment Conservation Campaign in Honor of Her

Majesty the Queen

Thaioil Group and Thai Tokai Carbon Products Co., Ltd.

implement this program every year to honor Her Majesty

the Queen on her birthday anniversary. The program aims to

raise the awareness in youths and the public of the need to

nurture the environment with emphasis on overall community

cleanliness and hygiene.

Euro IV Oil Production

The government plans to enforce Euro IV standard in gasoline

gasohol and diesel fuel as from January 1, 2012. Gasoline and

gasohol will be required to reduce sulfur content to 50 parts

per million (ppm) and benzene to 1% volume. Diesel fuel is

permitted 50 ppm of sulfur.

As reflected in our vision which commits Thaioil to

social and environmental well-being, we recognize the

importance of promoting the use of clean fuels. Therefore,

to meet the new environmental-friendly technology, we

have undertaken a study which concludes that the refinery

process can be modified to produce Euro IV compliant

diesel fuel which will be ready for distribution as early as

the first quarter of 2008, which is four years ahead of the

government’s schedule.

6. Community Relations ProjectsOur 46 years of successful operation was achieved through the

excellent support of the people of Sriracha. Our relationship

with the communities is, therefore, one of our top priorities of

concern. We now adopt a sustainable approach to community

relations in order to bring the policies of Thaioil Group in

this area to a more concrete and long-term fruition. At

the same time, we are focusing on greater participation by

the communities to strengthen development under the

concept “We think – We Act – Together”. These activities

help strengthren the ties between Thaioil Group and the

communities. In 2007, we implemented a number of activities

designed to benefit the communities, such as :

We think – We Act – Together Program (Tri-partite Meetings)

This new-approach meeting is held every quarter with the

seven communities around the refinery premises, Kasetsart

University Sriracha Campus, and Laem Chabang Municipality.

The purpose of the meeting is to exchange experiences and

brainstorm socio-economic and environmental development

ideas which, in order to succeed, require the involvement of

every party.

We Care, We Share, We Connect Program

Thaioil Group aims to enhance the coordinating, teamwork

and team development capabilities of the community

committee, to achieve shared success. Knowledge is an

element that runs through the theme of the seminars and

workshops we organize to enable members of the community

committee to adapt and apply in their works.

Visits to Thaioil Group and Thai Tokai Carbon Products

Co., Ltd., and Open House Program to Win Youths’ Hearts

The purpose of the programs is to inform and educate the

surrounding communities on the operations of Thaioil Group.

We believe this will help generate solid understanding and

trust in our skills and expertise on environmental and safety

issues.


Dubai crude and Singapore finished petroleum products prices were high and volatile in 2007, rising above 2006 levels. A number

of factors combined to push up these prices: geopolitical threats in oil producing countries, concern over the US economy and

the US dollar, worries about crude and product inventories, the impact of rapid growth in the Asia-Pacific region on overall oil

demand. Rising oil prices kept the growth of domestic demand for petroleum products subtle compared to the past. Besides the

pricing factor, bio-fuels—both gasohol and bio-diesel—had a bigger role to play in the domestic market. This was particularly

true in times of soaring oil prices and given the government’s promotion of bio-fuels produced from local agricultural products.

Meanwhile, the Asia-Pacific paraxylene and lube base oil markets were greatly assisted by strong economic growth in the region,

especially China and India, which helped stabilize demand for these two products while limited new supply sources resulted in

prices remaining high.

Key factors for high prices of Dubai crude and Singapore petroleum products were:

Political situations in oil producing countries: The market had concern over possible oil production disruptions as a result of

geopolitical conflicts especially those between Turkey and Kurdish separatists in northern Iraq, the nuclear development project

in Iran, and violence in Nigeria.

Concern over US economy: The US sub-prime mortgage crisis gave rise to concern over a global economic slowdown that would

directly affect oil demand.

Concern over US gasoline inventories during driving season: Planned and unplanned refinery outages in the US led to lower

gasoline stocks as the US prepared for the summer driving season.

Concern over Japan’s kerosene inventories for winter: Given the weather forecast for a milder-than-usual winter in 2007,

the country relaxed the past effort to build up the kerosene inventories, resulting in lower kerosene inventories in Japan since

last October. This stirred up concern in the market that shortages in kerosene supply could be triggered should temperatures

dip below what had been forecasted.

Crude Oil and Petroleum Product Prices

Jet Fuel

Diesel Fuel

Gasoline

Dubai Crude

Fuel Oil

US$/Barrel

2006 2007

120

110

100

90

80

70

60

50

40

30

049I N D U ST RYOV E RV I E W

INDUSTRY OVERVIEW

Concern over disruptions in crude production due to weather conditions: The market was worried about crude and petroleum

product shortage around the Gulf of Mexico due to the forecast for stronger hurricanes in the Atlantic. As it happened in 2007,

however, the hurricanes did not cause substantial damage to refineries in the area.

Impact from speculative trading in the futures market and the weakened US dollar: An influx of hedge funds trading in the

oil futures market, particularly in the face of the weakened US dollar, coupled with the US economic slowdown and the Federal

Reserve’s cut in interest rates, gave rise to an increase in investment in the crude market.

OPEC’s role in raising crude output ceiling: With crude prices surging in the latter half of 2007, OPEC decided to raise the output

ceiling to 500,000 barrels per day (bpd) starting from November 1, 2007. However, the market saw this as a move too little, too

late which did not help deterring the steadily rising prices.

Repercussions of the rapid growth in the overall oil demand in the Asia-Pacific region: The rapid economic growth in China,

India, Indonesia and Vietnam in 2007 resulted in an increase in oil consumption even despite the surging prices. This was

because domestic retail oil prices in those countries had been pegged by the respective government.

Thailand’s Petroleum Product Demand and Supply in 2007

Thailand’s Petroleum ProductDemand-Supply Balance

bpd

Overall Demand

Supply

Fuel Oil

Diesel Fuel

Jet Fuel

Gasoline

LPG

Source : Department of Energy Business, Ministry of Energy

1,000,000

800,000

600,000

400,000

200,000

0

2003 2004 2005 2006 2007

On initial assessment, the Office of the National Economic and Social Development Board estimated the country’s economic

growth in 2007 to be roughly 4.8% over 2006. Domestic consumption continued to be pressured by political uncertainties and

rising oil prices in the second half of the year. Investment by the private sector had also slowed down since the end of 2006 due

to the political uncertainty and state of the economy. The rapid growth in the export sector and the accelerated government

spending were significant factors driving the overall economy to grow at a decent rate.

Thailand’s overall demand for petroleum products was 724,000 bpd in 2007, up 0.3% from the year before. High demand was

registered for LPG and jet fuel as a direct result of retail LPG price, which had been low compared to other products, and the

increase in flights going through Thai airports.

050 I N D U ST RYOV E RV I E W

Consumption of gasoline and diesel fuel slightly outperformed that in the previous year despite retail prices being quite brisk.

The government’s support for gasohol drove domestic sales up considerably and compensated for the reduction in demand for

gasoline 91 and 95. Meanwhile, the increase in diesel fuel demand was considered to be low when compared to past average

growth. The moderate performance is attributable to the pressure of consistently high diesel prices combined with the slowdown

in industrial expansion as well as problems caused by the mid-year floods.

The higher demand for finished petroleum products and the nearly unchanged supply volume from the previous year meant

a reduction in the export of petroleum products from 142,000 bpd in 2006 to 133,000 bpd, or a drop of 6%. Diesel and fuel oil

continued to be the most exported products.

Thailand’s Export of Petroleum Products

bpd

Fuel Oil

Diesel Fuel

Jet Fuel

Gasoline

LPG

Source : Department of Energy Business, Ministry of Energy

200,000

160,000

120,000

80,000

40,000

0

2003 2004 2005 2006 2007

Thailand’s Domestic GasolineSales by Type

Gasoline 91

Gasoline 95

Gasohol

bpd

2005 2006 2007

100,000

80,000

60,000

40,000

20,000

0Source : Department of Energy Business, Ministry of Energy


Outlook in 2008

World crude prices and Singapore petroleum product prices will continue to be subject to upward pressure in 2008. This is due

to tight crude production and refining reserve capacity particularly prevailing in the first half of the year. Major risk factors are

demand from China and India, impact on the US economy from the sub-prime credit crisis, refinery capacity expansion in the

Asia-Pacific region, particularly China and India, an uptrend in the consumption of various alternative fuels, geopolitical tensions

in oil producing countries, and production disruptions at US refineries. Against this backdrop, Thaioil remains committed to

retaining its domestic market share as well as continued an effective risk management so as to reduce the effect of volatile global

oil prices.

Industry Overview: Paraxylene

The polyester-based fiber and textile industries dictated demand for paraxylene in 2007. Polyester demand continued to grow in

tandem with GDP growth in Asian countries, particularly China and India where GDP grew 8-9% in 2007. Global demand for

polyester is expected to grow at an average rate of 6% per year.

World Polyester Production2005 - 2011

Million tons

Asia

North America

Europe

Mideast/Africa

South America

* Maximam Capacity

50

45

40

35

30

25

20

15

10

5

0

2007 2008 2009 2010 20112005 2006

* 38.9

* 45.6 * 48.6* 52.3

* 55.4 * 58.0

* 41.6

Remark :2008 - 2011 figures are projected

As demand continued to grow, so did supply, with new capacities coming on stream in Asia and the Middle East. In 2008, Thailand

expects to change her role from a net paraxylene importer to a net paraxylene exporter upon completion of the plant expansion

by PTT Aromatics and Refining Plc. (former Aromatics (Thailand) Plc.)

Industry Overview: Benzene

The production capacity expansion of the phenol plant in Singapore is expected to lead to an increase in regional demand for

benzene in 2008. Thus, a substantial increase in the production of benzene is projected. Thai Paraxylene (TPX) is expected to come

on stream in 2008 to produce benzene and satisfy the increasing regional demand. Furthermore, there is a possibility of benzene

export to the US and Europe where demand seems to be high following the ban on MTBE in gasoline as well as the promotion

of the use of ethanol in petroleum products which in turn reduce benzene precursors.

Industry Overview: Toluene

The regional toluene market remains relatively balanced. Moreover, the projected rate of economic growth in China, India and

Vietnam is expected to trigger quite a substantial growth in demand for toluene in the construction and related industries.

Therefore, TPX plans to start producing toluene in 2008.


Industry Overview: Electricity

The peak consumption of electricity was on April 24, 2007 at 22,586 megawatts, 7% increasing from 2006. Electricity generation

grew 6% from the previous year to 150,665 gigawatthours.

Installed Generating Capacity2007

Source : Energy Policy and Planning Office,Ministry of Energy

3 6 %

7 %

1 %

I P P 1 0,0 26 M W

S P P 2 ,0 7 0 M W

I m p o r t s 3 4 0 M W

TOTA L 2 8, 2 3 0 M W

EGAT 1 5, 7 94 M W 5 6 %

Share of Power Generationby Fuel Type 2007

Source : Energy Policy and Planning Office,Ministry of Energy

Lignite & Coal

Impor t & Other Sources

Hydro Power

Natural GasFuel Oil2 %

67 % 5 %

5 %

2 1 %

In September 2007, Thailand’s total installed generating capacity was 28,230 megawatts, 7% increasing from the same month in

2006, comprising 15,794 megawatts (56%) from the Electricity Generating Authority of Thailand (EGAT), 10,026 megawatts (36%)

from independent power producers (IPPs), 2,070 megawatts (7%) from small power producers (SPPs), and the remaining 340

megawatts (1%) were imported from neighboring countries. Power generation by fuel type was comprised of 67% from natural

gas, 21% from coal and lignite, 5% from hydro power, 2% from fuel oil, and another 5% from imports and other sources.

In May 2007, the Ministry of Energy invited second round bids for the IPP project with capacity of 3,200 megawatts, which is

scheduled to begin commercial operation between 2011-2014. The registration for bidders was arranged on June 29, 2007 and bid

submission on October 19, 2007. There were 13 bidders with 20 proposals tendering for combined generating capacity of 17,000

megawatts, representing 5.3 times the capacity sought. During the first round of bids in 1994, there were 89 participants tendering

for combined generating capacity of 39,000 megawatts while the capacity sought was 5,943 megawatts.


On December 7, 2007, the National Energy Policy Council announced the selection of 4 projects with total capacity of 4,400

megawatts. Two are coal-generated and the other two will be generated by natural gas. This was higher than the intended capacity

of 3,200 megawatts due to the attractive tariffs offered. The entire electricity output will be sold to EGAT at 2.135 to 2.648 baht per

kilowatthour. Electricity will be supplied to the grid in 2012-2014.

The second generating unit of BLCP Power Co., Ltd. started providing the electricity supply to EGAT’s grid in February 2007 with

capacity of 717 megawatts. The first generating unit began commercial operation in October 2006. The first generating unit of

Gulf Power Generation Co., Ltd. began commercial operation in May 2007 with capacity of 734 megawatts and its second generating

unit is planned to start the operation in March 2008.

Industry Overview: Lube Base Oil

In 2006, Group I base oil production in the region was 2.4 million metric tons in deficit, coupled with no new supply in 2007.

Meanwhile, ExxonMobil, sited at Jurong in Singapore, expanded Group II capacity by another 200,000 metric tons per annum.

The regional demand is expected to increase at an average growth of 3-4% per annum until 2010, whereas Group I supply remains

stable due to the lack of capacity expansion. Additional supply can only be provided by an increase in production rate. By 2010,

Group I supply will be 2.8 million metric tons in deficit due to increasing demand and stabilized supply. However, the growing

demand can be partially met by Group II and Group III blends which are expected to be in surplus in the region from 2008

onwards.

In the domestic market, supply continued to outstrip demand in 2007, which dropped 1.6% from 2006 as a result of the economic

slowdown due to the negative growth of the vehicle sector and the lower capacity utilization of industrial sector. These factors

resulted in decreased lube base oil demand in the country. Another contributor to the decline in domestic lube base oil demand

is the longer oil change intervals as part of quality improvement to the lubricating oils.

Regional Lube Base OilDemand - Supply

Demand

Supply

Remark :2008 - 2009 figures are projected

2006 2007 2008 2009

12.0

10.0

8.0

6.0

4.0

2.0

0

Million metric tons/month


The completion of major turnarounds of Thai Lube Base (TLB) and IRPC in 2006 allowed these two domestic plants to operate at

full capacity, resulting in higher surplus than that in 2006. Supplies, therefore, had to be exported to countries in the region with

high demand volumes—Singapore, Vietnam, China, Taiwan, Indonesia, India, and Bangladesh. Surplus is expected to prevail in the

following year while demand will grow approximately 1-2% according to the country’s economic stimulation.

Industry Overview: Bitumen

Thailand’s Lube Base OilDemand and Supply

Tons/month

Demand

Domestic Supply

TLB

IRPC

60,000

50,000

40,000

30,000

20,000

10,000

0

20032002 2004 2005 2006 2007

Thailand retained her status as one of the countries in the region with a high growth rate. Domestic demand for bitumen grew

at an average of 4-5% per year over the past 3-4 years as a result of highway expansions from four to eight lanes throughout

the country. Bitumen supply from four major producers (TLB, ARC, IRPC, and Esso) was still in surplus around 50,000-60,000

metric tons per month. TLB and IRPC are major exporters to Asian countries with continual growth such as China, Vietnam,

Australia and India.

Thailand’s Bitumen Demand and Supply

Tons/month

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

Domestic Demand

Domestic Supply

TLB

ARC

IRPC

TOP

ESSO

20032002 2004 2005 2006 2007


056

T h a i o i l G ro u p ’s i n v e s t m e n t s t ra t e g y i s t a r g e t e d a t e n h a n c i n g o u r p o t e n t i a l t o achieve sustainable growth and secure our position to address the volatility inherent in the oil and petrochemical s industr y in the future. Our focus is on expanding the refining operation that is linked to petrochemical production and associated b u s i n e s s e s , a d d i n g t o p ro d u c t v a l u e , investing further in the power generation business and alternative fuel production to become a leading energy enterprise in Asia-Pacific.

Ongoing Projects

Aromatics Expansion by Thai Paraxylene

The first stage expansion of the aromatics production capacity

was completed in 2007 and is now in operation. The expansion

increased the production capacity of Mixed Xylenes products

which are routed as feed to the Paraxylene production unit

and exported. In the second stage of the project, which is

underway, a new production unit is being built and the existing

unit expanded. Completion is scheduled for the first quarter

of 2008.

Upon completion of the project, Thai Paraxylene will be able

to produce a full range of aromatics—Paraxylene, Mixed

Xylenes, Benzene and Toluene. The combined aromatics

production capacity will increase from the current 420,000

metric tons per annum to 900,000 metric tons per annum.

Other Future Projects

Euro IV Compliant Petroleum Products

Thaioil is in the process of upgrading the quality of gasoline

and diesel fuel to meet Euro IV standard which will be

mandated in 2012. Thaioil is currently ready to meet the new

standards particularly diesel fuel which will be distributed in

the first quarter of 2008. Moreover, we are ready to produce

gasoline with less than 1% volume of benzene as soon as

the aromatics expansion project being implemented by Thai

Paraxylene is completed.

Specialty Product by Thai Lube Base

Thai Lube Base is now in the preparation stage of the project

to upgrade extract oil into Treated Distillate Aromatic Extract

(TDAE) which has a low content of Poly Cyclic Aromatic (PCA).

This will be used as feedstock for the production of low-toxic

car tires to be enforced in European Community (EC) countries

in the near future. The construction project is planned for

completion in 2010 and will have the capacity to produce

50,000 tons per annum of TDAE.

FUTURE PROJECTS

F U T U R EP R OJ ECT S

057

Fleet Expansion by Thaioil Marine

Thaioil Marine plans to purchase five double-hull vessels

to meet the export requirements of PTT Group which is

continuously expanding. The new vessels are also in

compliance with the International Maritime Organization

(IMO) convention which requires that vessels transporting

petrochemical and petroleum products be double

hulled as from 2007 and 2010 respectively.

Ethanol Production

Thaioil has formed a joint venture with Padaeng Industry Plc.

and Petrogreen Co., Ltd. (a subsidiary of Mitr Phol Plc.) to

set up Maesod Clean Energy Co., Ltd. as the first producer in

Thailand of ethanol directly from sugarcane. The ethanol plant

will have a production capacity of 200,000 liters per day and

operation is expected to begin in 2009.

The Company has decided at this time to decelerate the

project to produce 500,000 liters per day of ethanol from

cassava roots. This decision was made in light of the domestic

supply-demand situation which is contingent on the govern-

ment’s energy policy in providing support to the blending of

ethanol in gasohol. The regional ethanol market indicates a

demand growth in the future and requires further study.

New Lorry Loading Station

Construction of a new lorry loading station is underway. Upon

completion in 2008, the new facility will be able to provide

service to customers more efficiently to meet the growing

demand. Service will also be extended to include loading of

biodiesel and toluene. In addition, the Company has installed

a Vapour Recovery Unit to protect the environment during

operation as required by government regulations.

IPP Project

Despite not being selected for the second round of IPP bidding,

we are ready to participate in the next round of IPP bids

solicited by the Ministry of Energy.

F U T U R EP R OJ ECT S

1. Refining Operations

Total refinery throughput of crude oil and other feedstock for

the year 2007 averaged at 216,500 bpd. Refinery utilization

was 96% of capacity due to the major turnaround. CDU-3

was also shutdown for revamp to expand the distillation

capacity to meet future growth in oil demand. On completion,

the total crude distillation capacity of the revamped CDU-3

increased by 22%. A critical component of this success is the

Company’s commitment to continuous operational efficiency

and reliability improvements to strengthen the country’s

energy security. It is also a reflection of the dedication of

our expert personnel to their responsibility in monitoring,

inspecting and maintaining process units and associated

equipment in good and reliable condition to uphold our

position as a recognized leading refiner of oil and petro-

chemicals in Asia-Pacific.

In 2007, the major turnaround has been scheduled for several

process units to improve their refinery capacity. This includes

the shutdown of CDU-3 for tie-in with the Mixed Xylenes (MX)

and other process units. To prevent reduction of output

during the shutdown that could upset the market, Thaioil

scheduled the shutdown in two periods. During the first

period (July-August 2007), these major process units were

taken offline : CDU-2 for tie-in with the MX Unit, Depropanizer

Unit 1 for modification to process the higher LPG feed

from the revamped CDU-3, Vacuum Distillation Unit 2

and Hydrocracker Unit 1 (HCU-1) to improve efficiency in

fractionating LPG from light Naphtha, Continuous Catalyst

Regeneration Unit 2 (CCR-2) for a scheduled turnaround,

and Thermal Cracking Unit for the decoking process.

During the second shutdown period (October-December

2007), these remaining units were taken out of operation :

Vacuum Distillation Unit-3, HCU-2 for catalyst change to

improve production of high-value products, Isomerization

Unit and CCR-1 for scheduled turnaround, CDU-3 and

Depropanizer Unit 3 for modification to handle the 22%

increase of crude distillation capacity.

2. Performance Benchmarks

In 2006, Shell Global Solutions International (SGSI) evaluated

and benchmarked the performance of Thaioil refinery by using

a set of parameters to compare against 40 oil refineries

worldwide also under Technical Service Agreement with

SGSI. The evaluation ranked Thaioil refinery in certain para-

meters higher than in 2005. This was due to the scheduled

and unscheduled turnaround to improve the efficiency

and effectiveness of the refinery for operation at full capacity.

The overall performance of Thaioil refinery was satisfactory

as shown in the graph in the next page.

The evaluation covered the refinery’s operating data in 2006 in

such parameters as operating cost excluding energy related

058

REFINING AND PETROCHEMICAL OPERATIONS

R E F I N I N G A N D P E T R O C H E M I C A L O P E R AT I O N S

expenses and depreciation, annualized maintenance cost,

personnel and labor costs, and the energy index. The study

conclusion placed Thaioil refinery in the first Tercile* of

international refineries. In particular, the efforts of Thaioil’s

Energy and Loss Improvement Committee in continually

monitoring the use of energy led to improve energy

management than in the previous year. As a result, the

loss index parameter evaluated by SGSI saw a remarkable

improvement. The personnel and labor indices, however,

grew because of contractors working during the major

turnaround but is only temporary.

In 2006, Solomon Associates evaluated Thaioil’s perfor-

mance by benchmarking against 70 refineries in Asia-

Pacific outside the 40 SGSI refineries. The outcome indicated

Thaioil refinery to be competitive in operating expense

(cash operating expense, US cents/UEDC, non-energy

operating expense, and maintenance index, US$/EDC) and

Mechanical Availability (%). However, Thaioil refinery had

a high labor rate compared to other refineries. The result

of the evaluation performed by Solomon Associates is

consistent with the SGSI benchmarking study.

Refining Process

059

KMT

TCU

ISOM

HVU-1

HVU-3

HVU-2

CDU-1

CDU-3

CDU-2

HDT-1

HDT-3

HDT-2

HMU-2

HMU-1

FCCU

HCU-2

HCU-1

ADIPSRU-3/4

SRU-1/2

HDS-1

HDS-3

HDS-2

ADIP FUEL GAS

LPG

PLATFORM

PREMIUM

REGULAR

JET

KEROSENE

AGO

DIESEL

FUEL OIL

SULPHUR

CCR-2

CCR-1

CRUDE

LONG RESIDUE


3. Energy Improvement

We are constantly attentive to improving energy use and

loss. The CDU-3 revamp was designed to improve energy

efficienc y while other process units are continually

monitored. If there is any indication of reduced efficiency,

action is taken immediately. For instance, regular removal

of soot from heat exchangers, cleaning of heat exchangers,

and selection of catalysts that require less energy in the

production process.

4. Operational Integration with Thai Lube Base

Alarm Management

Thaioil and Thai Lube Base are continuing with the previous

year’s initiative to coordinate efforts to reduce the number of

alarms. The purpose of this collaborative effort is to manage

the alarm system consistent with or better than applicable

standards. Together, we are also setting KPIs in each year for

the number of alarms as well as performing monthly reviews

of our capabilities in achieving the set targets.

Control System Improvement

Thaioil has integrated the entire process control system of

Thai Lube Base under the management of our process

* Tercile represents the participating refineries in the SGSI study arranged in ordered distribution.

The first tercile, represented by the inner circle, are refineries with good performance (less improving opportunities).

The second tercile are refineries with median performance.

The third tercile, represented by the outer circle, are refineries with low performance (more improving opportunities).

control technologists. This will enable the system to be

managed with maximum reliability and precision. Thai Lube

Base personnel are being trained and developed to take over

responsibility for managing their process control system in

the future.

Plant Information System

To improve processing efficiency, Thaioil sent our plant

information system experts to assist Thai Lube Base in

setting up and testing the system. The system went into

operation in early 2007 and can store both digital and analog

information for over five years. This information is analyzed

to identify the optimum production process.

Advance Process Control

Thaioil’s advance process control experts were sent to

provide support to the operation of Thai Lube Base from

conducting a feasibility study to determine the break-even

point and returns from the advance process control, to

qualification of contractors with the experience and expertise

to install a system suitable for the lube base production

process. This system will improve returns from increased

production using minimum energy.

060

SRI Efficiency Performance

Centre : Less OpportunitiesOutside : More Opportunities

OperationalAvailability

Loss Index

Energy Index

Shell Personnel Index

Operating Cost excl. Fuel & Depre.

AnnualizedMaintenance Cost

Maintenance Effort

Labor Cost

20052006

1st Tercile2nd Tercile3rd Tercile

Peer group comparisons


5. Operational Integration with Thai Paraxylene

In 2007, Thai Paraxylene under went an expansion to

increase the production capacity of Paraxylene from

348,000 to 489,000 tons per annum, Mixed Xylenes for

distribution from 72,000 to 90,000 tons per annum, and

to add 177,000 tons per annum of Benzene and 144,000 tons

per annum of Toluene to the product range. Previously,

it was estimated that Thai Paraxylene would shutdown

for expansion tie-in in the fourth quarter, which would

considerably reduce profits from the 2006 levels. However,

through well-coordinated and integrated production

planning with Thaioil, an exercise that began in 2006, as well

as joint initiatives to improve production and operational

efficiencies of Thai Paraxylene during the time when world

prices of Paraxylene and Mixed Xyelenes remained high,

the financial performance of Thai Paraxylene in 2007 was

excellent with a showing of better than expected profits.

These activities were:

Production and Marketing Plans

Thaioil and Thai Paraxylene jointly developed the short-

term and long-term production and sales plans that were

consistent with the rapidly changing market environment

and targeted at realizing optimum value for the operations

of both companies.

Aligning Production Plan with Thai Paraxylene Expansion

Thaioil cooperated with Thai Paraxylene in adjusting the

production plan so that only the MX Unit would be shut

down at the same time as the major turnaround by

Thaioil in October 2007 in order to tie in the Tatoray and

MX Units located within the Thaioil Refinery complex.

During the shutdown of the MX Unit, Thai Paraxylene

purchased Paraxylene feedstock from other sources which

allowed it to continue production and deliver to customers.

As a result, Thai Paraxylene continued to generate revenue

and profit from Paraxylene sales in the fourth quarter.

During the time Thai Paraxylene used cold Mixed Xylenes

as the only feedstock and was able to increase intake from

the usual 650 tons per day to 780 tons per day without

additional investment. In addition, using Mixed Xylenes as

the only feedstock at the utilization rate of 75% allowed

Thai Paraxylene to shutdown the pump in the Paraxylene

Unit, thus reducing electricity cost by one million baht

per month.

Alarm Management

Thaioil personnel assisted in the study to reduce the number

of alarms and in designing the program to count the number

of alarms from which to develop the approach to manage the

alarm system consistent with applicable standards. Thaioil

personnel also assisted in the study to determine KPIs in each

year for the number of alarms.

Control System Improvement

Thaioil integrated the entire process control system of Thai

061

In 2007, the Refinery underwent major turnaround

and the shutdown of CDU-3 for revamp to expand

the distillation capacity to meet future growth in oil

demand. On completion of the CDU-3 revamp, the

total refinery capacity increased by 22%


Paraxylene under the management of our process control

technologists as from mid-2007. This has enabled the system

to be managed with maximum reliability and precision.

Plant Information System

To improve processing efficiency, Thaioil sent our plant

information system experts to assist Thai Paraxylene in

setting up and testing the system. The system went into

operation in mid-2007 and can store both digital and analog

information for over five years. This information is analyzed

to identify the optimum production process.

Shutdown Preparation

During Thaioil’s shutdown of CDU-3 for expansion tie-in,

Thai Paraxylene sent manufacturing personnel to observe

and study the operation in preparation for their shutdown

and tie-in with the expansion in January 2008.

Cooperating in Emergency, Injury or Fatal Illness

Thai Paraxylene has a small workforce and, therefore, needs

a backup firefighting team to support response in a red alert

emergency. Thaioil and Thai Paraxylene have established joint

procedures whereby both will send their first line teams to

support each others in case of emergency. In addition, it was

agreed that Thai Paraxylene can request at any time for the

service of Thaioil’s ambulance in the event of injury or illness

to Thai Paraxylene personnel.

Testing Laboratory Equipment

Thaioil and Thai Paraxylene co-studied the proposed

acquisition of testing equipment required by both companies

and established procedures for the joint use of this

equipment, such as sulfur and nitrogen testing equipment,

which can reduce the cost of new equipment purchases by

seven million baht.

062 R E F I N I N G A N D P E T R O C H E M I C A L O P E R AT I O N S

Human resources risk management is continuously imple-

mented at Thaioil. We apply risk management principles to

the management of the organization and human resources.

Thaioil’s risk management section is responsible for identi-

fying the risks inherent in the organization and various

business units within Thaioil Group based on departmental

KPIs. Training and seminars are provided for staff by

department to help develop risk management skills. At the

same time, awareness of risks is fostered in all employees

throughout the organization.

We encourage management from the level of section head

upward to assume responsibility for knowledge management

within the unit as deem suitable for the management of that

particular unit. The approach helps to stimulate and promote

awareness which leads to the effective collection, compilation

and transfer of knowledge, skills and experiences. This

forms the foundation for systematic development of skills

and knowledge of staff through self-learning, which has a

positive effect on the capability development of a sustainable

organization.

Thaioil is committed to developing all-rounded leadership

skills in staff with high potential in particular. The succession

The human resources development initiatives in 2006 were continued in 2007 with emphasis on bolstering integration and cementing the strengths of Thaioil Group to address the present and future challenges of our business expansion programs.

One of the primary activities during the year was Macro

Structure Design which adjusts the structure of Thaioil Group

and develops human resources to support our commitment

to enhance and achieve our targeted sustainable potential.

The systematic design process of Thaioil’s macro structure

was carried out in the last quarter of 2007 and has resulted

in an integrated model of business management and human

resources development. In addition, improved efficiency of

Thaioil Group was realized through shared services, which

was implemented in parallel and in line with the macro

structure design.

The performance management system is being applied to

management from the level of section head upward based

on corporate KPIs. This is an effective tool uniformly the

corporate vision, mission and strategies into work targets

across the organization.

The corporate values of POSITIVE continue to be highlighted

and fostered. Realizing these core values reflects positively

on the development of our corporate brand as it gives the

Company a favorable reputation as well as public recognition.

Thaioil personnel are encouraged to participate in corporate

social responsibility programs and engage in good governance

practices.

HUMAN RESOURCES MANAGEMENT

063H U M A N R E S O U R C E SM A N AG E M E N T

plan for senior management in critical positions was reviewed

to ensure retirees are succeeded by fully qualified personnel

in terms of knowledge, skills, vision and attitude as well as

being a recognized leader. To train these potential successors,

a number of tools and channels are employed with support

from PTT Plc. and Shell Global Solutions (SGS). Transfer or

secondment within Thaioil Group is another approach we use

to effectively develop change management skills.

In the area of recruitment, Thaioil is successful in engaging

new qualified staff with positive attitude and ethics in appro-

priate numbers and in times demanded by needs of future

business expansion according to our long-term business plan.

The Company uses innovative recruitment strategies, through

continual collaboration with leading education institutions in

Thailand, such as granting scholarships, providing training

opportunities, and sharing professional knowledge and

experiences with education institutions.

Returns on these human capital development programs

and initiatives have been tangible. For instance, we have

achieved KPI targets in safety, we have in place an integrated

management system within Thaioil Group, we are recognized

for the knowledge and expertise of our personnel both

within the public and private sectors, and Thaioil and our

subsidiaries are recognized for achieving increased sales

and profits.

Our employees are our most valuable capital. We are,

therefore, committed to providing comprehensive training

and development programs as well as support from the day

they become a member of the Company until the day they

retire. We provide pre-retirement trainings that cover such

issues as health, personal finance, and post-retirement life.

This truly reflects the fact that Thaioil Group’s employees are

proudly ranked among the valued resources of Thailand.

064 H U M A N R E S O U R C E SM A N AG E M E N T

The year 2007 culminated in another consecutive year of solid results for Thaioil Group. We achieved a record net profit of 19,176 million baht, or 9.40 baht per share, up 1,517 million baht, or 0.74 baht per share, from the previous year. This performance was achieved against the backdrop of a major shutdown of CDU-3 during October 6 to December 5, 2007 for scheduled turnaround and expansion tie-ins.

Consolidated Results2007 2006 Change

GRM-Refinery US$/barrel 9.0 4.8 +4.2 +88%

Integrated margin 1 US$/barrel 10.5 7.6 +2.9 +38%

Sales million baht 261,051 279,109 -18,058 -6%

EBITDA million baht 29,030 24,577 +4,453 +18%

Net profit million baht 19,176 17,659 +1,517 +9%

Earnings per share baht 9.40 8.66 +0.74 +9%

1 Calculated from combined margin of Thaioil, Thai Paraxylene, and Thai Lube Base, divided by the exchange rate in each period, and divided by total feedstock of

Thaioil, Thai Paraxylene, and Thai Lube Base.

Thaioil and our subsidiaries recorded 261,051 million baht in

sales revenue, down 18,058 million baht due to stronger baht

currency. However, average oil prices in the global market

remained volatile and high, particularly the average prices of

unleaded gasoline and fuel oil which rose over US$ 9 over the

previous year. Terrorism concerns affected the demand and

supply situation, raising GRM from 88% or US$ 4.2 per barrel

in 2006 to US$ 9 per barrel in 2007. Stock gain was US$ 3.2

per barrel. Integrated margin of Thaioil Group reached US$

10.5 per barrel, up 38% from 2006. EBITDA totaled 29,030

million baht, an increase of 4,453 million baht or 18% over the

previous year. As a result, net profit was at a record high of

19,176 million baht or 9.40 baht per share, an increase of 1,517

million baht or 0.74 baht per share over the previous year.

Note:

In 2007, the Company has adjusted its accounting policy whereby recording of fixed assets is changed from the valuation method to the cost method, recording of

investment in subsidiaries and associates is changed to the cost method, and calculation of the costs of crude oil, petroleum products and oil fuel is changed from

the cost method to the weighted average method. We have therefore, amended the data recorded in 2006 for comparison. As a result, consolidated profits rose

2,396 million baht in 2007 and 1,064 million baht in 2006.

065

MANAGEMENT’S DISCUSSION AND ANALYSIS

M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A LYS I S

Results by Company

in million baht TOP TPX TLB IPT TP TM Total Change

Sales/service revenue 253,959 33,247 21,582 8,924 3,285 731 261,051 -18,058 -6%

EBITDA 21,384 3,865 1,932 1,203 649 68 29,030 +4,453 +18%

Interest expense (1,411) (8) - (288) (31) (5) (1,728) -189 -10%

Gain/(loss) on foreign exchange 1,948 34 (23) 191 - - 2,150 -1,420 -40%

Income tax (4,694) - (485) (16) (113) - (5,308) +2,105 +66%

Net profit/(loss) 1 14,083 3,401 1,130 627 262 13 19,176 +1,517 +9%

1 Excludes dividends received from subsidiaries and capital gains from capital reduction by subsidiaries.

• Thaioil revenue from sales totaled 253,959 million baht,

a drop of 26,189 million baht from 2006. This was

attributable to the combination of the stronger baht and

the shutdown of CDU-3 for revamp from October 6 to

December 5, 2007 (61 days). Average oil product prices

that rose almost US$ 10 per barrel drove up average

GRM to US$ 9 per barrel as compared to US$ 4.8 per

barrel in 2006. The refinery’s EBITDA grew to 21,384

million baht, up 8,599 million baht from the previous

year. Thaioil recognized gains from the exchange rate

and gains on unwind cross currency swap contract, on

the back of the baht that continued to grow stronger, of

1,948 million baht. Through effective financial manage-

ment, the Company was able to maintain the interest

expense at 1,411 million baht. Profit before dividend and

capital gain from capital reduction by subsidiaries totaled

14,083 million baht, a rise of 5,627 million baht. Combined

with dividend from subsidiaries of 2,253 million baht

and capital gain from reduction of preferred capital stock

by Thai Paraxylene of 1,528 million baht, Thaioil recorded

a net profit in 2007 of 17,864 million baht, up 7,719 million

baht or 76% from 2006.

• Thai Paraxylene revenue from sales totaled 33,247

million baht, down 8,357 million baht from 2006. EBITDA

was 3,865 million baht, down 2,260 million baht from the

previous year. Shutdown of the Mixed Xylenes Unit from

October 6 to December 14, 2007 (70 days) for maintenance

and installation of new equipment to support the capacity

expansion pressed Thai Paraxylene into purchasing the

high priced mixed xylenes as feedstock instead of receiving

platformate from Thaioil. The feedstock price had adjusted

upward with the gasoline price while the paraxylene price

remained almost unchanged from 2006, resulting in a

lower price differential. Interest expense in 2007 totaled

8 million baht, down 88 million baht from 2006 due to

full payment of long-term loans in the fourth quarter.

Net profit for 2007 reduced by 2,265 million baht from

the previous year to 3,401 million baht in 2007.

• Thai Lube Base revenue from sales totaled 21,582 million

baht, up 3,985 million baht from 2006. This was due to Thai

Lube Base utilizing 88% of production capacity for base oil,

which was a growth of 6%, and product sales volume

increasing by 21%. EBITDA, though, was 1,932 million baht,

a fall of 961 million baht due to baht strengthening and

feedstock price adjusting upward with fuel oil price and

lowering the differential between product prices and

feedstock price coupled. In the third quarter, Thai Lube

Base started paying corporate income tax which makes

net profit after tax deduction in 2007 equaled 1,130 million

baht, down 1,282 from the previous year.

• Independent Power (Thailand) revenue from sales totaled

8,924 million baht, up 540 million from 2006 due to power

generating availability of 87% a 13% growth from 2006.

066 M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A LYS I S

EBITDA was 1,203 million baht, a fall of 794 million baht

from the previous year. This was attributable to the lower

AP value according to the Power Purchase Agreement

and the higher maintenance cost per hour of the gas

turbine according to the Long Term Maintenance Contract

(LTMC). Independent Power (Thailand) also received a

total of 394 million baht in insurance compensation.

Foreign exchange gains dropped to 332 million baht over

the year before, resulting in a net profit of 627 million baht,

down 947 million baht from 2006.

• Thaioil Power revenue from sales totaled 3,285 million

baht, down 157 million baht from 2006. EBITDA was 649

million baht, a drop of 75 million baht from the previous

year. This owed to the reduced utilization rate following

the shutdown of Thaioil’s CDU-3 for revamp combined with

the higher production cost due to the increase in the fuel

oil price from 2006. In addition, the income tax exemption

benefit under the investment promotion granted by the

Board of Investment ended in March 2006 and Thaioil

Power paid 19 million baht in income tax. Net profit in 2007,

therefore, is recorded at 262 million baht, down 56 million

baht from 2006.

• Thaioil Marine revenue from services totaled 731 million

baht, up 213 million baht from 2006. EBITDA was 68

million baht, down 13 million from last year due to

higher oil costs combined with the interest expense and

administrative cost of ‘Thaioil 10’ prior to commercial

operation on December 21, 2007. Net profit of Thaioil

marine amounted 13 million baht, a drop of 17 million baht

from the prior year. Thaioil Marine accepted delivery of

the 32,250-deadweight-ton ‘Thaioil 10’ at a cost of US$

35 million in December 2007 and sold a 7,000 deadweight-

ton ‘Sathit Tara’ in January 2008, which makes Thaioil

Marine fleet consists of 5 vessels at present.

Analysis of Consolidated Financial Position

in million baht Dec 31, 2007 Dec 31, 2006 Change

Total assets 137,063 110,324 + 26,739 + 24%

Total liabilities 65,177 50,158 + 15,019 + 30%

Shareholders’ equity-net 71,886 60,166 + 11,720 + 19%

Total Assets

As at December 31, 2007, Thaioil and subsidiaries had a total

of 137,063 million baht in assets, an increase of 26,739 million

baht from the prior year due to expansion investments by

Thaioil Group. This consisted of Thaioil’s CDU-3 revamp and

expansion of the single buoy mooring, production capacity

expansion by Thai Paraxylene, and fleet expansion by Thaioil

Marine, for instance, including an increase in inventory and

accounts receivable due to higher oil prices and the production

capacity expansion.

Total Liabilities

As at December 31, 2007, Thaioil and subsidiaries had a total

of 65,177 million baht in liabilities, an increase of 15,019

million baht from the year before. This was the result of

an increase in accounts payable due to rises in oil price,

and additional loans drawdown for expansion projects

undertaken by Thai Paraxylene. Long-term loans of Thaioil

and subsidiaries (including loans due for repayment within

one year) totaled 31,959 million baht as at December 31, 2007.

US-dollar-denominated loans totaled US$ 416 million,

baht-denominated loans totaled 15,034 million baht, and

yen-denominated loans totaled 9,438 million yen. Foreign

exchange risk of translating yen into US dollars was covered

by the cross currency swap contract equivalent to US$ 80

million.

067M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A LYS I S

Shareholders’ Equity-Net

As at December 31, 2007, shareholders’ equity-net totaled

71,886 million baht for Thaioil and subsidiaries. This represented

an increase of 11,720 million baht from 2006 as a result of good

performance that registered a net profit of 19,176 million baht

minus dividend and interim payment of 7,858 million baht.

Analysis of Cash Flows and Financial Ratios

In 2007, cash from operating activities totaled 22,703 million

Financial Ratios

2007 2006

Liquidity times 1.9 2.6

Interest coverage times 16.8 12.8

Long-term debt to long-term capital times 0.3 0.3

Long-term debt to equity times 0.4 0.5

Total liabilities to debt times 0.9 0.8

Net debt to equity times 0.4 0.4

baht for Thaioil and subsidiaries. Cash from investing activities

totaled 17,178 million baht. The majority was payment for

projects such as 3,720 million baht for the CDU-3 revamp

project, 2,006 million baht for the single buoy mooring project,

417 million baht for the new gas turbine project, and 7,875

million baht for the Thai Paraxylene expansion project. Cash

in financing activities used by Thaioil and subsidiaries totaled

7,875 million baht. Therefore, as at December 31, 2007, Thaioil

and subsidiaries had cash of 4,213 million baht.

068 M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A LYS I S

069

1. Transactions between Thaioil and/or Thaioil Sub-

sidiaries and Thaioil’s Major Shareholder

(1) Transactions between Thaioil and PTT Plc.

Description

- Thaioil entered into an agreement with PTT Plc. for

product offtake and crude supply (POCSA) whereby PTT

and Thaioil agreed to purchase and sell finished petroleum

products at market prices according to product planning

procedures, specifications and conditions specified in the

agreement. PTT Plc. shall propose the product type and

volume required for domestic distribution and/or export.

The volume lifted by PTT shall be at least 49.99 percent of

Thaioil’s refining capacity. Thaioil shall notify the product

type and volume to be delivered within the agreed date,

and PTT Plc. shall purchase the volume agreed by

Thaioil for delivery. Furthermore, PTT Plc. shall have

special rights according to the agreement to purchase

products at market prices ahead of other customers at

the maximum volume of 100 percent of Thaioil’s refining

capacity according to terms of the agreement.

This agreement can be terminated for a number of

reasons including by either party giving written notice at

least 12 months in advance. However, the parties cannot

give notice prior to the 13th year as from April 20, 2000.

- Thaioil entered into agreements with PTT Plc. for the

supply of natural gas for use in Thaioil’s refinery at the

agreed volume for a period of eight years (2006-2013) and

15 years (2007-2121). Thaioil may modify the volume by

giving PTT Plc. advance notice. The monthly natural gas

cost shall comprise the cost of natural gas, calculated

according to the formula specified in the agreement, and

the utilization fee for the natural gas pipeline, which shall

be consistent with the normal business practice. Both

parties can extend the agreement by giving written notice

at least six months in advance.

- Thaioil entered into forward contracts with PTT Plc. at

intervals, according to the normal business practice, to

exchange in advance crude oil prices or the differential

between prices of finished products and crude oil

according to the contract. PTT Plc. and Thaioil shall pay

the difference between the fixed and floating prices each

time. This is to hedge against the risk of ever-changing

oil prices.

- Thaioil entered into an agreement with PTT Plc. for co-use

of equipment and tools as well as personnel of the Oil

Spill Response Co., Ltd. as from July 1, 2005 for clean-up

operations of oil spills in the sea or along the coastline.

Thaioil shall pay an annual fee and other expenses

proportionately with PTT. Both parties can extend the

agreement by giving the other party written notice at

least six months in advance.

(2) Transactions between Thaioil Subsidiary Companies

and PTT

Description

- Thaioil Power entered into an agreement with PTT Plc.

for the supply of natural gas for use in the operation of

the power plant of Thaioil Power for a period of 25 years

(1998 to 2022). Each year, Thaioil Power is obligated to

purchase natural gas at the minimum volume or pay for

the natural gas as specified in the agreement (Take or

Pay). The natural gas price shall be the market price

according to the normal business practice. Both parties

can extend the agreement by giving written notice at

least one year in advance.

- Independent Power (Thailand) entered into an agreement

with PTT Plc. for the supply of natural gas for use in

the operation of the power plant of Independent Power

(Thailand) for a period of 25 years (1999 to 2024). The

RELATED PARTY TRANSACTIONS

R E L AT E D PA RT YT R A N S ACT I O N S

070

quality and volume of natural gas are specified in the

agreement. The natural gas price shall be the market price

according to the normal business practice. This agreement

can be terminated by the parties or upon termination of

the Power Purchase Agreement between Independent

Power (Thailand) and EGAT. The parties can extend the

agreement by giving written notice in advance.

- Thaioil Marine entered into an agreement with PTT Plc.

for a three-year office lease. The agreement can be

extended by three years at a time, the lease shall be

based on actual cost, and the terms shall not differ from

those applied to non-related persons.

- Thaioil Marine entered into an agreement with PTT Plc.

for the chartering of oil and chemical tankers according

to the agreement dated January 25, 2007. This agreement

is valid until December 2007.

2. Transactions between Thaioil and Subsidiary or

Affiliated Companies

(1) Transactions with Thaioil Power

Description

- Thaioil entered into an agreement with Thaioil Power for

equipment operation, maintenance, repairs and other

support services, and the supply of feedstock and spare

parts including legal fuel reserve (the “Service and Supply

Agreement”). The agreement is valid for 24 years as from

April 1, 1998 or until the termination of the land lease or

sub-lease between Thaioil and Thaioil Power, whichever

occurs first. The service fee is the actual cost plus over-

heads according to the normal business practice. This

agreement can be terminated for a number of reasons

including by either party giving notice to the other party.


the use of basic infrastructure systems. The agreement

is valid for 24 years as from April 1, 1998 or until the

termination of the land lease or sub-lease between Thaioil

and Thaioil Power, whichever occurs first. The use and/or

utilization of Thaioil’s infrastructure systems, such as

power, steam and water distribution systems, control

system, and other Thaioil utilities in the vicinity of the

power plant. Payment for utilization of infrastructure

systems by Thaioil Power shall be at the rate of two

percent of the monthly revenue of Thaioil Power. This

agreement can be terminated for a number of reasons

including by either party giving notice to the other party.


the lease and sub-lease of land for a period of 25 years

and 9 months (December 1996 to September 2022). This is

for the purpose of utilizing certain parts of Thaioil’s land

at Sriracha that is in the possession of Thaioil according

to the land lease with the Ministry of Finance, and certain

parts of the land in Thaioil’s ownership for construction

and operation of the power plant and associated activities.

The combined rental shall be paid annually with adjust-

ments every five years according to the provisions of

the lease contract with the Ministry of Finance. Upon

expiration of the lease and sub-lease agreements,

ownership in buildings, including constructions and

equipment attached to buildings which are not the plant,

shall transfer to the Ministry of Finance and/or Thaioil as

the case may be.

- Thaioil received compensation from Thaioil Power for

the minimum volume of power and steam which Thaioil

Power could not meet under the terms of the power and

steam purchase agreement between Thaioil Power and

Thai Lube Base during the suspended operation of Thai

Lube Base. Thaioil shall receive this compensation upon

payment by Thai Lube Base to Thaioil Power for the

outstanding minimum power and steam costs according

to the debt restructuring program. Thaioil is obligated

under the agreement for purchase of shares in Thaioil

Power dated January 31, 2000 between Thaioil and

PTTEP International Co., Ltd. to use best efforts in

maintaining a balanced volume of power and steam

purchase from Thaioil Power.


071


the purchase of power and steam according to the agreed

prices for a period of 25 years (1998 to 2022). Power and

steam prices shall be market prices. This agreement can

be terminated for a number of reasons including by either

party giving notice to the other party.

- Thaioil Power entered into an agreement with Thaioil for

repayment of the construction cost of the natural gas

pipeline in exchange for the right to use the pipeline for a

period of 25 years as from April 1, 1998 or until termination

of the Power Purchase Agreement with EGAT, which-

ever occurs first. Thaioil Power repaid such construction

cost in full in 1998 and which was deducted as expense

according to the contract term.

(2) Transactions with Independent Power (Thailand)

Description

- Thaioil entered into an agreement with Independent

Power (Thailand) for the provision as from July 28, 1998

of various support services such as human resources,

training, personnel selection, coordination with govern-

ment authorities, and other services according to the

requirement notified by Independent Power (Thailand).

The service charge shall be the actual cost plus over-

heads according to the normal business practice. This

agreement shall be valid until termination of the Power

Purchase Agreement with EGAT. However, this agreement

can be terminated for a number of reasons including by

either party giving notice to the other party at least 120

days in advance.


Power (Thailand) whereby Thaioil shall be compensated

for the construction of the raw water pipeline in exchange

for the right to use the pipeline for a period of 25 years

as from July 28, 1998 or until termination of the Power

Purchase Agreement with EGAT, whichever occurs first.

Thaioil had invested in the construction of the raw water

pipeline to deliver water to Thaioil’s refinery at Sriracha.

Independent Power (Thailand) requested for use of

the raw water pipeline whereby Independent Power

(Thailand) shall compensate Thaioil for the construction

cost annually according to actual cost plus overheads

consistent with the normal business practice.


Power (Thailand) whereby Thaioil shall be compensated

for using the land to construct transmission lines to

connect the system of Independent Power (Thailand) to

EGAT’s grid for a period of 25 years as from August 15, 1998

or until termination of the Power Purchase Agreement

with EGAT, whichever occurs first. Independent Power

(Thailand) had compensated Thaioil for the land utilization

according to actual cost plus overheads consistent with

the normal business practice. Compensation was paid in


072

full in 1998 and Thaioil recorded the recognized revenue

according to the agreement term.


Power (Thailand) to sub-lease land for a period of 25

years and 9 months (December 1996 to September 2022)

for the construction and operation of the power plant and

associated activities. The combined rental shall be paid

annually with adjustments every five years according to

the provisions of the lease contract with the Ministry of

Finance. Upon expiration of the sub-lease agreements,

ownership in buildings, including constructions and

equipment of buildings which are not the plant, shall

transfer to the Ministry of Finance.


Power (Thailand) for the purchase and sale of the legal oil

reserve for a period of 25 years (August 2000-August 2025)

except when the Power Purchase Agreement between

Independent Power (Thailand) and EGAT is extended or

terminated. Thaioil shall supply the legal oil reserve

according to the requirement notified by Independent

Power (Thailand) and shall provide the service of main-

taining the legal oil reserve at the agreed volume. Service

charge shall be the actual cost plus overheads according

to normal business practice.

(3) Transactions with PTT ICT Solutions

Description

- Thaioil entered into an agreement with PTT ICT Solutions

for information technology and communications services

for an initial period of five years as from July 1, 2006.

Upon expiration, both parties shall consider extending

the agreement five years at a time. Either party wishing

to amend or modify the terms and conditions of the

agreement shall give written notice to the other party at

least 180 days in advance prior to the expiration of each

agreement.

(4) Transactions with Bangchak Petroleum

Description

- Thaioil entered into an agreement with Bangchak

Petroleum Plc. to exchange long residue for fuel oil

whereby long residue from Bangchak Petroleum Plc. shall

be processed in Thaioil’s process unit, and Bangchak

Petroleum Plc. shall offtake fuel oil from the refining

process for distribution in the market. The agreement is

valid until termination by either party giving written notice

at least 90 days in advance. Payment shall be offset with

the cost as specified in the agreement.

3. Transactions among Thaioil Subsidiar y and

Affiliated Companies

Description

- Thaioil Power entered into an agreement with Independent

Power (Thailand) whereby Thaioil Power shall reserve

power in the agreed amount at the fee according to the

actual cost plus overheads consistent with the normal

business practice. This agreement is valid for 25 years as

from January 6, 2000 or until the Power Purchase

Agreement between Independent Power (Thailand) and

EGAT is terminated, whichever occurs first. This agreement

can be terminated for a number of reasons by the

terminating party giving advance notice to the other

party.

- Thaioil Power entered into agreements with Thai Para-

xylene and Thai Lube Base for a period of 25 years until

2022 for the sale of power and steam according to the

agreed volumes. Prices of power and steam shall be

market prices with the condition that the minimum

volumes of power and steam shall be purchased or the

minimum prices of power and steam paid as provided

in the agreements. The agreements can be terminated

for a number of reasons by the terminating party giving

advance notice to the other party.


073

1. Company AssetsOn October 19, 2007, the closing date of the register to

verify minority shareholders, the Company’s registered

capital was 20,400,278,730 baht, and the paid-up capital

was 20,400,278,730 baht, comprising 2,040,027,873 ordinary

shares at the par value of 10 baht per share.

The Company has a US$ 350 million 10-year unsecured

bond with a single reimbursement which matures on June

9, 2015, and 2 baht bonds of 5,500 million baht, the first,

a 2,750 million baht 3-year senior unsecured bond due in

2009, and the second, a 2,750 million baht 7-year bond due

in 2013.

2. ShareholdersAs at October 19, 2007, the first 10 major shareholders,

including shareholding as provided in Section 258 of the

Securities and Exchange Act B.E. 2535, are as follows:

3. Dividend PolicyThe Board of Directors may consider paying the annual

dividend with approval from the annual general meeting of

shareholders, except payment of the interim dividend which

the Board of Directors is authorized to approve from time to

time when the Company’s profit deems it appropriate. The

interim dividend payment shall be reported at the following

shareholders meeting.

The present dividend payout policy of the Board of Directors

is to pay at least 25% of the consolidated net profit after

deductions of all categories of reserves as specified in Company

Regulations and applicable laws. Payment of such dividend is

subject to the cash flows and investment plans of Thaioil and

Thaioil subsidiaries in each year, and other requirements and

considerations as determined by the Board of Directors.

S H A R E H O L D I N G A N D M A N AG E M E N T ST R U CT U R E

SHAREHOLDING AND MANAGEMENT STRUCTURE

Top Ten Major Shareholders 1 Amount of Shareholding Shares Percentage

1. PTT Plc.2 1,010,647,483 49.54

2. State Street Bank and Trust Company 65,781,586 3.22

3. Mellon Bank, NA 65,431,900 3.21

4. Nortrust Nominees Ltd. 40,467,485 1.98

5. HSBC (Singapore) Nominees Pte. Ltd. 36,468,870 1.79

6. Nippon Oil Corporation 36,137,200 1.77

7. The Bank of New York (Nominees) Limited 29,728,267 1.46

8. Somers (UK) Limited 28,069,700 1.38

9. Gerlach & Co – UMB Funds 19,812,300 0.97

10. State Street Bank and Trust Company for Australia 18,808,415 0.92

Total 1,351,353,206 66.24

Note :1 Excluding shareholders of Thai NVDR Co., Ltd., a subsidiary of The Stock Exchange of Thailand with the objective of promoting investor investment, particularly

international investors, in order to invest in common stock of listed companies without being restricted by the foreign shareholding limit which does not have the right to vote at meetings of listed companies.

2 PTT Plc., as a major shareholder of Thaioil, participates in formulating the Company’s management and operational policies through approval of the Board of Directors. There were 4 executive directors from PTT Plc. out of 13 in 2007.

074

5. Board of DirectorsThe Board of Directors are primarily responsible for estab-

lishing the vision, policies and operating budgets together with

management, decisions on activities that benefit the Company,

shareholders, stakeholders, including employees and social

communities associated with the Company. There were 13*

directors serving in 2007 as follows:

• 12 non-executive directors of which 9 were independent

directors*.

• 1 executive director, namely the Managing Director.

The dividend policy for Thaioil subsidiaries shall be considered

and proposed by the board of directors of each subsidiary

to the annual general meeting of shareholders for approval

every year. Consideration shall be given to investment plans

and other requirements and considerations.

4. Management StructureThe organizational structure of Thaioil in 2007 consists of the

Board of Directors, Audit Committee, Corporate Governance

Committee, Nomination and Remuneration Committee, Risk

Management Committee, and Management.

The Board of Directors in 2007 (as at December 31, 2007) comprised:

1. Mr. Cherdpong Siriwit Independent Director and Chairman of the Board

2. Mr. Manu Leopairote Independent Director and Chairman of the Audit Committee

3. Mr. Pala Sookawesh Independent Director and Chairman of the Nomination and Remuneration Committee

4. Mr. Prasert Bunsumpun Director and Member of the Nomination and Remuneration Committee

5. Mr. Chakramon Phasukavanich Independent Director and Member of the Nomination and Remuneration Committee

6. Lt. Gen. Prayut Chan-O-Cha Independent Director and Chairman of the Corporate Governance Committee

7. Mr. Apisak Tantivorawong Independent Director and Member of the Corporate Governance Committee

8. Mr. Nibhat Bhukkanasut Independent Director

9. Mr. Prajya Phinyawat Director and Member of the Corporate Governance Committee

10. Mr. Nit Chantramonklasri Independent Director and Member of the Audit Committee

11. Mr. Pichai Chunhavajira Director

12. Mr. Norkun Sittiphong* Independent Director and member of the Audit Commitee

13. Mr. Olarn Chaipravat* Independent Director and Chairman of the Corporate Governance Committee

14. Mr. Viroj Mavichak Director and Secretary to the Board

* One director completed his term at the 2007 annual general meeting of shareholders on April 10, 2007 and was not re-elected, namely Mr. Olarn Chaipravat,

and one director resigned during 2007, namely Mr. Norkun Sittiphong, on December 20, 2007.

Independent Directors

Independent directors are directors independent of majority

shareholders or group of majority shareholders and

management. Independent directors must have all the

qualifications required by The Stock Exchange of Thailand and

the Securities and Exchange Commission, which are:

1. Must not hold more than 1% of all shares with voting

rights in Thaioil, Thaioil subsidiaries or third parties with

potential conflict of interest.

2. Must not have been involved in management or is an

employee, staff, salaried consultant, or person with

controlling powers in Thaioil, Thaioil subsidiaries or third

parties with potential conflict of interest for at least

1 year.

3. Must have no business relationship, benefits or interests,

whether directly or indirectly, in the financial or operational

management of Thaioil, Thaioil subsidiaries or third parties

with potential conflict of interest in a manner that impedes

independence.

4. Must not be a close relative of executives or majority

shareholders of Thaioil, Thaioil subsidiaries or third parties

with potential conflict of interest. Have not been appointed

as a nominee to protect the interest of a director or

majority shareholder.


075

Independent directors have the power to express opinions

freely in performing the assigned task of protecting the

interests of minority shareholders. The Company requires

independent directors to meet at least twice a year to promote

the opportunity to meet among themselves to propose

guidelines in improving the quality of Thaioil’s corporate

governance consistent with good governance practices of

registered companies in The Stock Exchange of Thailand.

Authorized Directors

The signatures of any 2 directors shall be binding on the

Company when affixed with the seal of the Company.

Board Roles and Responsibilities

The Company’s Articles of Association (AOA) provide that

the roles and responsibilities of the Board of Directors is to

manage the Company’s business and affairs in compliance

with laws, objectives, regulations and shareholder resolutions

by upholding integrity and the best interests of the Company

and shareholders.

The Board of Directors shall elect 1 member as Chairman of

the Board. If the Board of Directors considers it appropriate,

one director or more may be elected as Vice Chairmen. The

role of the Vice Chairman is defined in the Company Regulations

with regards to activities assigned by the Chairman. The

Company’s AOA further provide that the Board of Directors

shall meet at least once every 3 months and may hold

additional meetings as required. In 2007, the Board of Directors

met 7 times.

The Board of Directors has the following roles and

responsibilities:

- Reviews and approves activities proposed by management.

- Regularly assesses the performance of the Managing

Director and fixes his remuneration.

- Establishes the corporate vision and assumes responsibility

for operating results and management performance with

dedication and diligence.

- Reviews and approves key strategies and policies,

including objectives, financial targets, risks, work plans,

and budgets, as well as oversees that management

follow the established policies and plans effectively and

efficiently.

- Assigns the Audit Committee to review the accounting

system and financial reporting as well as oversees that a

process is in place to effectively and efficiently evaluate

the competence of internal control and internal audit

systems.

- Assigns the Audit Committee to review the risk manage-

ment policy to ensure it extends across the organization

and is practiced by management, and reports to the Board

of Directors.

- Be alert to and resolves potential conflict of interest

among stakeholders; establishes guidelines for transac-

tions that may conflict with the interests of the Company

and shareholders; and establishes procedures for the

complete and adequate disclosure of transactions that

may have a conflict of interest.

- Establishes and approves the written corporate governance

policy and business ethics. The Company shall propose

a review of the corporate governance policy and shall

evaluate performance in practicing such policy once a

year.

6. Board CommitteesTo ensure good governance of the Company according to good

corporate governance principles of The Stock Exchange of

Thailand, the Board of Directors has appointed various

committees to oversee specific issues and to ensure that

various activities of the Company comply with the rules and

regulations of The Stock Exchange of Thailand and the

Securities and Exchange Commission.

The standing committees are:

6.1 Audit Committee

The Stock Exchange of Thailand stipulates that listed companies

must set up an audit committee to review business operations,

financial reports, and internal control systems, to select

independent auditors, and to review conflicts of interest, as

well as to submit reports on the activities of the Audit

Committee.


076

The Audit Committee appointed by the Board of Directors

consists of the following 3 non-executive independent

directors:

1. Mr. Manu Leopairote Chairman of the Audit

Committee (Independent)

2. Mr. Nit Chantramonklasri Member of the Audit


3. Mr. Norkun Sittiphong * Member of the Audit


* Resigned from director of the Company and member of the Audit Committee on December 20, 2007.

Ms. Hasaya Nipatvaranan, Internal Systems Audit Manager,

serves as Secretary to the Audit Committee.

Roles and Responsibilities

1. Reviews the accuracy and reliability of quarterly and

annual financial statements as well as adequacy of

information disclosure by coordinating with the indepen-

dent auditors and management responsible for preparing

the financial reports.

2. Reviews the adequacy and effectiveness of internal control

and internal audit systems. Recommends the Internal

Systems Audit Department to review or examine any

transaction considered to be important and necessary

with the independent auditors and the Internal Audit

Manager. Recommends modifications to internal control

systems that are important and necessary to the Board

of Directors. Reviews shall be undertaken with the

independent auditors and Internal Systems Audit Manager.

3. Reviews the Company’s compliance with laws governing

securities and stock exchange, or requirements of The

Stock Exchange of Thailand, and other laws applicable to

the Company’s business.

4. Reviews evidence associated with activities that conflict

the interest of or affects the operations of the Company.

5. Reviews the accuracy and adequacy of disclosed

information on related party transactions or potential

conflicts of interest.

6. Reviews risk management systems and recommends

modifications to improve efficiency.

7. Reports review of risk management to the Board of

Directors.

8. Reviews accuracy and effectiveness of information

technology associated with financial reports and internal

controls.

9. Promotes development of financial reporting system to

international accounting standards.

10. Selects and recommends the appointment of independent

auditors and set their fees giving consideration to reliability

and adequacy of resources, and amount of audit work

by such independent auditors, including experiences of

personnel assigned to audit the Company’s accounts.

11. Provides advice on the budget and workforce of the

Internal Systems Audit Department.

12. Reviews that the internal audit plan meets internationally

accepted methods and standards.

13. Evaluates the annual performance of the Internal Systems

Audit Manager.

14. Prepares the Audit Committee report for disclosure in

the Company’s annual report according to principles

prescribed by The Stock Exchange of Thailand.

15. Chairman and members of the Audit Committee shall

attend the annual general meeting of shareholders in order

to clarify issues associated with the Audit Committee or

appointment of the independent auditors.

16. Reviews and modifies the charter of the Audit Committee.

17. Performs other tasks as assigned by the Board of

Directors within the roles and responsibilities of the

Audit Committee.

In the year under review, the Audit Committee performed as

follows:

1. Reviewed the quarterly and 2007 financial statements with

management, the Internal Systems Audit Manager and the

independent auditors to ensure the accuracy and reliability

of the Company’s accounting system and financial reports

and complete, adequate and timely information disclosure

consistent with generally accepted accounting principles

and associated rules and regulations.

2. Reviewed that the Company had in place effective internal

control and internal audit systems that efficiently serves

the changing environment.

3. Reviewed the Company’s compliance with laws governing

securities and stock exchange, The Stock Exchange of

Thailand regulations, and other laws applicable to the

Company’s business.


077

4. Assessed the accuracy and adequacy of disclosed

information, in particular on related party transactions or

potential conflicts of interest.

5. Considered the annual audit plan and reviewed the audit

report as well as recommended modifications to improve

the efficiency.

6. Selected and recommended the appointment of indepen-

dent auditors and set their fees.

7. Reviewed the quarterly risk management reports.

8. Reviewed and modified the charter of the Audit Committee.

9. Considered and approved matters specifically assigned

by the Board of Directors.

6.2 Corporate Governance Committee

The Board of Directors at Meeting No. 5/2550 on September

14, 2007 resolved to appoint Lt. Gen. Prayut Chan-O-Cha

(independent director), and Mr. Apisak Tantivorawong

(independent director) as members of the Corporate

Governance Committee to fill the 2 vacancies. The Corporate

Governance Committee, therefore, consisted of 3 non-

executive directors as follows:

1. Lt. Gen. Prayut Chan-O-Cha Chairman of the

Corporate Governance


2. Mr. Apisak Tantivorawong Member of the Corporate

Governance Committee

(Independent)

3. Mr. Prajya Phinyawat Member of the Corporate

Governance Committee

Note:Mr. Olarn Chaipravat, Chairman of the Corporate Governance Committee, completed his term as director of the Company at the 2007 annual general meeting of shareholders on April 10, 2007.

Mr. Narongrit Tavornvisitporn, Assistant Managing Director-

Corporate Affairs, serves as Secretary to the Corporate

Governance Committee.


1. Formulates the policy for continued development of

good corporate governance practices according to

international standards as the basis for application by

the Company.

2. Formulates the policy for standard evaluation of

corporate governance within the Company and oversees

the evaluation every year.

3. Oversees that the Company complies with principles

of good corporate governance of regulatory agencies,

namely The Stock Exchange of Thailand and the

Securities and Exchange Commission.

4. Regularly reviews the Company’s corporate governance

policy to ensure consistency with international practices

and the recommendations of regulatory or associated

agencies.

In 2007, the Audit Committee met 7 times with an attendance rate of 95% as follows:

Audit Committee Meetings in 2007

Attendance

Mr. Manu Mr. Nit Mr. NorkunMeeting Leopairote Chantramonklasri SittiphongNo. Held on Member Member Member

1/2550 Friday 16th February 2007 P P P2/2550 Tuesday 24th April 2007 P P P3/2550 Friday 11th May 2007 P P P4/2550 Thursday 17th May 2007 P P P5/2550 Friday 10th August 2007 P P Œ6/2550 Thursday 8th November 2007 P P P7/2550 Thursday 20th December 2007 P P Resigned as director December 20, 2007


078

5. Promotes understanding and practice of a good

governance culture among management and all levels

of employees.

6. Provides guidance to working group preparing for cor-

porate governance evaluation by an outside independent

organization at least once every 3 years.

4. Considers and approves the performance evaluation form

for the Board of Directors.

In the year under review, the Corporate Governance Com-

mittee performed as follows:

1. Organized the election of the Chairman of the Corporate

Governance Committee after the Board of Directors

Meeting No. 5/2550 on September 14, 2007 resolved

to appoint Lt. Gen. Prayut Chan-O-Cha and Mr. Apisak

Tantivorawong as members of the Corporate Governance

Committee to fill the 2 vacancies.

2. Provided advice on improving compliance with good

corporate governance guidelines following the self-

evaluation of the Company by applying the guidelines of

the evaluation form of The Stock Exchange of Thailand,

such as establishing the charters of Board committees,

and CEO succession plan.

3. Provided advice on modification to the 2007 evaluation

form for the Board of Directors by implementing 3 types

of evaluation, namely self-evaluation, evaluation of the

Board of Directors, and peer evaluation.

4. Provided advice on the approach to encourage all

employees to participate in the CG E-learning program

organized by the Company to promote employee education

and understanding of the principles of good corporate

governance and work ethics.

6.3 Nomination and Remuneration Committee

The Nomination and Remuneration Committee appointed

by the Board of Directors comprises the following three

non-executive directors, two of whom are independent directors:

1. Mr. Pala Sookawesh Chairman of

the Nomination and

Remuneration


2. Mr. Chakramon Phasukavanich Member of the Nomination

and Remuneration


3. Mr. Prasert Bunsumpun Member of the Nomination

and Remuneration

Committee

Mr. Narongrit Tavornvisitporn, Assistant Managing Director-

Corporate Affairs, serves as Secretary to the Nomination and

Remuneration Committee.


1. Establishes procedures and criteria for nominating directors.

2. Establishes qualifications for director nominees with focus

on skills, experience, and special expertise that would

benefit the Company, available time, and commitment to

performing role of director.

3. Selects qualified candidates for nomination as directors

and proposes to the Board of Directors for approval at the

annual general meeting of shareholders.

In 2007, the Corporate Governance Committee met twice with full attendance as follows:

Corporate Governance Committee Meetings in 2007

Attendance

Lt. Gen. Prayut Mr. Prajya Mr. ApisakMeeting Chan-O-Cha Phinyawat TantivorawongNo. Held on Chairman Member Member

1/2550 Friday 14th September 2007 P P P2/2550 Wednesday 19th December 2007 P P P


079

4. Encourages the Company to provide minority share-

holders with the opportunity to propose candidates for

nomination as directors.

5. Annually reviews the Managing Director succession plan

and the list of qualified candidates.

6. Selects qualified directors for appointment as Board

committee members and proposes to the Board of

Directors for approval upon vacancy.

7. Submits annual recommendation to the Board of Directors

with respect to the structure and component of director

remuneration.

8. Proposes criteria for reviewing remuneration consistent

with the roles and responsibilities of directors in accor-

dance with the Company’s overall performance in order to

attract and retain accomplished and qualified directors

with high quality and potential. The proposal shall be

endorsed by the Board of Directors prior to proposing to

the annual general meeting of shareholders for approval.

9. Evaluates performance and considers appropriate

remuneration for the Managing Director.

Director Nomination

The selection of qualified candidates for nomination as

directors is performed by the Nomination and Remuneration

Committee. Candidates meeting the required qualifications

and criteria and who have the knowledge, experience and

expertise that would benefit the Company are proposed to

the Board of Directors. If approved, the Board of Directors

submits the list for election at the annual general meeting of

shareholders. Resolution of the shareholders shall require

a majority vote of shareholders attending the meeting and

eligible to vote.

In the year under review, the Nomination and Remuneration

Committee performed as follows:

1. Selected qualified candidates suitable for nomination as

directors and proposed to the Board of Directors to seek

approval from the shareholders meeting.

2. Provided recommendation to the Board of Directors with

respect to the structure and components of director

remuneration.

3. Proposed the criteria for reviewing remuneration con-

sistent with the roles and responsibilities of directors in

accordance with the Company’s overall performance.

4. Selected qualified directors for appointment as members

of the Nomination and Remuneration Committee and

proposed to the Board of Directors for approval upon vacancy.

5. Reported the results of the director nomination and

compensation to the Board of Directors.

6. Encouraged the Company to provide minority share-

holders with the opportunity to propose candidates for

nomination as directors.

In 2007, the Nomination and Remuneration Committee met 4 times with an attendance rate of 92% as follows:

Nomination and Remuneration Committee Meetings in 2007

Attendance

Mr. Pala Mr. Prasert Mr. ChakramonMeeting Sookawesh Bunsumpun PhasukvanichNo. Held on Chairman Member Member

1/2550 Tuesday 13th February 2007 P P P2/2550 Thursday 15th March 2007 P P P3/2550 Tuesday 24th July 2007 P P P4/2550 Friday 14th December 2007 P Œ P


080

6.4 Risk Management Committee

The Company appointed the Risk Management Committee

with Mr. Somkeirt Hudthagosol, Deputy Managing Director,

as Chairman, and Assistant Managing Directors and manage-

ment as members. Ms. Pearl Shinawatra, Risk Management

Administrator, serves as Secretary to the Risk Management

Committee.


1. Oversees that the overall management process of risks

exposed to Thaioil and Thaioil subsidiaries is effective and

consistent with the risk management policy.

2. Promotes the efficient monitoring of business risk

management and control.

3. Provides adequate support to management and appro-

priate to business environment to manage risks at

acceptable levels.

4. Encourages all employees to consistently apply the risk

management process to daily work.

5. Presents risk management results to the Audit Committee

and Managing Director to confirm the effectiveness and

efficiency of risk management and internal controls.

In the year under review, the Risk Management Committee

performed as follows:

1. Considered corporate risk management in January 2007.

2. Approved engagement of independent consultants to

evaluate the quality level of risk management at Thaioil.

3. Reviewed and expedited every business unit to manage

risk according to international standards.

4. Approved risk management plans and control measures

proposed by business units.

5. Reviewed risk management performance of major

projects, namely CDU-3 revamp project, second Single

Buoy Mooring project, and expansion project by Thai

Paraxylene.

6. Appointed the Risk Management Steering Committee to

support risk management work by Thaioil and Thaioil

subsidiaries to be implemented with greater efficiency.

7. Assigned Company representatives to attend meetings

with Risk Management Committee of the Oil Business

Group within the PTT Group on issue of product prices and

foreign exchange.

8. Approved the risk management plans of Thaioil and Thaioil

subsidiaries.

7. Board Composition and AppointmentThe composition, nomination, appointment, removal or

resignation of directors are prescribed in the Company’s

AOA, which can be summarized as follows.

1. The Board of Directors shall consist of not less than five

members with at least half of the directors residing in

Thailand and all of the directors must be appointed by

the shareholders meeting. At least three members shall

serve on the Audit Committee with at least one member

qualified in finance and accounting, and at least half of

the Committee members must reside in Thailand.

2. The shareholders meeting shall appoint directors accor-

ding to the following principles and procedures:

i. Each shareholder shall be entitled to one vote for each

share.

ii. Each shareholder shall be entitled to cast all the votes

under (i) for as many nominees as there are directors

to be elected but cannot distribute the votes among

nominees.

iii. Nominees who receive the largest number of votes in

descending order shall be elected. In the event of

nominees receiving equal votes and exceeding the

number of vacancies to be filled, the chairman of the

meeting shall cast the deciding vote.

3. At each annual general meeting of shareholders, one-third

of the directors shall retire from office. If the number of

directors cannot be divided into 3 equal parts, the

number of directors closest to one-third shall retire.

Directors to retire from office in the first and second years

after registration as a public company shall draw lots. In

consequent years, directors who have served the longest

shall retire from office. Directors retiring in this manner

are eligible for re-election.

4. Any director who wishes to resign from office must submit

a letter of resignation to the Company. The resignation

shall be effective on the date the Company receives the

letter.

5. Removal of a director from office before the end of term

shall require a resolution of shareholders by not less than

three-fourths of the total votes of shareholders attending


081

the meeting and eligible to vote and not less than one-

half of the total number of shares held by shareholders

attending the meeting and eligible to vote.

8. Roles and Responsibilities of Managing DirectorThe Managing Director is assigned by the Board of Directors

to manage the normal business and affairs of the Company

according to the plans and budgets approved by the Board

of Directors with due consideration to discipline, honesty,

integrity and the best interests of the Company and the

shareholders. He shall be scrupulous in avoiding conflicts of

interest with Thaioil and Thaioil subsidiaries. His roles and

responsibilities are:

1. To develop and propose a five-year/ten-year business plan

and strategies for conducting business to the Board of

Directors.

2. To provide the Board of Directors with information on

Company activities or other required information.

3. To manage the business and affairs of the Company

consistent with business plans and strategies approved by

the Board of Directors.

4. To effectively structure and manage the organization

according to guidelines given by the Board of Directors.

5. To foster POSITIVE into the corporate culture to support

the corporate vision, mission and strategies.

6. To perform other duties as assigned by the Board of

Directors.

7. To have the authority to delegate and/or assign other

persons to perform specific tasks within the framework of

rules, regulations or orders established by the Board of

Directors and/or the Company.

8. To prepare and present reports on the performance of the

Company to the Board of Directors every two months

including reports on other matters as required.

9. Related Party Transactions or Acquisition or Disposal of Assets of the Company In the event Thaioil or Thaioil subsidiaries (companies in which

Thaioil directly or indirectly has a shareholding of more than

50% of the registered paid-up capital of such companies)

becomes involved in a related party transaction or an activity

in which substantial assets of the Company are acquired or

disposed, according to the principles of The Stock Exchange of

Thailand, the Company must take the action stipulated by The

Stock Exchange of Thailand. This requires approval to be

sought from shareholders to enter a related party transaction

or to acquire or dispose of substantial assets of the Company

with a majority vote not being less than three-fourths of all the

votes of shareholders or proxies attending the meeting and

eligible to vote without counting the votes of shareholders

involved in the conflict of interest.

10. Director and Executive Remuneration10.1 Director Remuneration

The 2007 annual general meeting of shareholders set the

monthly remuneration of directors and Board committee

members including a special bonus to reflect the Company’s

performance as follows:

1. Directors shall receive a monthly remuneration 60,000

baht.

Members of the three Board committees, which are

the Audit Committee, Nomination and Remuneration

Committee, and Corporate Governance Committee, shall

receive a monthly remuneration of 25,000 baht.

The Chairman of the Board, Chairman of the Audit

Committee, Chairman of the Nomination and Remu-

neration Committee, and Chairman of the Corporate

Governance Committee shall receive a monthly remu-

neration of 25% higher than directors.

In conclusion, the remuneration of 14 directors, which

includes directors in office during 2007 for a period of 12

months ending as at December 31, 2007 and directors who

completed their terms or resigned during 2007, totals 12.02

million baht. This comprised monthly remuneration for

directors of 9.42 million baht and monthly remuneration

for Board committee members of 2.60 million baht.

2. Director remuneration in the form of a special bonus for

2006 performance totaled 50 million baht, which is

according to the resolution of the 2007 annual general

meeting of shareholders on April 10, 2007. Consideration

was given to the successful performance of the Company

and the sacrifice and commitment of directors to the

Company throughout 2006.


082

Details of the remuneration received by each director can be summarized as follows:

Director Remuneration for 2007 Year Total

Name Position Director Committee Special Total Member 1 Bonus 2 Remuneration

1 Mr. Cherdpong Siriwit Independent Director and 900,000 - 4,961,126.52 5,861,126.52 Chairman of the Board2 Mr. Manu Leopairote Independent Director and 720,000 375,000 3,968,901.21 5,063,901.21 Chairman of the Audit Committee3 Mr. Pala Sookawesh Independent Director and Chairman of 720,000 375,000 3,968,901.21 5,063,901.21 the Nomination and Remuneration Committee4 Mr. Prasert Bunsumpun Director and Member of the Nomination 720,000 300,000 3,968,901.21 4,988,901.21 and Remuneration Committee5 Mr. Chakramon Phasukavanich Independent Director and Member of 720,000 300,000 3,968,901.21 4,988,901.21 the Nomination and Remuneration Committee6 Mr. Apisak Tantivorawong3 Independent Director and Member 540,000 100,000 - 640,000.00 of the Corporate Governance Committee7 Lt. Gen. Prayut Chan-O-Cha4 Independent Director and Chairman of 540,000 125,000 - 665,000.00 the Corporate Governance Committee8 Mr. Nibhat Bhukkanasut Independent Director 720,000 - 3,968,901.21 4,688,901.21

9 Mr. Prajya Phinyawat Director and Member of 720,000 300,000 3,968,901.21 4,988,901.21 the Corporate Governance Committee10 Mr. Nit Chantramonklasri Independent Director and 720,000 300,000 3,968,901.21 4,988,901.21 Member of the Audit Committee11 Mr. Pichai Chunhavajira Director 720,000 - 2,783,667.70 3,503,667.70

12 Mr. Viroj Mavichak Director and Secretary to the Board 720,000 - 3,968,901.21 4,688,901.21

Directors completing term and resigning during 2007 1. Mr. Olarn Chaipravat5 Independent Director and Chairman of 240,000 125,000 3,968,901.21 4,333,901.21 the Corporate Governance Committee 2. Mr. Norkun Sittiphong6 Independent Director and 720,000 300,000 108,737.05 1,128,737.05 Member of the Audit Committee

Total 9,420,000 2,600,000 43,573,642.16 55,593,642.16

Note :1 Board committees comprise Audit Committee, Nomination and Remuneration Committee, and Corporate Governance Committee.2 Special bonus for 2006 performance according to the resolution of 2007 annual general meeting of shareholders on April 10, 2007 paid in April 2007. The special

bonus excludes the bonus paid to 2 directors the resigned before 2007, namely, Mr. Prapun Naigowit and Mr. Somchai Wongsawat at 16,426,357.84 baht.3 Appointed as director at 2007 annual general meeting of shareholders on April 10, 2007 and as the member of the Corporate Governance Committee at the 5th,

2007 Board of Directors Meeting on September 14, 2007.4 Appointed as director at 2007 annual general meeting of shareholders on April 10, 2007 and as the Chairman of the Corporate Governance Committee at the 5th,

2007 Board of Directors Meeting on September 14, 2007.5 Completed term at 2007 annual general meeting of shareholders on April 10, 2007.5 Appointed as director on december 22, 2006 to replace Mr. Somchai Wongsawat and resigned from director and Audit Committee member on December 20, 2007.

Note: * Remuneration of 17 executives as at December 31, 2007Excludes those who were assigned to work at other companies : Mr. Pramin Phantawesak, Mr. Chaiwat Damrongmonkolgul, Mr. Bowon Vongsinudom, Mr. Klahan Tochamnanvit, Mr. Somchai Wongwattanasan, and Ms. Duangporn Teerepabpaisit.Includes Mr. Viroj Meenaphant as from January-June 2007.

10.2 Executive Remuneration

As at the fiscal year ended December 31, 2007, remuneration

of 17* executives totaled 152.4 million baht. This comprises

remuneration in the forms of monthly salaries and allowances

of 100.9 million baht, special bonuses of 29.7 million baht,

provident fund contributions of 9.5 million baht, and retirement

gratuity fund payments of 12.3 million baht.

10.3 Other Remuneration

Executives who were provident fund members received

contributions at the rate of 15% of salaries according to

regulations of the provident fund which is the general practice

of the Company.


RISK MANAGEMENT

083

Thaioil has continuously addressed the chal-lenges of managing risk exposures. It is our objective to raise the bar on risk management standards and create a risk management ethic in the corporate culture.

The Risk Management Steering Committee (RMSC) was

recently appointed to drive the risk management effort

throughout the entire Thaioil Group. The RMSC is responsible

for providing support to all department managers in imple-

menting measures to mitigate risks that are inherent in the

work process of every business unit. Through the application

of risk management practices and control self assessment,

risks are identified and controlled within the established risk

appetite and tolerance of each business unit. Risk management

plans are developed by department managers and presented

to the RMSC for review, guidance and approval.

The Company has modified risk management measures to

conform to the international risk management standard AS/

NZS 4360. We have also modified our procedures for risk

assessment and control based on the recommendation of the

consultant firm which was engaged to review the efficiency of

our risk management system and of our Risk Management

Section. The improvements undertaken in 2007 can be

summarized as follows :

1. Improved the efficiency in using the risk management

information systems to provide executives and managers

with a communication channel between their departments

and the Risk Management Section, ensured compliance with

risk control measures according to plan, and utilized data-

base information to analyze and report on the integrity of risk

management performance.

2. Extended the risk management framework to every

business unit in the Company, and adjusted the role of Risk

Coordinators as set out in the Risk Management Manual.

Provided support to department managers in planning the

control of departments’ risks within the established risk

appetite to facilitate operations to achieve the corporate goals

and vision of becoming a regional refining and petrochemical

leader.

3. Developed Risk Management Section personnel and

Risk Coordinators to become competent in assessing risks

and determining standardized risk management procedures

across the entire Thaioil Group. Collaborated with the

risk management function in refining and petrochemical

companies within the PTT Group.

Risk factors that could potentially impede the business from

achieving set goals in 2007 were as follows :

1. External Risks

This relates to the uncertain global economic environment

which impacts on business expansion and oil demand;

domestic disturbances in a number of countries, particularly

in oil trading countries, which affect the supply of quality

crude oil and market oil prices; volatile interest rates and

foreign exchange rates which influence working capital,

crude oil prices, transportation costs, and equipment costs;

political instability which could have a potential effect on

energy policies, business and operating regulations, and

good corporate governance, for instance.

2. Internal Risks

This relates to fragmented vision, mission, corporate culture,

business strategies and management policies; lack of safety

and security in operating process, production, technology

and communication, equipment utilization in the production

process, and employee knowledge development, for instance.

In 2007, we implemented the following measures to manage

various risks and mitigate exposure :

R I S KM A N AG E M E N T

084

1. Long-Term Business Plan

The Company formulated a 10-year strategy and business

plan to ensure cohesive investment in expansion projects

and development, implementation of production capacity

expansion to meet rising oil demand in the region, investment

and joint venture undertakings in energy projects to grow

revenue to offset GRM that will exhibit a downward trend

over the next couple of years.

2. Crude Supply and Production Planning

Instability in many countries, including oil trading countries, is

causing an imbalanced supply of quality crude and market

demand which creates crude price hikes leading to greater

difficulty in securing crude supply for the refinery. Thaioil is,

therefore, exposed to risks in crude oil supply and production

planning for timely delivery of products to customers. We are

cooperating with refineries within the PTT group to strategize

effective crude supply and production planning, and to

develop tools for analysis and calculation of GRM, an integral

component in production planning.

3. Price Management

Current prices of crude oil, finished products and GRM in the

global market are very precarious due to limited reserve

capacity of crude oil. Large amounts of funds are being moved

in the oil market by investors and oil funds which impact on

Thaioil’s working capital and performance results. We have,

therefore, participated in the following commodity hedging:

• Crack Spread Swap to guarantee the spread differential

between product price and crude price, which is a key

variable affecting Thaioil’s GRM. For instance, hedging

between the Singapore prices of gasoline, jet fuel, diesel

fuel and fuel oil against the Dubai crude price.

• Time Spread Swap to lock the price differential between

the same product or crude oil but during different times

which minimizes the risk of the fluctuating oil stock value.

For instance, hedging against the Dubai crude price in

different months.

4. New Expansion Investment

We have set the investment strategy in our long-term business

plan to generate added value according to economic and

market conditions. During 2007, we successfully completed

projects to improve the production capacity of Thaioil and our

subsidiaries such as the CDU-3 revamp project, the second

Single Buoy Mooring project, and the expansion project of

Thai Paraxylene.

5. Personnel Development and Succession

We have been continuously recruiting and developing qualified

employees to succeed retiring personnel. At the executive

level, Thaioil has collaborated with PTT Group companies on

the group leadership development program which develops

new generations of executives to succeed those approaching

retirement. At the staff level, new recruitments are provided

with training to develop skills and expertise in their jobs in

order to reduce accidents and serious incidents that would

affect operations. Supervisors are required to coach and

closely monitor the performance of new recruits.

6. Organizational Structure and Culture Adjustment

We have designed the macro structure to support our

strategies in becoming a regional refining and petrochemical

leader and planned for changes in organizational structure,

roles of business units, and reporting lines to facilitate

business growth. We have implemented the change in

corporate values to POSITIVE to align them with our corporate

vision and mission in future. We have focused on commu-

nication effectiveness to support staff in adjusting to the

changes in an increasingly competitive environment.

Our risk management plan for 2008 extends across all

Thaioil Group companies with full support from the RMSC to

raise the bar in risk management standards and further

develop a corporate culture of risk management ethics as

is the goal of Thaioil.

R I S KM A N AG E M E N T

The Company strives to be a leading corporation, to generate trust in investors and stakeholders associated with our business, to add value to the organization, to advance management efficiency and to drive the Company’s sustainable growth. We aim to achieve this vision by managing our business according to corporate governance principles that are globally recognized and in a manner that benefits Thailand. Through good corporate governance, we will realize our goals and sustain excellence in ethics, which is the core value of a leading enterprise.

We have established corporate governance policies to form

the framework in which to conduct our various business

functions. All the directors, management and staff are

required to comply with the governance requirements as

set out in the Corporate Governance Manual, with trust, faith

and understanding in the principles of good governance.

The corporate governance guidelines shall apply to all

activities at every level across the Company. By adhering to

the corporate governance guideline – accountability, equitable

treatment of shareholders, reliability and transparency as

such – we aim to make good governance a routine practice

that is embedded in our organizational culture. Improvements

to the corporate governance policy shall be prompted as

appropriate to changing business practices and social

needs as well as to conform to international standards.

Compliance with corporate governance requirements are

aligned to KPIs and used to evaluate the performances of

directors, management and staff.

Thaioil has promoted employees’ knowledge and under-

standing of good corporate governance and work ethics by

engaging a consultant firm to produce an e-learning

program on corporate governance (CG E-learning). This

enables every management member and employee to

learn about the principles of the Corporate Governance

Manual through online lessons and video presentation.

Tests are also taken online upon completion of the program.

CG E-Learning was first introduced to the employees on

July 1, 2007 and was very well received by management

and staff. In the seven-month period since the program

was initiated, a total of 517 employees have completed

the CG E-learning course, which represents 63% of total

employees.

The Company has also integrated CG E-learning as part of

the orientation program for new recruits. This equips them

with basic knowledge from which they can complete the

course in one week on their own. It is further planned to

extend CG E-learning to our subsidiaries to provide them with

the opportunity to learn about the corporate governance

principles instituted within their respective companies.

In August 2007, Thaioil delivered the revised Corporate

Governance Manual to every director, management and staff.

They were required to read and sign their acceptance of the

policies and apply them as guidelines in conducting their

duties as directors, management or employees of the

Company.

The Corporate Governance Manual has been revised to reflect

the current circumstances as well as providing additional key

policies, such as those relating to hydrocarbon manufacturing

and management, asset engineering and maintenance, for

example. Thaioil has also disseminated the Corporate

Governance Manual on the Company’s intranet and corporate

website. This will enable staff, outsiders and all stakeholders

to download the manual for future reference.

In September 2007, Thaioil held its annual corporate gover-

nance evaluation using the 2006 The Stock Exchange of

Thailand’s Self-Evaluation Form. The result indicates

that the Company achieved more than 90% of the corporate

governance requirements. The Corporate Governance

Committee has also given guidance and recommendations

on specific areas of improvement for incorporation in the

business plan of the following year.

CORPORATE GOVERNANCE POLICY

085C O R P O R AT EG OV E R N A N C E P O L I CY

In October 2007, the Board of Directors participated in the

Board of the Year Awards 2006/07 organized by the Thai

Institute of Directors in collaboration with The Stock Exchange

of Thailand, The Federation of Thai Industries, The Thai

Bankers’ Association, Thai Listed Companies Association,

and The Federation of Thai Capital Market Organization.

Thaioil’s Board of Directors was selected as Board of the

Year for Distinctive Practice in 2006/07.

To bring the standard of the Company’s corporate governance

on par with best international practices, Thaioil has adopted

the principles of good corporate governance along the new

guidelines laid down by The Stock Exchange of Thailand in

2006 as follows:

Article 1 Rights of ShareholdersIt is the Company’s policy to respect the rights of shareholders

and to facilitate the exercise of those rights, including the right

to attend meetings of shareholders and to vote, and to refrain

from any action that impedes these opportunities.

Shareholders can protect their interests by exercising the

rights to ask questions, express opinions, offer recommen-

dations, and vote at the meetings of shareholders.

Shareholders have the right to participate in making

decisions concerning fundamental corporate changes,

such as the election or removal of directors, nomination of

independent directors, appointment of independent auditors,

declaration of dividends, increase or reduction of capital,

prescription or amendment of Company Regulations and

Articles of Association, and special resolutions.

The Company will give prior notice of the annual general

meeting of shareholders on the corporate website and give

shareholders the opportunity to propose agenda items and

nominees for election as directors in advance. Shareholders

will receive adequate, accurate, complete, transparent,

timely and verifiable information on which to form decisions.

Information accompanying the agenda for shareholders’

meetings is posted on the Company’s website prior to being

mailed to shareholders.

The Company has prepared notice of the annual general

meeting of shareholders which specifies the meeting venue,

date, time, agenda, and matters to be proposed to the meeting

together with appropriate details. It is clearly specified whether

the matter to be proposed at the meeting is for information or

consideration, and the opinion of the Board of Directors on

such matter is included. Announcement will be made on

the Company’s website prior to the annual general meeting

of shareholders. Shareholders are given the opportunity in

advance, to propose agenda items and qualified nominees for

election as directors of the Company. Shareholders shall be

notified of any additional items to the agenda. Notice of the

annual general meeting of shareholders shall be delivered to

all shareholders and the registrar not less than fourteen (14)

days prior to the meeting. In the event of an emergency to

protect the rights and benefits of the Company, notice may be

delivered not less than seven (7) days in advance. Information

in relation to agenda items for the meeting is available at the

Company’s website prior to being delivered to shareholders.

Article 2 Equitable Treatment of ShareholdersThe Company recognizes the importance of every shareholder

and treats shareholders equally and fairly to promote

confidence from investors. The Company offers shareholders

the opportunity to assign proxies to attend the annual

general meeting of shareholders and vote on their behalf in

the event they are unable to attend. Conditions to assigning

proxies are provided in the meeting notice. Adequate time is

allocated for the meeting and equal opportunity is provided for

shareholders to express their opinions, ask questions and

exercise their rights to elect individual directors. Shareholders

are entitled to vote on every item using the polling card

distributed at the meeting by the Company. Directors and

officers involved in matters on the agenda will attend the

meeting to answer questions raised by shareholders. The

main questions, answers and opinions are recorded in the

minutes of the meeting for future review by shareholders.

The Company has put in place measures to protect the use

of inside information as set out in Article 4 on Disclosure

and Transparency.

Article 3 Role of StakeholdersThe Company extends care and considerations to every group

of stakeholders. Treatment of each group of stakeholders is

clearly defined in the Corporate Governance Manual. It is set as

guideline for employees to follow and is considered an important

duty for all employees. This can be summarized as follows :

086 C O R P O R AT EG OV E R N A N C E P O L I CY

Treatment of - The Company is committed to repre-

shareholders senting the shareholders in conducting

business with transparency, putting in

place reliable finance and accounting

systems, creating optimum satisfac-

tion for shareholders by considering

the Company’s long-term growth and

appropriate levels of sustained returns.

Treatment of - To create customer satisfaction by

customers delivering quality products that meet

requirements of customers.

Treatment of - To bear in mind equality and honesty

partners: in conducting business, and the mutual

interests of partners. This is served

through strict compliance with legal

requirements and other applicable

rules and adhering to business ethics

in competition.

Treatment of - To develop and foster a good working

employees culture and environment as well as

promote teamwork to boost employees’

morale in order for them to work for

the Company with confidence in their

career security.

Treatment of - To respect social and environmental

community and issues, recognize the importance of

the environment preserving limited natural resources in

order to pass on to later generations,

and promote energy efficiency to create

sustainable development.

Treatment of - To comply strictly with regulatory

government and requirements on environment, safety,

related agencies labor, tax and accounting, as well as

government announcements appli-

cable to other aspects of the Company’s

operations.

The Company requires that management members at every

level assume responsibility and regard it as a matter of

importance for ensuring that employees under supervision

acknowledge, understand and comply rigorously with the

Corporate Governance Manual. Employees who commit ethical

violation shall receive disciplinary punishment. If any employee

discovers any legal or ethical wrongdoings, complaint or

report shall be made to the Chairman of the Corporate

Governance Committee, or the Chairman of the Audit

Committee, or the Managing Director. The Company will

investigate the matter without revealing the source to protect

the employee against any consequences.

Article 4 Disclosure and Transparency The Company discloses information on material matters

regarding the Company, including financial reports and other

information, that are clear, concise, easy to understand,

transparent, complete, adequate, reliable and timely.

Governance policies and structure are also reported in the

annual registration statement (Form 56-1), annual report

(Form 56-2), and at the Company’s website to ensure

shareholders with equitable access. The Company further

reports on the responsibility of the Board of Directors for the

financial statements which appear together with the report

of the independent auditors in the annual report.

The Company requires that all employees perform their duties

only in the best interest of the Company. Actions and decisions

must be free from the influence of personal gains, gains of

family, relatives or other personal contacts. Employees must

employ the same standard in complying with the rules and

procedures of the Company. Measures have been adopted to

deter employees from the illegal use of inside information for

personal gains or for gains of family or associated persons,

and to protect non-public information and documents, such as

information on business activities or future plans.

Sharing of inside information among employees shall be

within the scope of assigned duties and responsibilities.

Management members are responsible for reporting

ownership of securities on every acquisition, disposal

and transfer of securities to the Office of the Securities

and Exchange Commission. This is an important measure

to support the practice according to the good corporate

governance principles in the area of inside information.

The Company has developed internal controls to protect

confidential information for management, employees and

contractors in every business unit to follow as set out below :

1. Established strict measures and control systems

within departments and sections to prevent confidential

information from being disclosed to the public prior

to formal announcement. These measures and control


systems form part of the risk management mechanism

that is crucial to the Company.

2. To regard it as the duty and responsibility of all super-

visors at all level to oversee and manage important data

and information from being leaked outside by employees

under supervision prior to formal announcement by the

Company.

Employees who disclose important information and news to

outsiders without approval from the Managing Director shall

be subject to disciplinary action according to Company

procedures and may face legal proceedings.

The Company attaches great importance to investor relations

which focus on the correctness, quality and adequacy of

Company information disclosed to investors, analysts and

other related persons in a transparent and comprehensive

manner. High-ranking management members meet regularly

with investors and securities analysts. Meetings are held

to clarify quarterly and annual results, Company visits are

organized, seminars are arranged for domestic and inter-

national investors and analysts to create good understanding

of how the Company is managed, which in turn promotes good

relations and consistent exchange of opinions.

The Company has set up the Investor Relations section as a

focal point in conducting proactive investor relations activities

according to best practices of leading international organi-

zations to promote a highly effective channel of communication

with investors, analysts and other parties. Opportunities are

also provided for investors to raise questions and receive

Company information via various channels, such as at meetings

with investors and securities analysts, on visits to Company

facilities, information accessible via the Company’s website

(www.thaioil.co.th), by direct phone line (0-2299-0124) and

e-mail ([email protected]), all of which can be readily contacted

for clarification and answers to questions by investors.

Article 5 Board Responsibilities5.1 Board Structure

Independent directors on the Board represent at least one-

third of all directors and must not be less than three directors.

All directors are highly qualified and possess none of the

characteristics prohibited under the Public Company Limited

Act, are under 70 years of age, knowledgeable, capable and

experienced in business management. They perform the duty

of establishing the corporate policy, vision, strategy, goal,

mission, business plan and budget, as well as overseeing that

the management of the Company is conducted according

to the defined policies in compliance with the framework

of laws, objectives, Company Regulations and shareholder

resolutions. Directors discharge their responsibilities

accountably, honestly, and discretely according to principles of

best practices. The Board of Directors is led by the Chairman

of the Board who is a qualified leader and highly capable of

guiding management to perform effectively, capable of adding

maximum economic value to the business and providing

maximum return to the shareholders.

There is a clear separation of the roles of the Chairman of the

Board and the Managing Director. The Manager of Corporate

Management Office serves as the Company Secretary to

provide counsel on legal and regulatory issues on which the

Board of Directors must keep abreast, as well as to oversee

activities of the Board of Directors and monitor compliance

with Board resolutions.

In 2007, there were 13 directors1, one of whom was an executive

director while the remaining 12 members were non-executive

directors.

The names of the directors, and the roles and responsibilities

of the Board of Directors and the Managing Director are set

out in Shareholding and Management Structure under items

5 on page 74-75 and 8 on page 81.

Remark :1 Mr. Norkun Sittiphong resigned as director of the Company on December

20, 2007. Therefore, the Board of Directors consisted of 12 members as at December 31, 2007.

5.2 Board Committees

The Board has established a number of committees to assist

in effectively discharging its responsibilities.

In 2007, the standing committees comprised :

- The Audit Committee consisted of 3 independent

directors2. The qualifications of the members meet the

requirements stipulated in the announcement of The

Stock Exchange of Thailand regarding qualifications and

scope of work of the audit committee. The committee


is assigned to perform checks and balances of the

management of various business activities to ensure

reliability and integrity and that the best interests of all

stakeholders are served. The names and roles and

responsibilities of the Audit Committee are set out in

Shareholding and Management Structure under item 6.1

on page 76.

Remark :2 Mr. Norkun Sittiphong resigned as member of the Audit Committee

on December 20, 2007. Therefore, the Audit Committee consisted of 2 members as at December 31, 2007.

- The Corporate Governance Committee consisted of 3

independent directors including the Chairman of the

Committee. Their names, roles and responsibilities are set

out in Shareholding and Management Structure under

item 6.2 on page 77-78.

- The Nomination and Remuneration Committee consisted

of 3 independent directors including the Chairman of

the Committee. Their names, roles and responsibilities

are set out in Shareholding and Management Structure

under item 6.3 on page 78-79.

- There were a total of 9 independent directors3, which

represented 69% of the Board, as at December 31, 2007.

Their names, roles and responsibilities are set out in

Shareholding and Management Structure under item 5

on page 74-75.

- The Thaioil Group Risk Management Committee consisted

of 18 department-level management members. Their

names, roles and responsibilities are set out in Shareholding

and Management Structure under item 6.4 on page 80.

Remark :3 Mr. Norkun Sittiphong resigned as director of the Company and member

of the Audit Committee on December 20, 2007. Therefore, there were 8 independent directors, which represented 67% of the Board, as at December 31, 2007.

5.3 Responsibilities of the Board

The Board of directors provides leadership, vision and

independent decision-making for the optimum benefits of the

Company and shareholders. The Board ensures a clear

separation of duties and responsibilities between the Board

and management, and oversees that systems are in place

to enhance the legal and ethical integrity of business

operations.

All directors understand the duties and responsibilities of

the Board and the business of the Company. Duties are

discharged with honesty, due care and diligence, and with

regard for the highest benefit of the Company and the fair

treatment of all shareholders. The Board has expressed its

opinions independently and devoted time to fully perform its

duties and responsibilities.

The roles and responsibilities of the Board are set out in

Shareholding and Management Structure under item 5 on

page 74-75.

5.4 Board Meetings

Meetings of the Board of Directors are planned in advance and

members are notified of the plan in order to arrange their

schedules to attend the meetings. The Chairman of the Board

approves matters to be included in the agenda in consultation

with the Managing Director and in response to requests by

directors to incorporate other major issues in the agenda of

the following meeting. Supporting documents are distributed

to each director well before the meeting to provide sufficient

time to study and reach an informed decision on items for

consideration.

Company Regulations provide that the Board meet at least

once every three months with additional meetings as

necessary. In practice, the Board meets at least once every

two months. In 2007, the Board met seven times. Notice of the

meeting is delivered to directors at least seven (7) days prior

to the meeting, except in the event of an emergency to protect

the rights or benefits of the Company. An agenda is set

for each meeting and adequate supporting documents are

distributed sufficiently in advance to allow directors adequate

time for a thorough review. At the meeting, each director is

entitled to freely discuss and comment on matters.

From January 1 to December 31 2007, meetings by the Board

of Directors (each meeting which had a quorum) and Board

committees as well as attendance were as follows :


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5.5 Performance Evaluation

The Board of Directors is evaluated each year to determine

whether its member has performed their duties as the Board

effectively. Guidelines in the performance evaluation of the

Board are established as a benchmark for comparison and

analysis. The results of the performance evaluation and

performance according to corporate governance principles

are presented in the annual report.

The Board approved the Board evaluation forms which

were reviewed by the Corporate Governance Committee.

Evaluation comprises self-evaluation, Board evaluation, and

peer evaluation. Issues evaluated are such as accoun-

tability, responsibility, equitable treatment of stakeholders,

transparency, vision to create long-term value, ethics, Board

policy, Board composition, Board meeting, Board practice, and

Board duties. The evaluation result is calculated from the full

score of each item and rated as follows :

Over 85% = Excellent

Over 75% = Very Good

Over 65% = Good

Over 50% = Satisfactory

Under 50% = Poor

Result of the exaluation can be summarized as follows:

1. Individual director evaluation (self-evaluation) covers six

areas of:

(1) Accountability

(2) Responsibility

(3) Equitable treatment

(4) Transparency

(5) Vision to create long-term value

(6) Ethics

The overall result of the individual director evaluation (self-

evaluation) in these six areas indicates majority compliance

and regular compliance in the majority of directors. The

average score is 94% for a rating of Excellent.

2. Board evaluation covers five areas of:

(1) Board policy

(2) Board composition

(3) Board meeting

(4) Board practice

(5) Board duties

The overall result of the Board evaluation in these five areas

indicates that the majority of directors believe that the Board

performed very well/very appropriately with an average score

of 87% for a rating of Excellent.

3. Peer evaluation covers the same six areas as in the

individual evaluation (self-evaluation). The results of the

evaluation are compared to the self-evaluation of each

director to provide a clearer outcome.

The overall result of the peer evaluation in six areas indicates

an average rating of Excellent for a score of 96%.

The scores as well as opinions of the directors in each category

form the basis for improving the performance of the Board in

the following year. The Managing Director also participates in

explaining his expectations for support from the Board.

5.6 Remuneration

It is the Company’s policy to compensate directors and

the Managing Director at reasonable levels to motivate and

retain quality directors, or at levels comparable to industrial

practices. Remuneration is linked to the Company’s perfor-

mance. The Nomination and Remuneration Committee sets

the remuneration principles, payment method, and reports

the nomination and remuneration performance to the Board

of Directors for approval at the annual general meeting of

shareholders.

Details of remuneration payments to directors and manage-

ment in 2007 are set out in Shareholding and Management

Structure under item 10.1 on page 81-82.

5.7 Continuing Education of Directors and Management

The Company promotes and facilitates training and the

continuing education for those associated with the corporate

governance system, such as directors, Audit Committee

members, management members, Company Secretary. This

enables continuous improvement to work performance. In

addition, every new director receives introduction documents

and materials beneficial to performing the new duties. An

introduction session is also organized to introduce new

directors to the Company’s business, strategies and plans.


The Board of Directors has completed training courses by the Thai Institute of Directors Association (IOD) and outside institutions

as follows :

The Company further promotes the development of directors

and management members in forms of educational

visits and seminars both locally and abroad, development

programs also include in-house training and participation in

courses organized by outside institutions. Some of the

training courses attended by management members are for

example : Basic Understanding of the Oil Business and

Changes, Quality of Financial Statements and Creation of

Trust in Businesses, Leadership Competency Assessment

(360 degrees), Company Secretary, Finance for Non-Financial

Directors, and Understanding the Fundamentals of Financial

Statements.

092

IOD Courses attended by Directors

The Role Directors Directors Audit of Chairman Certification Accreditation Committee Director Program (RCP) Program (DCP) Program (DAP) Program (ACP) 1 Cherdpong Siriwit P P 2 Manu Leopairote P P 3 Pala Sookawesh P P 4 Prasert Bunsumpun P P 5 Chakramon Phasukavanich P P P 6 Apisak Tantivorawong P

7 Lt. Gen. Prayut Chan-O-Cha

8 Nibhat Bhukkanasut P P 9 Prajya Phinyawat P 10 Nit Chantramonklasri P P P 11 Pichai Chunhavajira P 12 Norkun Sittiphong

13 Viroj Mavichak P P

C O R P O R AT EG OV E R N A N C E P O L I CY

Thaioil attaches great importance to sound internal controls and requires that every business unit across the Company establishes and maintains effective internal control systems at all levels of business processes. T h e B o a r d o f D i re c t o r s h a s a p p o i n t e d d i re c t o r s , w h o m e e t t h e q u a l i f i c a t i o n requirements of The Stock Exchange of Thailand laws, to form the Audit Committee. Its duty is to ensure that adequate and appropriate internal control systems have been developed and followed, and the systems are efficient and effective in the utilization of resources and assets. The committee further oversees accounting and financial reporting systems, and legal and statutory compliance. The Audit Committee independently monitors and evaluates the efficiency of internal control systems, and assesses risk management per formance and governance conformance.

The Internal Systems Audit Department monitors and

evaluates the adequacy and efficiency of internal control

systems in key business processes of Thaioil and sub-

sidiaries, reviews the reliability and integrity of financial

reports, evaluates the quality of control over the perfor-

mance of business units, offers recommendations for

effective system improvements to heads of business

units, supports all staff in implementation of control self-

assessment to enhance the internal control efficiency. The

Internal Systems Audit Department reports findings to the

Audit Committee every quarter. It bases its report on the

following internal control framework of COSO:

1. Control Environment

Thaioil has clearly established our vision, mission and values,

determined the short- and long-term business strategies to

provide the direction for our operations, and identified KPIs

related to financial performance, stakeholder relationships,

internal performance, and learning and growth. We have

developed a performance evaluation system using KPIs and

competencies as measurement tools for employees at the

level of sections heads and higher. Management is also

encouraged to adhere to corporate governance principles

and policies. The Corporate Governance Manual has been

distributed to all directors, management and staff as general

guidance. In August 2007, the revised Manual was re-

distributed to all employees who must sign an acknow-

ledgement that they have read, understood and are bound by

the principles and policies set out in the Manual. The signed

acceptances are returned to the Human Resources Department.

2. Risk Assessment

We have established a risk management policy whereby

risks are linked with business plans. Measures to control

risks have been developed to enhance the quality of risk

management, to foster a risk management culture, and to

encourage every business unit to practice risk management

in order to achieve KPI targets.

The Risk Management Committee has been appointed to

oversee that the overall risk management processes are

effective, to develop a risk management assessment system

and a business risk control system, and to provide manage-

ment with the support needed in order to manage risks

effectively and appropriately for the current business

conditions, as well as maintaining risks at the acceptable

levels.

In May 2007, the Company set up the Thaioil Group

Risk Management Steering Committee with the Deputy

Managing Directors, Assistant Managing Directors, and

Managing Directors of Group companies as its members.

The committee is responsible for supporting the Risk

INTERNAL CONTROLS

093I N T E R N A LC O N T R O L S

Management Committee in ensuring that risk management

endeavors by Thaioil Group progresses effectively in the

same direction. The committee also helps to promote a

risk management culture to achieve the set targets and to

encourage employees to undertake risk management as part

of their daily work. Moreover, with an effort to monitor the

progress of limiting risks at the acceptable levels, a risk

management unit has been set up to liaise with the Risk

Coordinators of each business unit. Monthly reports are

provided for the Risk Management Committee who regularly

reports to the Audit Committee and Managing Director.

Between November 2006 and June 2007, a reputable consul-

tant well-recognized in the petroleum industry was engaged

to perform a gap analysis. The outcome will be used to

determine a comprehensive risk management plan at the

corporate level and work process level in 2008.

3. Control Activities

Thaioil has established key business policies, as set out in the

Corporate Governance Manual, for application as a general

guidance in implementing the Company’s activities in a

systematic and efficient manner to achieve the set objectives

and goals. These are, for example, the quality, safety, occupa-

tional health and environment policy, the manufacturing and

hydrocarbon management policy, the engineering and asset

maintenance policy, the related party transaction policy, and

the human resources management policy.

In addition, the Company has implemented the Corporate

Authorization Procedures in which the Managing Director

authorizes management and staff at different levels to approve

various business transactions. This provides flexibility to

each business unit and ensures appropriate control. Overall,

the Company has in place the control activities that are

adequate, appropriate and effective.

4. Information and Communication

Thaioil has established appropriate information systems and

communication channels both within and outside the Company

to provide relevant parties with access to information that is

complete, correct, timely and adequate for decision-making.

For internal communication, employees will receive infor-

mation regarding policies and regulations applicable to

work performance via the intranet. Information will also

be communicated to employees via meetings between

management and staff such as management meetings with

department heads after each Board of Directors meeting

and bi-monthly meetings between Company representatives

and the Employee Committee, for example. Management

members also meet regularly on a monthly basis. Information

is communicated to outside parties via the corporate website

at www.thaioil.co.th, The Stock Exchange of Thailand system

for information disclosure, quarterly meetings with investors

and analysts, and press releases.

5. Monitoring and Evaluation

The Internal Systems Audit Department implements audits

according to the annual plan and reports the outcome of

the audits and risk management monitoring to the Audit

Committee every quarter. The Audit Committee then reviews

whether information disclosed in financial reports are

adequate, complete and correct, whether the evaluation of

internal control and risk management efficiencies are

appropriate, whether compliance with securities and The

Stock Exchange of Thailand laws has been practiced, and

whether disclosure of related party transactions or tran-

sactions with conflict of interest have been transparent

and verifiable. Relevant management and heads of business

units are then notified of the audit results to improve

performance.

Internal Control Audit

The Audit Committee has reviewed the financial statements,

internal control systems, risk management and corporate

governance of the Company in 2007 and found no weaknesses

that may have a significant impact on the operations of the

Company. Overall, it can be concluded that the Company has

effective, appropriate and adequate internal control systems

which is consistent with the opinion of the external auditors.

The Company’s internal control systems are adequate and

appropriate to protect or mitigate potential risks.

094 I N T E R N A LC O N T R O L S

The accompanying consolidated financial statements of Thai

Oil Public Company Limited and subsidiaries have been

prepared in conformity with the requirements of the Public

Company Act B.E. 2535 (1992), the Securities and Exchange

Act B.E. 2535 (1992), the Announcement of the Department of

Commercial Registration dated September 14, 2001 issued in

accordance with Section 11, Paragraph 3 of the Accounting Act

B.E. 2543 (2000), and the accounting standards prescribed by

the Federation of Accounting Professions.

The Board of Directors is responsible for the financial

statements which have been prepared to provide assurance

that the financial position, income, expenses and cash flows

are true and fair, an effective internal control system has been

established, accounting records have been properly and

adequately maintained to safeguard assets and prevent fraud

and other irregularities with material implications, suitable

accounting policies have been selected in the preparation

of the financial statements and consistently applied in

accordance with generally accepted accounting standards,

and key information has been adequately disclosed in the

notes to the financial statements. The independent auditors

have expressed their opinion on the financial statements

of Thai Oil Public Company Limited and the consolidated

financial statements of Thai Oil Public Company Limited and

subsidiaries in the Auditors’ Report.

BOARD OF DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

095B OA R D O F D I R ECTO R S’ R E S P O N S I B I L I T Y F O R F I N A N C I A L R E P O RT I N G

Viroj Mavichak Managing Director Thai Oil Public Company Limited

Cherdpong Siriwit Chairman of the Board Thai Oil Public Company Limited

097F I N A N C I A L STAT E M E N T S

To the Shareholders of Thai Oil Public Company Limited

I have audited the accompanying consolidated and separate balance sheets as at 31 December 2007, and the related statements

of income, changes in shareholders’ equity and cash flows for the year then ended of Thai Oil Public Company Limited and its

subsidiaries, and of Thai Oil Public Company Limited, respectively. The Company’s management is responsible for the correctness

and completeness of information presented in these financial statements. My responsibility is to express an opinion on these

financial statements based on my audits. The consolidated financial statements and the Company’s financial statements of

Thai Oil Public Company Limited and its subsidiaries and of Thai Oil Public Company Limited, respectively, for the year ended

31 December 2006 were audited by another auditor whose report dated 16 February 2007 expressed an unqualified opinion on

those statements. As described in notes 2, 3 and 30 to the financial statements, the Company’s financial statements for the year

ended 31 December 2006 have been restated for the effects of the change in accounting policy for investments in subsidiaries

and associates from the equity method of accounting to the cost method, and are now termed ‘separate’ financial statements

and for the effects of the change in valuation method for property, plant and equipment from revaluation to cost, and the effects

of the change in valuation method for crude oil and feedstock and finished and semi- finished products of the Company and its

subsidiaries from last-in, first-out and first-in, first-out to weighted average in the consolidated and the Company’s financial

statements. I have audited the adjustments that were applied to the restatement of the 2006 financial statements and in my

opinion these adjustments are appropriate and have been properly applied.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated and separate financial statements referred to above present fairly, in all material respects,

the financial positions as at 31 December 2007 and the results of operations and cash flows for the year then ended of Thai Oil

Public Company Limited and its subsidiaries, and of Thai Oil Public Company Limited, respectively, in accordance with generally

accepted accounting principles.

(Thirdthong Thepmongkorn)

Certified Public Accountant

Registration No. 3787

KPMG Phoomchai Audit Ltd.

Bangkok

15 February 2008

AUDIT REPORT OF CERTIFIED PUBLIC ACCOUNTANTAs at 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries

098 F I N A N C I A L STAT E M E N T S

(in Baht)

Consolidated financial statements

Separatefinancial statements

Assets Note 2007 2006 2007 2006(Restated) (Restated)

Current assets

Cash and cash equivalents 5, 15 4,213,003,996 6,525,429,668 1,110,786,175 1,393,331,570

Current investments 6, 15 547,128,118 456,910,727 - -

Trade accounts receivable 4, 7 22,960,940,709 18,754,250,172 21,181,925,386 16,434,350,229

Accounts receivable from subsidiary,

associated and related parties 4 309,256,360 13,342,149 460,431,083 71,827,105

Short-term loans to subsidiary company 4 - - 1,518,000,000 -

Inventories 8 32,801,759,820 20,655,541,403 29,568,885,877 18,163,811,601

Other current assets 9 2,144,298,002 2,552,211,154 1,312,524,732 2,022,140,539

Total current assets 62,976,387,005 48,957,685,273 55,152,553,253 38,085,461,044

Non-current assets

Investments in subsidiaries and associates 10 144,983,720 44,366,812 6,989,637,032 8,238,421,192

Other long-term investments 6 16,977,929 - 16,977,929 -

Property, plant and equipment 11, 15 71,439,750,951 59,293,522,297 37,789,018,608 34,369,039,984

Intangible assets 12 28,346,781 51,916,607 26,926,413 50,564,717

Negative goodwill 10 (502,112,333) (531,361,590) - -

Deferred tax assets 13 209,436,730 210,998,367 209,436,730 210,998,367

Other non-current assets 4, 14 2,749,016,971 2,297,158,517 2,121,657,617 1,787,913,351

Total non-current assets 74,086,400,749 61,366,601,010 47,153,654,329 44,656,937,611

Total assets 137,062,787,754 110,324,286,283 102,306,207,582 82,742,398,655

BALANCE SHEETSAs at 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries

The accompanying notes are an integral part of these financial statements.


(in Baht)



Liabilities and shareholders’ equity Note 2007 2006 2007 2006(Restated) (Restated)

Current liabilities

Short-term loans from financial institutions 15 350,000,000 1,000,000,000 350,000,000 1,000,000,000

Trade accounts payable 4, 16 26,050,477,701 12,937,372,511 25,434,672,506 13,219,017,456

Current portion of long-term loans 11, 15 1,099,636,060 1,133,370,227 295,620,000 -

Accounts payable to subsidiary, associated

and related parties 4 302,011,200 27,385,484 306,179,020 26,201,987

Excise duty payable 671,449,655 821,750,619 671,449,655 821,750,619

Income tax payable 26 2,063,819,262 669,860,108 1,775,620,774 441,268,782

Other current liabilities 17 2,008,900,220 2,438,815,371 1,204,860,267 2,186,829,026

Total current liabilities 32,546,294,098 19,028,554,320 30,038,402,222 17,695,067,870

Non-current liabilities

Long-term loans from financial institutions 11, 15 13,510,571,026 11,150,880,499 4,631,380,000 6,766,542,000

Notes 15 17,348,898,612 18,167,917,718 17,348,898,612 18,167,917,718

Deferred tax liabilities 13 1,502,606,359 1,582,479,047 1,462,705,817 1,536,194,458

Other non-current liabilities 18 268,931,641 228,062,812 464,130,503 430,074,865

Total non-current liabilities 32,631,007,638 31,129,340,076 23,907,114,932 26,900,729,041

Total liabilities 65,177,301,736 50,157,894,396 53,945,517,154 44,595,796,911

BALANCE SHEETS (Continued)As at 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries



(in Baht)



Liabilities and shareholders’ equity Note 2007 2006 2007 2006(Restated) (Restated)

Shareholders’ equity

Share capital 19

Authorised share capital 20,400,278,730 20,400,278,730 20,400,278,730 20,400,278,730

Issued and paid-up share capital 20,400,278,730 20,400,278,730 20,400,278,730 20,400,278,730

Reserve

Share premium 20 2,456,261,491 2,456,261,491 2,456,261,491 2,456,261,491

Retained earnings

Appropriated

Legal reserve 20 2,040,027,873 2,040,027,873 2,040,027,873 2,040,027,873

Other 244,500,000 244,500,000 244,500,000 244,500,000

Unappropriated 42,293,935,875 30,768,411,399 23,219,622,334 13,005,533,650

Total equity attributable to the Company’s

shareholders 67,435,003,969 55,909,479,493 48,360,690,428 38,146,601,744

Minority interest 4,450,482,049 4,256,912,394 - -

Total shareholders’ equity 71,885,486,018 60,166,391,887 48,360,690,428 38,146,601,744

Total liabilities and shareholders’ equity 137,062,787,754 110,324,286,283 102,306,207,582 82,742,398,655

BALANCE SHEETS (Continued)As at 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries



(in Baht)



Note 2007 2006 2007 2006(Restated) (Restated)

Revenues 21

Revenue from sale of goods and

rendering of services 4, 28 261,050,798,145 279,109,124,993 253,958,677,430 280,148,125,599

Net foreign exchange gain 1,520,155,820 3,489,381,219 1,433,058,390 2,887,029,905

Other income 4, 22 1,261,756,811 1,109,252,033 5,341,091,695 3,232,647,425

Total revenues 263,832,710,776 283,707,758,245 260,732,827,515 286,267,802,929

Expenses 21

Cost of sale of goods and rendering of services 4 235,450,026,442 259,032,298,215 235,396,177,241 271,411,035,559

Selling and administrative expenses 4, 23 1,769,438,915 1,069,222,956 1,367,601,775 494,529,243

Share of losses from investments accounted

for using the equity method 10 633,093 633,187 - -

Total expenses 237,220,098,450 260,102,154,358 236,763,779,016 271,905,564,802

Profit before interest, financial and

income tax expenses 26,612,612,326 23,605,603,887 23,969,048,499 14,362,238,127

Interest and financial expenses 4, 25 (1,727,615,303) (1,916,724,527) (1,411,189,049) (1,393,652,625)

Income tax expense 26 (5,307,793,616) (3,202,673,016) (4,693,666,242) (2,823,605,046)

Profit after tax 19,577,203,407 18,486,206,344 17,864,193,208 10,144,980,456

Net profit of minority interest (401,574,407) (827,176,835) - -

Net profit 19,175,629,000 17,659,029,509 17,864,193,208 10,144,980,456

Basic earnings per share 27 9.40 8.66 8.76 4.97

STATEMENTS OF INCOMEFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries



STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries

(in Baht) Consolidated financial statements (Restated)

Reserves Retained earnings Total equity Issued and Appropriated attributable to Total

paid-up Share Revaluation to legal Unappro- the Company’s Minority shareholders’ Note share capital premium surplus reserve Other priated shareholders interest equity

Balance at 1 January 2006 20,400,278,730 2,456,261,491 15,049,071,881 1,284,945,078 244,500,000 23,831,083,809 63,266,140,989 3,586,313,278 66,852,454,267

Change in accounting policy 30 - - (15,049,071,881) - - 233,520,241 (14,815,551,640) 1,484,806 (14,814,066,834)

Restated balance 20,400,278,730 2,456,261,491 - 1,284,945,078 244,500,000 24,064,604,050 48,450,589,349 3,587,798,084 52,038,387,433

Change in shareholders’

equity for 2006

Legal reserve 20 - - - 755,082,795 - (755,082,795) - - -

Net profit - - - - - 17,659,029,509 17,659,029,509 827,176,835 18,486,206,344

Dividends 29 - - - - - (10,200,139,365) (10,200,139,365) (158,062,525) (10,358,201,890)

Balance at 31 December 2006 20,400,278,730 2,456,261,491 - 2,040,027,873 244,500,000 30,768,411,399 55,909,479,493 4,256,912,394 60,166,391,887

Balance at 1 January 2007 20,400,278,730 2,456,261,491 12,574,529,649 2,040,027,873 244,500,000 30,842,300,623 68,557,898,366 4,254,884,453 72,812,782,819

Change in accounting policy 30 - - (12,574,529,649) - - (73,889,224) (12,648,418,873) 2,027,941 (12,646,390,932)

Restated balance 20,400,278,730 2,456,261,491 - 2,040,027,873 244,500,000 30,768,411,399 55,909,479,493 4,256,912,394 60,166,391,887

Change in shareholders’

equity for 2007

Net profit - - - - - 19,175,629,000 19,175,629,000 401,574,407 19,577,203,407

Dividends 29 - - - - - (7,650,104,524) (7,650,104,524) (208,004,752) (7,858,109,276)

Balance at 31 December 2007 20,400,278,730 2,456,261,491 - 2,040,027,873 244,500,000 42,293,935,875 67,435,003,969 4,450,482,049 71,885,486,018



STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued)For the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries

(in Baht) Separate financial statements (Restated)

Reserves Retained earnings Total equityIssued and Appropriated attributable to

paid-up Share Revaluation to legal Unappro- the Company’sNote share capital premium surplus reserve Other priated shareholders

Balance at 1 January 2006 20,400,278,730 2,456,261,491 15,049,071,881 1,284,945,078 244,500,000 23,831,083,809 63,266,140,989

Change in accounting policy 30 - - (15,049,071,881) - - (10,015,308,455) (25,064,380,336)

Restated balance 20,400,278,730 2,456,261,491 - 1,284,945,078 244,500,000 13,815,775,354 38,201,760,653

Change in shareholders’ equity for 2006

Legal reserve 20 - - - 755,082,795 - (755,082,795) -

Net profit - - - - - 10,144,980,456 10,144,980,456

Dividends 29 - - - - - (10,200,139,365) (10,200,139,365)

Balance at 31 December 2006 20,400,278,730 2,456,261,491 - 2,040,027,873 244,500,000 13,005,533,650 38,146,601,744

Balance at 1 January 2007 20,400,278,730 2,456,261,491 12,574,529,649 2,040,027,873 244,500,000 30,842,300,623 68,557,898,366

Change in accounting policy 30 - - (12,574,529,649) - - (17,836,766,973) (30,411,296,622)

Restated balance 20,400,278,730 2,456,261,491 - 2,040,027,873 244,500,000 13,005,533,650 38,146,601,744

Change in shareholders’ equity for 2007

Net profit - - - - - 17,864,193,208 17,864,193,208

Dividends 29 - - - - - (7,650,104,524) (7,650,104,524)

Balance at 31 December 2007 20,400,278,730 2,456,261,491 - 2,040,027,873 244,500,000 23,219,622,334 48,360,690,428



(in Baht)




Cash flows from operating activities

Net profit 19,175,629,000 17,659,029,509 17,864,193,208 10,144,980,456

Adjustments for

Depreciation and amortisation 4,966,124,457 4,813,871,101 3,329,107,464 3,190,907,116

Unrealised net foreign exchange gain (935,742,079) (2,676,212,717) (838,264,869) (2,236,020,766)

Interest expense 1,679,901,312 1,860,687,158 1,365,415,192 1,343,494,149

Increase in allowance for doubtful accounts - 1,290,184 - -

Share of losses from investments accounted

for using the equity method 633,093 633,187 - -

Dividend income - - (2,253,187,231) (1,688,989,857)

Unrealised net gain on remeasurement

to fair value of crack spread swap agreements (69,251,117) - (69,251,117) -

Unrealised gain on remeasurement to fair value

of cross currency swap contracts (114,175,982) (80,661,130) - (80,661,130)

Gain from decrease in preferred shares

of subsidiary - - (1,528,403,529) -

Loss (gain) on disposal of property,

plant and equipment and other assets 6,143,294 51,825,662 6,757,062 (8,218,841)

Loss from written-off property,

plant and equipment - 20,700,959 - -

Realisation of deferred land lease and other income (21,453,133) (30,886,185) (188,357,090) (187,933,440)

Income tax expense 5,307,793,616 3,202,673,016 4,693,666,242 2,823,605,046

Net profit of minority interest 401,574,407 827,176,835 - -

30,397,176,868 25,650,127,579 22,381,675,332 13,301,162,733

STATEMENTS OF CASH FLOWSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries



(in Baht)




Changes in operating assets and liabilities

Trade accounts receivable (4,224,212,224) (937,463,617) (4,758,547,074) (227,660,700)

Accounts receivable from subsidiary, associated

and related parties (70,319,623) (3,357,393) (163,009,390) 88,432,785

Inventories (12,146,218,417) (745,789,295) (11,405,074,277) (777,309,676)

Other current assets 251,291,293 (278,393,726) 547,115,361 (177,250,813)

Other non-current assets (568,174,815) (372,722,932) (584,869,480) (311,061,554)

Trade accounts payable 13,117,384,451 (653,940,793) 12,219,682,320 (297,173,625)

Accounts payable to subsidiary, associated

and related parties 61,674,598 23,671,943 54,590,955 (40,580,442)

Excise duty payable (150,300,963) 458,847,689 (150,300,963) 458,847,689

Other current liabilities (23,380,765) (503,648,660) (29,326,629) (440,000,387)

Other non-current liabilities 55,515,335 86,174,234 183,693,301 247,386,094

Income tax paid (3,998,024,100) (4,812,849,163) (3,431,241,256) (4,635,274,061)

Net cash provided by operating activities 22,702,411,638 17,910,655,866 14,864,388,200 7,189,518,043

STATEMENTS OF CASH FLOWS (Continued)For the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries



(in Baht)




Cash flows from investing activities

Dividends received - - 2,253,187,231 1,688,989,857

Increase in current investments (90,217,391) (35,423,678) - -

Decrease in subordinated loan to subsidiary - - - 136,065,946

Increase in short-term loans to subsidiary - - (1,518,000,000) -

Increase in long-term loans

to savings co-operative of employees (22,579,429) (29,027,359) (22,579,429) (29,027,359)

Increase in other long-term investments (16,977,929) - (16,977,929) -

Purchase of property, plant and equipment (16,937,997,844) (8,278,170,086) (7,067,496,686) (5,860,504,675)

Sale of property, plant and equipment 2,518,519 101,880,966 1,614,279 99,942,961

Purchase of intangible assets (11,138,473) (9,392,699) (10,735,395) (9,271,097)

Proceeds from decrease in preferred

shares of subsidiary - - 2,918,437,689 -

Payment of invesments in shares of

subsidiary and associated companies (101,250,000) (45,000,000) (141,250,000) (45,000,000)

Net cash used in investing activities (17,177,642,547) (8,295,132,856) (3,603,800,240) (4,018,804,367)




(in Baht)




Cash flows from financing activities

Interest paid (1,787,433,103) (2,292,245,164) (1,431,488,831) (1,371,185,052)

Dividends paid (7,858,109,276) (10,358,201,890) (7,650,104,524) (10,200,139,365)

Proceeds from short-term loans from

financial institution - 1,000,000,000 - 1,000,000,000

Repayment of short-term loans from

financial institution (650,000,000) - (650,000,000) -

Proceeds from long-term loans 5,402,694,000 1,479,058,854 - -

Repayment of long-term loans (2,944,346,384) (9,670,328,921) (1,811,540,000) (4,117,460,000)

Proceeds from issue of notes - 5,500,000,000 - 5,500,000,000

Net cash used in financing activities (7,837,194,763) (14,341,717,121) (11,543,133,355) (9,188,784,417)

Net decrease in cash and cash equivalents (2,312,425,672) (4,726,194,111) (282,545,395) (6,018,070,741)

Cash and cash equivalents at beginning of year 6,525,429,668 11,251,623,779 1,393,331,570 7,411,402,311

Cash and cash equivalents at end of year 5 4,213,003,996 6,525,429,668 1,110,786,175 1,393,331,570

Non-cash transactions

Purchase of property, plant and

equipment on credit terms 693,807,286 1,084,375,062 111,486,192 1,044,657,841



NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries


These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the directors on 15 February 2008.

1. General information

Thai Oil Public Company Limited, the “Company”, is incorporated in Thailand in 1961 and has its registered office as follows:

Head office : 123 Suntowers Building B, 16th Floor, Vibhavadi Rangsit Road,

Chomphon, Chatuchak, Bangkok, Thailand.

Sriracha office and refinery plant : 42/1 Moo 1, Sukhumvit Road Km. 124, Tungsukla, Sriracha, Cholburi, Thailand.

The Company was listed on the Stock Exchange of Thailand in October 2004.

The Company is a company in the PTT Public Company Limited (“PTT”) group of companies. PTT is incorporated in Thailand

and is the major shareholder of the Company, holding 49.1% of the Company’s issued and paid-up share capital.

The principal businesses of the Company are oil refining and distributions. Details of the Company’s subsidiaries as at 31

December 2007 and 2006 were as follows:

Country of Ownership interest Name of the entity Type of business incorporation (%) 2007 2006

Direct subsidiaries

Thai Paraxylene Co., Ltd. Paraxylene manufacturing Thailand 99.99 99.99

Thai Lube Base Public Co., Ltd. Lube base oil refining and

distribution Thailand 99.99 99.99

Thaioil Marine Co., Ltd. Petroleum and liquid

chemical products

transported by marine Thailand 99.99 99.99

Thaioil Power Co., Ltd. Steam and power

Generation Thailand 54.99 54.99

Independent Power (Thailand) Co., Ltd. Power generation Thailand 24.00 24.00

Thaioil Energy Co., Ltd. Power generation Thailand 99.99 -



Country of Ownership interest Name of the entity Type of business incorporation (%) 2007 2006

Indirect subsidiaries

Independent Power (Thailand) Co., Ltd. Power generation Thailand 56.00 56.00

Top Independent Power Co., Ltd. Power generation Thailand 99.99 -

2. Basis of preparation of the financial statements

The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of

the financial statements has been prepared for the convenience of readers not conversant with the Thai language.

The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) including related interpretations

and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting

principles in Thailand.

During 2007, the FAP issued the following revised TAS relevant to the Group’s operations and effective for accounting periods

beginning on or after 1 January 2007:

TAS 44 (revised 2007) Consolidated and Separate Financial Statements

TAS 45 (revised 2007) Investments in Associates

TAS 46 (revised 2007) Interest in Joint Ventures

The adoption of these revised TAS has resulted in a change in the Company’s accounting policy for interests in subsidiaries

and associates in the separate financial statements of the Company. The effects of this change are disclosed in note 30.

In addition to the above revised TAS, the FAP has issued during 2007 a number of other new and revised TAS which are only

effective for financial statements beginning on or after 1 January 2008 and have not been adopted in the preparation of these

financial statements. These new and revised TAS are disclosed in note 36.

The financial statements are presented in Thai Baht, rounded in the notes to the financial statements to the nearest thousand

unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies.



The preparation of financial statements in conformity with TAS requires management to make judgments, estimates and

assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The

estimates and associated assumptions are based on historical experience and various other factors that are believed to be

reasonable under the circumstances, the results of which form the basis of making the judgments about carrying amounts

of assets and liabilities that are not readily apparent from other sources. Accordingly, actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised

in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future

periods, if the revision affects both current and future periods.

3. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and

the Group’s interests in associates.

Significant intra-group transactions between the Company and its subsidiaries are eliminated on consolidation.

Subsidiaries

Subsidiaries are those companies controlled by the Company. Control exists when the Company has the power, directly or

indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. The financial

statements of subsidiaries are included in the consolidated financial statements from the date that control commences until

the date that control ceases.

Associates

Associates are those companies in which the Group has significant influence, but not control, over the financial and operating

policies. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates

on an equity accounted basis, from the date that significant influence commences until the date that significant influence

ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to

nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive

obligations or made payments on behalf of the associate.



Business combinations

Business combinations are accounted for using the purchase method. The cost of an acquisition is measured at the fair value

of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly

attributable to the acquisition.

(b) Foreign currency transactions

Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the

transactions.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Thai Baht at

the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the

statement of income.

Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign

exchange rates ruling at the dates of the transactions.

(c) Derivative financial instruments

Derivative financial instruments are used to manage exposure to foreign exchange, interest rate and commodity price risks

arising from operational, financing and investment activities. Derivative financial instruments are not used for trading purposes.

However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in the

statement of income when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss

on remeasurement to fair value is recognised immediately in the statement of income. However, where derivatives qualify for

hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see accounting

policy 3(d)).

The fair value of interest rate swaps is based on broker quotes at the balance sheet date. Those quotes are tested for

reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using

market interest rates for a similar instrument at the balance sheet date.

The fair value of cross currency swaps is the estimated amount by using valuation techniques which refer to observable

market data that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current

interest rates, foreign currencies, and the current creditworthiness of the swap counterparties



The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not

available, then fair value is estimated by discounting the difference between the contractual forward price and the current

forward price at the balance sheet date for the residual maturity of the contract using a risk-free interest rate (based on

government bonds).

(d) Hedging

Fair value hedges

Where a derivative financial instrument hedges the changes in fair value of a recognized asset, liability or unrecognised firm

commitment (or an identified portion of such asset, liability or firm commitment), any gain or loss on remeasuring the fair

value or foreign currency component of the hedging instrument is recognised in the statement of income. The hedged item

is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the statement of

income.

Hedge of future foreign currency transactions

The fair value of future foreign currency contracts is based on their listed market price, as at balance sheet date.

Hedge of interest rates

The Company enters into interest rate cap option agreements with various investment-grade counter-parties to hedge against

its U.S. Dollar floating interest rate loans. During periods where U.S. Dollars LIBOR interest rate does not exceed the caps, the

Company pays interest at the prevailing U.S. Dollars LIBOR interest rates. The cap premium is recorded as deferred charges

for interest rate hedging, and is amortised based on the straight-line method over the term of the agreements.

A subsidiary company enters into interest rate swap agreements with various investment-grade counter-parties to hedge

against its U.S Dollars with LIBOR interest rates. The differences under interest rate swaps are recorded as adjustments to

the interest expense relating to the hedged loans in the statement of income.

Hedge of Crack Spread

From time to time depending on the market condition, the Company enters into Crack Spread Swap agreements to lock in

margins between benchmark finished products and crude. The differences between the fixed prices of the agreement and the

settlement prices are recognised as gains or losses in current operations.



(e) Cash and cash equivalents

Cash and cash equivalents in the statements of cash flows comprise cash balances, saving accounts, current accounts and

highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities

for the purpose of the statement of cash flows.

(f) Trade and other accounts receivable

Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts.

The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer

payments. Bad debts are written off when incurred.

(g) Inventories

Raw materials, work in progress and finished goods

Inventories are stated at the lower of cost and net realisable value.

Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present

location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of

overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete

and to make the sale.

Crude oil and feedstock and finished and semi-finished oil products

Cost of crude oil and feed stock and finished and semi-finished oil products is calculated using weighted average cost in

line with the major shareholder’s accounting policy. This is a change of group accounting policy, the effects of which are

disclosed in note 30.

Materials, spare parts and supplies

Cost of materials, spare parts and supplies is calculated using the weighted average cost.



(h) Investments

Investments in subsidiaries and associates

Investments in subsidiaries and associates in the separate financial statements of the Company are accounted for using the

cost method. This is a change of accounting policy, the effects of which are disclosed in note 30. Investments in associates

in the consolidated financial statements are accounted for using the equity method.

Investments in other debt and equity securities

Debt securities that the Group intends and is able to hold to maturity are stated at amortised cost less impairment losses

(if any). The difference between the acquisition cost and redemption value of such debt securities is amortised using the

effective interest rate method over the period to maturity.

Debt securities and marketable equity securities other than those securities held for trading or intended to be held to maturity,

are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly

in equity. The exceptions are impairment losses and foreign exchange gains and losses, which are recognised in the statement

of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is

recognised in the statement of income.

Equity securities which are not marketable are stated at cost less impairment losses.

Disposal of investments

On disposal of an investment, the difference between net disposal proceeds and the carrying amount is recognised in the

statement of income.

If the Group disposes of part of its holding of a particular investment, the deemed cost of the part sold is determined using

the weighted average method applied to the carrying value of the total holding of the investment.

(i) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. This is a change of

the Company’s accounting policy in relation to valuation method for property, plant and equipment form revaluation to cost

in line with the major shareholder’s accounting policy. The effects of this change are disclosed in note 30.



Depreciation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of

an item of property, plant and equipment (except the power plant of Thaioil Power Company Limited which is depreciated by

the units of production method). The estimated useful lives are as follows:

Buildings 10 - 25 years

Leasehold improvements 5 - 20 years

Refinery plant of the Company (starting from 1 October 1994,

depreciated over the remaining estimated useful life) 20 years

Lube base oil refinery plant of a subsidiary company 16 - 20 years

Paraxylene plant of a subsidiary company 10 - 25 years

Power plant of a subsidiary company (Independent Power (Thailand) Co., Ltd.) 25 years

Transmission facility 20 years

Machinery, equipment and plant equipment 5 - 20 years

Oil and liquid chemical tankers 9 - 14 years

Furniture, fixtures, office equipment and others 5 - 10 years

Vehicles 5 years

No depreciation is provided on assets under construction.

(j) Intangible assets

Negative goodwill

Negative goodwill in a business combination represents the excess of the fair value of the Group’s share of the identifiable

net assets acquired over the cost of acquisition.

Negative goodwill is stated at cost less accumulated amortisation and impairment losses (if any). Negative goodwill arising

on acquisition of shares in a subsidiary in the Company’s separate financial statements is included in investments.

Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment

losses (if any).



Amortisation

Amortisation is charged to the statement of income on a straight-line basis from the date that intangible assets are available

for use over the estimated useful lives of the assets, unless such lives are indefinite. Intangible assets with an indefinite

useful life are not amortised but are systematically tested for impairment at each balance sheet date. The estimated useful

lives are as follows:

Computer software 5 years

Licence fee 10-15 years

Negative goodwill 20 years

Deferred charges are amortised over the estimated periods to which the benefits relate, which are principally in line with the

agreements to which such deferred charges relate.

(k) Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any

indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually

and when indicators of impairment are identified.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable

amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to

equity, in which case it is charged to equity.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is

objective evidence that the value of the asset is impaired, the cumulative loss that had been recognized directly in equity

is recognised in the statement of income even though the financial asset has not been derecognised. The amount of the

cumulative loss that is recognised in the statement of income is the difference between the acquisition cost and current fair

value, less any impairment loss on that financial asset previously recognised in the statement of income.

Calculation of recoverable amount

The recoverable amount of the Group’s investments in held-to-maturity securities and receivables carried at amortised cost is

calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Receivables

with a short duration are not discounted.



The recoverable amount of other assets is the greater of the assets’ net selling price and value in use. In assessing value in

use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash

inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit

to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a held-to-maturity security or receivable carried at amortised cost is reversed if the subsequent

increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that

would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(l) Discount on notes

Discount on notes, comprising the difference between proceeds from notes issuance and redemption value on maturity, is

recognised in the statement of income over the period of the borrowings on an effective interest basis.

(m) Trade and other accounts payable

Trade and other accounts payable are stated at cost.

(n) Employee benefits

Provident fund

Obligations for contributions to provident fund are recognised as an expense in the statement of income as incurred.

Retirement gratuity fund

Obligations for contributions to retirement gratuity fund are computed on the benefit formula at balance sheet date and are

recognised as an expense in the statement of income. Benefits are payable upon retirement, disability, death or resignation.



(o) Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of

a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting

the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,

where appropriate, the risks specific to the liability.

(p) Revenue

Revenue excludes value added taxes or other sales taxes and is arrived at after deduction of trade discounts.

Sale of goods and services rendered

Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred

to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant

uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods. Service income

is recognised as services are provided.

Rental income

Rental income from assets is recognised in the statement of income on a straight-line basis over the term of the lease.

Interest and dividend income

Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of

income on the date the Group’s right to receive payments is established which in the case of quoted securities is usually the

ex-dividend date.

(q) Expenses

Operating leases

Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of

the lease. Contingent rentals are charged to the statement of income for the accounting period in which they are incurred.

Repairs and maintenance

Expenditure on repairs and maintenance is charged to the statement of income in the period in which the expenditure is

incurred. Expenditure of a capital nature is added to the cost of the related plant and equipment.



Finance costs

Interest expenses and similar costs are charged to the statement of income for the period in which they are incurred, except

to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset

which necessarily takes a substantial period of time to be prepared for its intended use or sale.

(r) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date,

and applicable to the reporting period and any adjustment to tax payable in respect of previous years.

Deferred tax

The Company and certain subsidiary companies record deferred tax. Deferred tax is provided, using the liability method, on

temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts

used for taxation purposes. Temporary differences are not recognised for goodwill not deductible for tax purposes; the initial

recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in

subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided

is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates

enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against

which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related

tax benefit will be realised.

4. Related party transactions and balances

Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or

directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists,

at contractually agreed prices.



The followings are relationships with related parties that control or jointly control the Company or are being controlled or

jointly controlled by the Company or have transactions with the Group.

Name of entities Country of Nature of relationship incorporation

PTT Public Co., Ltd. Thailand Major shareholder

Thai Paraxylene Co., Ltd. Thailand Subsidiary and / or directorship

Thai Lube Base Public Co., Ltd. Thailand Subsidiary and / or directorship

Thaioil Power Co., Ltd. Thailand Subsidiary and / or directorship

Thaioil Marine Co., Ltd. Thailand Subsidiary and / or directorship

Thaioil Energy Co., Ltd. Thailand Subsidiary and / or directorship

Measod Clean Energy Co., Ltd. Thailand Associated company and / or directorship

PTT ICT Solutions Co., Ltd. Thailand Associated company and / or directorship

Thai Petroleum Pipeline Co., Ltd. Thailand Related company and / or directorship

Star Petroleum Refining Co., Ltd. Thailand Major shareholder’s associated company

Thailand Major shareholder’s associated company

IRPC Public Co., Ltd. Thailand Major shareholder’s associated company

PTT Aromatics and Refining Public Co., Ltd.

(Amalgamation between The Aromatics (Thailand)

Public Co., Ltd. and Rayong Refinery

Public Co., Ltd.)) Thailand Major shareholder’s associated company

Bangchak Petroleum Public Co., Ltd. Thailand Major shareholder’s associated company

PTT Retail Management Co., Ltd Thailand Subsidiary of major shareholder’s

subsidiary company

Independent Power (Thailand) Co., Ltd. Thailand Subsidiary of Company’s subsidiary company

and / or directorship

Top Independent Power Co., Ltd. Thailand Subsidiary of Company’s subsidiary company

and / or directorship

The pricing policies for particular types of transactions are explained further below:

(1) Revenue from sale of goods and rendering of services and purchase of goods are determined by reference to market

prices or, where no market price exists, at contractually agreed prices.

(2) Other income and other expenses are determined by contractually agreed prices.

(3) Directors’ remuneration is determined by shareholders.



Significant transactions for the years ended 31 December 2007 and 2006 with related parties were as follows:

(in thousand Baht)



2007 2006 2007 2006

Major shareholder


rendering of services 146,951,943 158,450,090 143,539,700 155,481,804

Purchase of crude oil and feedstock 122,814,070 126,417,323 113,616,619 118,139,261

Revenue from sale of fixed assets - 105,000 - 105,000

Other income 18,208 14,560 18,123 14,540

Interest expense - 6,641 - 6,641

Expenses 685,786 12,821 684,802 11,934

Purchase-sale of crude oil and

feedstock for legal reserve* 3,729,550 2,197,680 3,729,550 2,197,680

Subsidiaries


rendering of services - - 30,153,732 38,770,292

Purchase of crude oil and feedstock - - 29,120,601 32,852,446


feedstock for legal reserve* - - 2,151,750 1,810,000

Interest income - - 15,357 1,022

Dividend income - - 2,253,187 1,688,990

Other income - - 638,579 1,061,899

Land lease income - - 39,311 37,746

Interest expense - - - 2,214

Expenses - - 15,503 26,774



(in thousand Baht)



2007 2006 2007 2006

Associate

Expenses 40,109 16,514 40,109 16,514

Other related parties


rendering of services 17,962,348 13,059,860 16,530,493 11,816,034

Purchase of crude oil and feedstock 2,904,596 2,414,106 2,376,675 2,410,627


feedstock for legal reserve* 7,169,468 2,192,530 7,169,468 2,192,530

Other income 10,683 11,337 10,683 11,337

Revenue from sale of fixed assets 500 - 500 -

Expenses 82,829 60,212 82,829 60,212

Directors’ remuneration 90,472 111,515 62,020 61,539

* Paper transactions between related parties for the purchase and sale of crude oil and feedstock, which are physically held

in storage by the seller, entered only for the purpose of maintaining the legal minimum levels of crude oil inventory in the

respective related parties, have been reversed from the financial statements for the years ended 31 December 2007 and

2006.



Balances as at 31 December 2007 and 2006 with related parties were as follows:

Trade accounts receivable from related parties

(in thousand Baht)



2007 2006 2007 2006

Major shareholder

PTT Public Co., Ltd. 10,514,015 8,073,655 10,329,062 7,794,791

Subsidiaries

Thai Paraxylene Co., Ltd. - - 2,160,340 2,928,404

Thai Lube Base Public Co., Ltd. - - 208,286 76,978

Thaioil Power Co., Ltd. - - 59,103 32,363


PTT Retail Management Co., Ltd 241,494 - 241,494 -

IRPC Public Co., Ltd. 137,096 404,466 24,764 30,331

Bangchak Petroleum Public Co., Ltd. 553,815 949,701 534,954 945,782

11,446,420 9,427,822 13,558,003 11,808,649

Less allowance for doubtful accounts (266) (266) - -

Net 11,446,154 9,427,556 13,558,003 11,808,649



Accounts receivable from subsidiary, associated and related parties

(in thousand Baht)



2007 2006 2007 2006

Major shareholder

PTT Public Co., Ltd. 273,759 4,080 273,357 4,080

Subsidiaries


Thai Paraxylene Co., Ltd. - - 17,025 11,784


Independent Power (Thailand) Co., Ltd. - - 25,482 5,629

Thaioil Energy Co., Ltd. - - 48,459 -

Thaioil Marine Co., Ltd. - - 8,216 861

Top Independent Power Co., Ltd. - - 242 -

Associate

PTT ICT Solutions Co., Ltd. 35,497 9,262 35,497 9,262

Total 309,256 13,342 460,431 71,827

Loan to related party

(in thousand Baht)



2007 2006 2007 2006

Short-term loan to subsidiary

Thaioil Marine Co.,Ltd.

(interest rate in 2007 at MMR

rate not exceeding the average

MLR of 5 banks less margin) - - 1,518,000 -



Movements during the years ended 31 December 2007 and 2006 of loan to related party were as follows:

Loan to related party

(in thousand Baht)



2007 2006 2007 2006

Short term loan

Subsidiary

At 1 January - - - -

Increase - - 1,518,000 -

At 31 December - - 1,518,000 -

Trade accounts payable - related parties

(in thousand Baht)



2007 2006 2007 2006

Major shareholder

PTT Public Co., Ltd. 17,140,340 8,323,271 16,040,108 6,655,321

Subsidiaries


Thai Paraxylene Co., Ltd. - - 1,658,170 2,172,438

Thai Lube Base Public Co., Ltd - - 316,486 215,899


Bangchak Petroleum Public Co., Ltd. - 60,754 - 60,754

IRPC Public Co., Ltd. 110,523 168 66,925 -

Total 17,250,863 8,384,193 18,199,523 9,257,404



Accounts payable to subsidiary, associated and related parties

(in thousand Baht)



2007 2006 2007 2006

Major shareholder

PTT Public Co., Ltd. 256,696 4,972 255,723 2,375

Subsidiaries

Independent Power (Thailand) Co., Ltd. - - 1,882 -


Thaioil Marine Co., Ltd. - - - 227

Associate

PTT ICT Solutions Co., Ltd. 39,840 15,602 39,840 15,602

Other related party

Thai Petroleum Pipeline Co., Ltd. 5,475 6,811 5,475 6,811

Total 302,011 27,385 306,179 26,202

Significant agreements with related parties

(a) Power and Steam Purchase Agreements

In 1997 and 1998, a subsidiary company entered into Power and Steam Purchase Agreements for 25 years with the Company

and two subsidiary companies whereby the subsidiary company will supply electric and steam energy to the said companies

at the agreed quantity and price and with a minimum take or pay obligation.

In 2005, a subsidiary company entered into a Steam Purchase Agreement for 20 years with the Company whereby the subsidiary

company will supply steam energy to the Company at the agreed quantity and price.

(b) Cost Reimbursement Agreements

In 1998, a subsidiary company entered into a Cost Reimbursement Agreement with the Company covering the construction

costs of natural gas pipeline facilities and the use of the pipeline facilities. Under the terms of the agreement, the subsidiary

company agreed to absorb the total investment costs advanced by the Company on the basis and conditions stipulated in the

agreement. The agreement will be in effect for a period of 25 years or until the termination of the Power Purchase Agreement

entered into by the subsidiary company with EGAT, whichever is sooner.



In 1998, a subsidiary company entered into three Cost Reimbursement Agreements with the Company covering the construction

costs of natural gas pipeline facilities, raw water pipeline and the use of land for the construction of a transmission line connecting

the subsidiary company to the Electricity Generating Authority of Thailand (EGAT). Under the terms of these agreements, the

subsidiary company agreed to share these investment costs on the bases and conditions stipulated in the agreements. These

agreements will be in effect for a period of 25 years or until the termination of the Power Purchase Agreement entered into

by the subsidiary company with EGAT, whichever is sooner.

(c) Services and Supplies Agreements

In 1997 and 1998, subsidiary companies entered into agreements with the Company for the Company to provide the subsidiary

companies with services and supplies on the scope, terms and conditions described in the agreements. These include the

following:

- operate, maintain and repair the power generation plant to generate electricity and process steam to the subsidiaries’

customers;

- manage, control and arrange for handling, inspection, storage and procurement of materials, spare parts, and equipment

necessary for operations and maintenance of plant; and

- provide supporting services such as financial and accounting services, personnel resources with training and development

of such personnel and managing such personnel to support the business operations of the subsidiary companies.

In consideration thereof, the subsidiary companies agree to pay certain fees based on the terms and conditions stipulated in

the agreements. This agreement has been effective for 24 years or until the termination of the land lease agreement with

the Company, whichever is sooner.

(d) Land Lease Agreements

In 1997, a subsidiary company entered into agreements with the Company to lease/sublease certain parcels of land for a

period of 25 years and 9 months ending in 2022 with total annual rental of Baht 1.2 million. This rent will be adjusted every

5 years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company

totaling approximately Baht 16.1 million.

In 1997, a subsidiary company entered into agreements with the Company to sublease certain parcels of land for a period

of 25 years and 10 months ending in 2022 with total annual rental of Baht 2.8 million. This rent will be adjusted every 5

years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company totaling

approximately Baht 31.7 million.



In 1995, the Company entered into agreements with a subsidiary company to lease/sublease certain parcels of land for a

period of 27 years and 8 months ending in 2022 with total annual rental of Baht 8.6 million. This rent will be adjusted every

5 years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company totaling

approximately Baht 116 million.

In 1997, the Company entered into agreements with a subsidiary company to lease/sublease certain land for 25 years and

10 months up to 2022 with total annual rental of Baht 4.7 million. This rent will be adjusted every 5 years. Under the terms

of the agreements, the subsidiary company paid deposits and front-end fees to the Company amounting to approximately

Baht 59.1 million.

(e) Raw Materials and Finished Product Purchases and Sales Agreements

In 2005, the Company entered into raw material and finished products purchases and sales agreements with a subsidiary

company. The agreement commenced on 1 April 2005 and may be terminated by either party giving at least six months notice

in writing to the other party. The volume and purchase and sale price of raw materials and finished products are specified

in the agreements.

(f) By-Product Sale and Purchase Agreement

In 2005, the Company entered into a by-product sale and purchase agreement with a subsidiary company. The term of the

agreement was 10 years from 1 October 2004 and may be terminated by mutual consent. The volume and purchase and sale

prices of by-product are specified in the agreement.

(g) Oil-Products Sale and Purchase Agreements

In 2006, the Company entered into two sale and purchase oil products agreements with a subsidiary company. The agreements

commenced on 1 November 2005 and 1 March 2006, respectively, and shall be terminated if either party does not comply

with the terms and conditions stipulated in the agreements. The volume and purchase and sale prices are specified in the

agreements.

(h) Technology and Communication Service Agreement

In 2006, the Company entered into a technology and communication service agreement with an associate. The term of the

agreement was 5 years commencing from 1 July 2006 and may be extended for successive periods of five years each. Rates

for service income are specified in the agreement.

(i) Crack Spread Swap Agreements

In 2007, the Company entered into certain crack spread swap agreements with a related party. The Company has to receive

payments from or make payments to the other party based on the terms and conditions stipulated in the agreements.



(j) Product Off take and Crude Oil Supply Agreement

In 2000, the Company entered into a Product Off take and Crude Oil Supply Agreement with a related company whereby (a)

the Company will sell and the related company will purchase refined petroleum products produced by the refinery for 49.99%

of 220,000 barrels of products per day and (b) the related company will supply and the Company will purchase crude oil and/

or feedstock for the refinery required to produce 49.99% of 220,000 barrels of products per stream day. The credit term for

crude oil and/or feedstock shall be mutually agreed. On 13 September 2004, the Company and the related company agreed

to amend the agreement to increase the required volume to 270,000 barrels per day after the completion and start-up of the

expansion of Crude Distillation Unit 3 (CDU-3).

(k) Agreement for Crude Oil Processing

In 1999, the Company entered into an agreement for crude oil processing with a related company whereby the related company

will supply crude oil to the Company and the Company will provide a processing service. In this regard, the Company will

either receive payments from or make payments to the related company depending on whether the processing fee for the

different amount of products lifted by the related company is higher or lower than the total value of Relevant Crude Intake

in the same month, taking into account other expenses plus the cost of funds, if any, incurred by either party. There was no

expiry date specified in this agreement.

(l) Long Residue Cracking and Fuel Oil Exchange Agreement

In 2002, the Company entered into a Long Residue Cracking and Fuel Oil Exchange Agreement with a related company to

exchange a related company’s Long Residue for Cracking in the Company’s process and receive Fuel Oil left from the process

for selling in such related company’s market. The agreement shall continue indefinitely until terminated by not less than

ninety days’ prior written notice given by either party. Payments shall be made on a net settlement basis as stipulated in

the agreement.

(m) Oil Transportation Agreements

In 2007, a subsidiary company entered into agreements with 2 subsidiary companies and a related company to transport oil

products and chemical products at quantity and pricing as stipulated in the agreements for the term of one year.

(n) Office Rental Agreement

In 2002 a subsidiary entered into office rental agreement with a related company for the period of 3 years. This agreement

will be consecutively renewed for the period not exceeding than 3 years. The annual fee is paid at rate as stipulated in the

agreement.



(o) Natural Gas Supply Agreements

In 1997, 1998, 2006 and 2007 the Company and two subsidiaries entered into sale and purchase of gas agreements with a

related company. The terms of the agreements were for periods of 25, 8 and 15 years, respectively. Under the agreements,

the related company agrees to provide natural gas to the Company and the subsidiaries at quantity and pricing as stipulated

in the agreements.

5 Cash and cash equivalents(in thousand Baht)



2007 2006 2007 2006

Cash on hand 1,904 2,671 368 1,022

Savings and current accounts 4,211,096 5,242,759 1,110,418 1,392,310

Fixed deposits (with maturity period <3 months

from the acquisition date) 4 - - -

Promissory notes issued by financial institutions - 1,280,000 - -

Total 4,213,004 6,525,430 1,110,786 1,393,332

The currency denomination of cash and cash equivalents as at 31 December was as follows:

(in thousand Baht)



2007 2006 2007 2006

Thai Baht (THB) 3,912,375 6,496,407 1,102,543 1,392,727

United States Dollars (USD) 300,585 28,774 8,243 356

Others 44 249 - 249

Total 4,213,004 6,525,430 1,110,786 1,393,332

As at 31 December 2007, savings deposits, current deposits and fixed deposits of subsidiary companies totaling Baht 288.5

million (2006 : Baht 1,879.4 million) are pledged as collateral for credit facilities as discussed in note 15. The subsidiary

companies can withdraw these deposits when needed as specified in the loan agreements.



6. Other investments(in thousand Baht)



2007 2006 2007 2006

Current investments

Fixed deposits 289,766 204,613 - -

Promissory notes issued by financial institutions 257,362 252,298 - -

547,128 456,911 - -

Other long-term investments

Equity securities available for sale 16,978 - 16,978 -

Other non marketable equity securities, net - - - -

16,978 - 16,978 -

Total 564,106 456,911 16,978 -

Current investments

Subsidiary companies have current investments in fixed deposits and promissory notes with terms over 3 months but not over

one year with several local financial institutions. These current investments bear interest at rates of 2.75 % to 3.80 % per

annum in 2007 (2006: interest at rates of 5.0 % to 6.1 % per annum). These current investments are pledged as collateral

for subsidiary companies’ credit facilities as discussed in note 15. Subsidiary companies can redeem the current investments

when needed.

Equity securities available for sale

In 2007, the Company entered into MFC Energy Open End Fund with certain companies so as to raise funds from financial

institution investors who are interested in investing in energy or relating energy business. In consideration thereof, the Company

has commitment to purchase a 16.98 % holding in this Fund, comprising 40 million units at par value of Baht 10, amounting

to Baht 400 million. As at 31 December 2007, the Company has invested Baht 17 million in this Fund.



Other non marketable equity securities


Type of Business Ownership interest Paid-up capital Cost method Dividend income

(%) (in thousand Baht)

2007 2006 2007 2006 2007 2006 2007 2006

Related party

Thai Petroleum Pipeline Oil transportation

Co., Ltd. by pipeline 9.19 9.43 8,479,000 8,267,687 779,497 779,497 - -

779,497 779,497 - -

Less allowance for loss on

impairment of investments (779,497) (779,497) - -

Net - - - -

Separate financial statements

Type of Business Ownership interest Paid-up capital Cost method Dividend income


2007 2006 2007 2006 2007 2006 2007 2006

Related party

Thai Petroleum Pipeline Oil transportation

Co., Ltd. by pipeline 9.19 9.43 8,479,000 8,267,687 779,497 779,497 - -

779,497 779,497 - -

Less allowance for loss on

impairment of investments (779,497) (779,497) - -

Net - - - -

Thai Petroleum Pipeline Co., Ltd.

On 9 January 2004, the Company purchased 1,129,453 preferred shares of Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) with

a par value of Baht 100 each, equivalent to Baht 113 million.

At the extraordinary shareholders’ meeting of THAPPLINE held on 26 September 2005, the shareholders approved the

increase of 43,015,000 new preferred shares with a par value of Baht 100 each totaling Baht 4,301.5 million. The Company is

entitled to purchase 4,165,516 preferred shares totaling Baht 416.55 million.



In 2005, the Company recorded an additional Baht 529.5 million allowances for loss on impairment of investments in shares

of THAPPLINE, bringing the total allowance recorded to Baht 779.5 million, since THAPPLINE has recorded recurring losses

for consecutive years. Subsequently in the fourth quarter 2005, THAPPLINE repaid the balance of a tariff prepayment with

interest of Baht 416.3 million to the Company. Consequently, the Company reversed allowance for impairment of Baht 250

million and presented the amount net of the additional provision.

7. Trade accounts receivable(in thousand Baht)



Note 2007 2006 2007 2006

Related parties 4 11,446,420 9,427,822 13,558,003 11,808,649

Other parties 11,515,811 9,328,038 7,623,922 4,625,701

22,962,231 18,755,860 21,181,925 16,434,350

Less allowance for doubtful accounts (1,290) (1,610) - -

Net 22,960,941 18,754,250 21,181,925 16,434,350

(Reversal of) doubtful debts

expenses for the year (320) 1,290 - -

Aging analyses for trade accounts receivable were as follows:

(in thousand Baht)



2007 2006 2007 2006

Related parties

Within credit terms 11,446,154 9,424,537 13,558,003 11,808,649

Overdue:

Less than 6 months - 3,019 - -

Over 12 months 266 266 - -

11,446,420 9,427,822 13,558,003 11,808,649

Less allowance for doubtful accounts (266) (266) - -

Net 11,446,154 9,427,556 13,558,003 11,808,649



(in thousand Baht)



2007 2006 2007 2006

Other parties

Within credit terms 11,166,341 9,296,963 7,320,497 4,625,701

Overdue:

Less than 3 months 310,773 12,639 303,425 -

6-12 months 9,214 3,671 - -

Over 12 months 29,483 14,765 - -

11,515,811 9,328,038 7,623,922 4,625,701

Less allowance for doubtful accounts (1,024) (1,344) - -

Net 11,514,787 9,326,694 7,623,922 4,625,701

Total 22,960,941 18,754,250 21,181,925 16,434,350

The normal credit term granted by the Group ranges from 19 days to 60 days.

Trade accounts receivable from other parties overdue for more than 12 months include approximately Baht 27.7 million (2006:

Baht 13.4 million) owed by a state enterprise. As at 31 December 2007, the subsidiary is in the process of negotiation with

this state enterprise and has received legal advice that the debt should be received in full. Accordingly, no allowance for

doubtful account has been made in respect of this debt.



The currency denomination of trade accounts receivable as at 31 December was as follows:

(in thousand Baht)



2007 2006 2007 2006

Thai Baht (THB) 17,228,115 15,714,568 16,962,489 14,694,593

United States Dollars (USD) 5,732,826 3,039,682 4,219,436 1,739,757

Total 22,960,941 18,754,250 21,181,925 16,434,350

8. Inventories(in thousand Baht)



2007 2006 2007 2006

(Restated) (Restated)

Crude oil and feedstock 11,408,651 8,075,063 9,737,477 7,099,678

Materials, spare parts and supplies 1,010,958 918,949 709,526 660,649

Finished and semi-finished oil Products 7,686,830 5,217,150 6,439,951 3,972,740

Gas oil for power plant 13,389 13,634 - -

Goods in transit

- Crude oil 12,668,590 6,421,207 12,668,590 6,421,207

- Materials, spare parts and supplies 13,342 9,538 13,342 9,538

Total 32,801,760 20,655,541 29,568,886 18,163,812

In 2007, the Company and its subsidiaries have changed their accounting policy for valuing crude oil and feedstock and finished

and semi-products from last-in, first-out and first-in, first-out to weighted average. The change of such accounting policy

has the effect of increasing the balances of crude oil and feedstock and finished and semi-products as at 31 December 2007

in the consolidated and separate financial statements by Baht 487.4 million and Baht 365.7 million, respectively (2006: Baht

908.8 million and Baht 914.7 million, respectively). The effects of the change in accounting policy are disclosed in note 30.

As at 31 December 2007, the Company and subsidiaries’ inventories as stated above included a legal reserve amounting to

Baht 8,586 million and Baht 392 million (2006: Baht 6,524 million and Baht 451 million, respectively).



9. Other current assets (in thousand Baht)



2007 2006 2007 2006

Value-added tax receivable 906,158 509,695 313,165 423,474

Prepaid expense 349,928 394,006 235,229 228,359

Other accounts receivable 292,957 312,276 210,610 72,080

Account receivable from Oil Fuel Fund 365,386 1,148,057 365,386 1,148,057

Account receivable from cross currency

swap contracts - 80,661 - 80,661

Current portion of loan to savings

co-operative of employees 35,651 34,037 35,651 34,037

Others 194,218 73,480 152,484 35,473

Total 2,144,298 2,552,212 1,312,525 2,022,141

10. Investments in subsidiaries and associates(in thousand Baht)



2007 2006 2007 2006

(Restated)

At 1 January 44,367 - 8,238,421 8,193,421

Share of net losses of investments

- equity method (633) (633) - -

Acquisitions 101,250 45,000 141,250 45,000

Repayment of preferred shares

by subsidiary - - (1,390,034) -

At 31 December 144,984 44,367 6,989,637 8,238,421



Investments in subsidiaries and associates as at 31 December 2007 and 2006, and dividend income from those investments

for the years then ended were as follows:

Consolidated financial statements Ownership interest Paid-up capital Cost method Equity method Dividend income


2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

Associates

PTT ICT Solutions Co., Ltd. 20.00 20.00 150,000 150,000 30,000 30,000 31,430 29,660 - -

Measod Clean Energy Co., Ltd. 30.00 30.00 387,500 50,000 116,250 15,000 113,554 14,707 - -

Total 537,500 200,000 146,250 45,000 144,984 44,367 - -

Separate financial statements (Restated) Ownership interest Paid-up capital Cost method Dividend income


2007 2006 2007 2006 2007 2006 2007 2006

Subsidiaries

Thaioil Power Co., Ltd. 54.99 54.99 2,810,000 2,810,000 1,545,500 1,545,500 193,187 193,188

Independent Power (Thailand) Co., Ltd.

- Indirectly held by Thaioil Power Co., Ltd. 56.00 56.00 1,771,000 1,771,000 - - - -

- Directly held by the Company 24.00 24.00 487,968 487,968 59,931 -

Thaioil Marine Co., Ltd. 99.99 99.99 630,000 630,000 630,000 630,000 - -

Thai Paraxylene Co., Ltd. 99.99 99.99 2,572,414 5,490,852 2,161,193 3,551,227 - -

Thai Lube Base Public Co., Ltd. 99.99 99.99 1,757,891 2,832,959 1,978,726 1,978,726 2,000,069 1,495,802

Thaioil Energy Co., Ltd. 99.99 - 40,000 - 40,000 - - -

TOP Independent Power Co., Ltd.

- Indirectly held by Thaioil Energy Co., Ltd. 99.99 - 20,000 - - - - -

Associates

PTT ICT Solutions Co., Ltd. 20.00 20.00 150,000 150,000 30,000 30,000 - -

Measod Clean Energy Co., Ltd. 30.00 30.00 387,500 50,000 116,250 15,000 - -

Total 10,138,805 13,734,811 6,989,637 8,238,421 2,253,187 1,688,990



The following summarised financial information on associated companies which have been accounted for using the equity

method is not adjusted for the percentage of ownership held by the Group:

Ownership interest

TotalAssets

TotalLiabilities

TotalRevenue

Profit (Loss)


2007

PTT ICT Solutions Co., Ltd. 20 682,367 525,214 639,448 8,851

Measod Clean Energy Co., Ltd. 30 616,053 237,542 13,017 (8,011)

Total 1,298,420 762,756 652,465 840

2006

PTT ICT Solutions Co., Ltd. 20 331,340 183,039 233,722 (1,699)

Measod Clean Energy Co., Ltd. 30 51,921 2,899 25 (978)

Total 383,261 185,938 233,747 (2,677)

Independent Power (Thailand) Co., Ltd.

On 16 December 2004, the Company entered into an agreement to purchase shares of Independent Power (Thailand) Co., Ltd.

from Unocal Asia Pacific Ventures Ltd., a former shareholder, in the amount of 42,504,000 shares (equivalent to 24% of total

shares of this company) at the price of U.S. Dollars 12.8 million. On 11 March 2005, the Company completed the acquisition as

per the conditions stipulated in the above agreement. The Company recognised the difference between the cost of acquisition

and the fair value of Baht 585 million as negative goodwill in the balance sheet. The negative goodwill is amortised by the

straight line basis over its estimated useful life of 20 years. In 2007, the Company amortised such negative goodwill by Baht

29 million (2006: Baht 29 million), resulting in the remaining balance of the aforementioned negative goodwill of Baht 502

million as at 31 December 2007 (2006: Baht 531 million).

Thai Paraxylene Co., Ltd.

At the extraordinary shareholders’ meeting of Thai Paraxylene Co., Ltd. held on 18 April 2005, the shareholders unanimously

approved the repayment of all its preferred shares in the amount of Baht 2,918 million (divided into Baht 291.8 million preferred

shares at Baht 10 par value). On 9 October 2007, the subsidiary registered the decrease of its preferred shares with the Ministry

of Commerce and remitted Baht 2,918 million to the Company as preferred shareholder. The Company’s cost of investment

in these preferred shares was Baht 1,390 million and the Company, accordingly, recognised a gain of Baht 1,528 million in its

separate financial statements for the year ended 31 December 2007 (note 22).



Thai Lube Base Public Company Limited

At the annual general meeting of the shareholders of Thai Lube Base Public Company Limited held on 27 April 2007, the

shareholders approved the cancellation of unissued shares of Baht 90 (divided into 9 shares at Baht 10 par value) and approved

the decrease in the registered share capital of the company from Baht 2,832,959,060 (divided into 283,295,906 shares at Baht

10 par value) to Baht 1,757,890,730 (divided into 175,789,073 shares at Baht 10 par value) and transferred the difference between

the former paid-up share capital and the newly paid-up share capital to reduce the subsidiary’s discount on share capital of

Baht 1,075,068,326. On 18 July 2007, the subsidiary registered the decrease in the registered share capital with the Ministry

of Commerce.

PTT ICT Solutions Co., Ltd.

On 7 June 2006, the Company invested Baht 30 million to acquire 3 million ordinary shares representing 20% of the issued

share capital of PTT ICT Solutions Co., Ltd. at their par value of Baht 10 each.

Measod Clean Energy Co., Ltd.

On 9 October 2006, the Company entered into an agreement to invest in the establishment of Measod Clean Energy Company

Limited to construct and operate an ethanol production plant, together with Padaeng Industry Public Company Limited and

Petrogreen Company Limited. The Company agreed to invest Baht 30 million to acquire 30% of the share capital of Measod

Clean Energy Company Limited. On 21 November 2006, Measod Clean Energy Company Limited called for payment of share

capital at the rate of 50% of par value. The Company has accordingly paid Baht 15 million in respect of its shareholding.

As at 31 August 2007, Measod Clean Energy Co., Ltd. called for payment of the remaining share capital at the rate of 50% of

par value. The Company has accordingly paid Baht 15 million in respect of the shareholding on 7 September 2007.

At the extraordinary shareholders’ meeting of Measod Clean Energy Co., Ltd. held on 4 September 2007, the shareholders

unanimously approved the increase of 57.5 new common shares with a par value of Baht 10 each totaling Baht 575 million.

Measod Clean Energy Co., Ltd. called for payment of share capital at the rate of 50% of par value of additional registered

shares and the Company paid Baht 86.25 million in respect of its 30% shareholding.


11. Property, plant and equipment

(in thousand Baht)

Consolidated financial statements (Restated)

Land Buildings

Leaseholdimpro-

vements

Refineryplant

and plantequipment

Paraxyleneplant

Powerplant

Trans-mission

facility

Machinery,equipment

and plantequipment

Oil and liquid

chemical tankers

Furniture, fixtures,

office equipmentand others Vehicles

Constructionin progress Total

Cost

At 1 January 2006 2,655,370 1,030,866 4,795 94,649,634 8,606,680 15,553,311 192,637 1,980,617 527,796 428,641 22,971 2,428,004 128,081,322

Change in accounting policy (note 30) (242,157) - - (32,291,462) (448,422) - - - - - - - (32,982,041)

Balance 2,413,213 1,030,866 4,795 62,358,172 8,158,258 15,553,311 192,637 1,980,617 527,796 428,641 22,971 2,428,004 95,099,281

Additions 290,530 - - - - - - 3,202 - 8,442 4,230 8,787,389 9,093,793

Transfers, net - 549 - 284,056 - - - 76,899 - 38,753 556 (400,813) -

Disposals (128,419) (49,454) - (36,700) - - - (20,482) - (2,143) (5,177) - (242,375)

At 31 December 2006 and

1 January 2007 2,575,324 981,961 4,795 62,605,528 8,158,258 15,553,311 192,637 2,040,236 527,796 473,693 22,580 10,814,580 103,950,699

Additions - - - - 51,220 - - 22,903 7,058 15,198 1 16,451,052 16,547,432

Transfers, net - 131,309 - 8,587,570 - - - 99,611 1,081,379 56,488 375 (10,068,251) (111,519)

Disposals - - - - - - - (1,302) - (22,507) (1,046) - (24,855)

At 31 December 2007 2,575,324 1,113,270 4,795 71,193,098 8,209,478 15,553,311 192,637 2,161,448 1,616,233 522,872 21,910 17,197,381 120,361,757



(in thousand Baht)

Consolidated financial statements (Restated)

Land Buildings

Leaseholdimpro-

vements

Refineryplant

and plantequipment

Paraxyleneplant

Powerplant

Trans-mission

facility

Machinery,equipment

and plantequipment

Oil and liquid

chemical tankers

Furniture, fixtures,

office equipmentand others Vehicles


Accumulated depreciation

At 1 January 2006 - 561,077 1,100 49,250,027 1,628,696 3,688,817 68,628 646,966 170,567 353,312 14,047 - 56,383,237

Change in accounting policy (note 30) - - - (16,285,473) (23,381) - - - - - - - (16,308,854)

Balance - 561,077 1,100 32,964,554 1,605,315 3,688,817 68,628 646,966 170,567 353,312 14,047 40,074,383

Depreciation charge for the year - 43,181 207 2,820,546 431,132 682,619 9,632 198,816 37,189 25,711 3,686 - 4,252,719

Transfers, net - - - - - - - - - - - - -

Disposals - (25,615) - (15,132) - - - (20,380) - (2,014) (3,961) - (67,102)


1 January 2007 - 578,643 1,307 35,769,968 2,036,447 4,371,436 78,260 825,402 207,756 377,009 13,772 - 44,260,000

Depreciation charge for the year - 40,186 207 2,902,408 422,400 654,342 9,632 218,126 39,170 34,555 3,137 - 4,324,163

Transfers, net - - - - - - - - (43,231) - - - (43,231)

Disposals - - - - - - - (396) - (14,901) (805) - (16,102)

At 31 December 2007 - 618,829 1,514 38,672,376 2,458,847 5,025,778 87,892 1,043,132 203,695 396,663 16,104 - 48,524,830

Impairment losses

At 31 December 2006 397,176 - - - - - - - - - - - 397,176

At 31 December 2007 397,176 - - - - - - - - - - - 397,176

Net Book Value

At 31 December 2006 2,178,148 403,318 3,488 26,835,560 6,121,811 11,181,875 114,377 1,214,834 320,040 96,684 8,808 10,814,580 59,293,523

At 31 December 2007 2,178,148 494,441 3,281 32,520,722 5,750,631 10,527,533 104,745 1,118,316 1,412,538 126,209 5,806 17,197,381 71,439,751



(in thousand Baht)

Separate financial statements (Restated)

Land Buildings

Refineryplant

and plantequipment

Machinery,equipment

and plantequipment

Furniture,fixtures,

officeequipmentand others Vehicles


Cost

At 1 January 2006 2,594,657 765,438 88,437,150 918,504 260,061 9,582 2,025,924 95,011,316

Change in accounting policy

(note 30) (242,157) - (32,291,462) - - - - (32,533,619)

Restated balance 2,352,500 765,438 56,145,688 918,504 260,061 9,582 2,025,924 62,477,697

Additions 286,198 - - - - - 6,207,965 6,494,163

Transfers, net - 549 284,056 23,337 33,316 556 (341,814) -

Disposals (67,706) (49,454) - (20,482) (1,066) - - (138,708)

At 31 December 2006 and 2,570,992 716,533 56,429,744 921,359 292,311 10,138 7,892,075 68,833,152

1 January 2007

Additions - - - - - - 6,134,325 6,134,325

Transfers, net - 131,309 8,587,570 17,905 20,715 375 (8,757,874) -

Disposals - - - (1,302) (22,143) - - (23,445)

At 31 December 2007 2,570,992 847,842 65,017,314 937,962 290,883 10,513 5,268,526 74,944,032




(in thousand Baht)

Separate financial statements (Restated)

Land Buildings

Refineryplant

and plantequipment

Machinery,equipment

and plantequipment

Furniture,fixtures,

officeequipmentand others Vehicles


Accumulated depreciation

At 1 January 2006 - 455,833 46,675,319 421,341 217,133 7,750 - 47,777,376

Change in accounting policy

(note 30) - - (16,285,473) - - - - (16,285,473)

Restated balance - 455,833 30,389,846 421,341 217,133 7,750 - 31,491,903

Depreciation charge for the year - 30,197 2,518,840 57,648 14,182 1,151 - 2,622,018

Transfers, net - - - - - - - -

Disposals - (25,615) - (20,381) (989) - - (46,985)


1 January 2007 - 460,415 32,908,686 458,608 230,326 8,901 - 34,066,936

Depreciation charge for the year - 27,201 2,601,240 59,787 16,817 839 - 2,705,884

Transfers, net - - - - - - - -

Disposals - - - (396) (14,587) - - (14,983)

At 31 December 2007 - 487,616 35,509,926 517,999 232,556 9,740 36,757,837

Impairment losses

At 31 December 2006 397,176 - - - - - - 397,176

At 31 December 2007 397,176 - - - - - - 397,176

Net Book Value

At 31 December 2006 2,173,816 256,118 23,521,058 462,751 61,985 1,237 7,892,075 34,369,040

At 31 December 2007 2,173,816 360,226 29,507,388 419,963 58,327 773 5,268,526 37,789,019



In 2007, the Company has changed its accounting policy for valuing property, plant and equipment from revaluation to cost.

The change of such accounting policy has the effect of reducing the book value of property, plant and equipment as at 31

December 2007 in the consolidated and separate financial statements by Baht 14,844.6 million and Baht 14,419.6 million,

respectively (2006: Baht 16,686.5 million and Baht 16,248.1 million, respectively). The effects of the change in accounting policy

are disclosed in note 30.

As at 31 December 2007 and 2006, the gross carrying amounts of certain fully depreciated property, plant and equipment that

were still in use amounted to approximately Baht 1,396 million and Baht 1,335 million in the consolidated financial statements,

respectively, and amounted to approximately Baht 1,158 million and Baht 1,122 million in the separate financial statements,

respectively.

The subsidiary companies’ power plant and certain assets are mortgaged as collateral for long-term loans as discussed in

note 15.

12. Intangible assets(in thousand Baht)


ComputerLicence fee software Total

Cost

At 1 January 2006 561,299 37,935 599,234

Additions 2,941 6,452 9,393

Disposals - - -

At 31 December 2006 and 1 January 2007 564,240 44,387 608,627

Additions 9,663 1,475 11,138

Disposals - - -

At 31 December 2007 573,903 45,862 619,765



(in thousand Baht)



Accumulated amortisation

At 1 January 2006 489,770 30,038 519,808

Amortisation charge for the year 34,133 2,769 36,902

Disposals - - -



Disposals - - -

At 31 December 2007 556,951 34,467 591,418

Net book value

At 31 December 2006 40,337 11,580 51,917

At 31 December 2007 16,952 11,395 28,347

(in thousand Baht)



Cost

At 1 January 2006 560,460 29,728 590,188

Additions 2,941 6,330 9,271

Disposals - - -


Additions 9,663 1,072 10,735

Disposals - - -

At 31 December 2007 573,064 37,130 610,194



(in thousand Baht)



Accumulated amortisation

At 1 January 2006 489,673 22,764 512,437


Disposals - - -



Disposals - - -

At 31 December 2007 556,660 26,608 583,268

Net book value

At 31 December 2006 39,692 10,873 50,565

At 31 December 2007 16,404 10,522 26,926

13. Deferred tax

Deferred tax assets and liabilities determined after appropriate offsetting are included in the balance sheets as follows:

(in thousand Baht)



2007 2006 2007 2006(Restated) (Restated)

Deferred tax assets 209,437 210,998 209,437 210,998

Deferred tax liabilities (1,502,607) (1,582,479) (1,462,706) (1,536,194)

Net (1,293,170) (1,371,481) (1,253,269) (1,325,196)



Movements in deferred tax assets and liabilities during the year were as follows:

(in thousand Baht)


Charged / (credited) to

At1 January

2007

Statementof income

(note 26)Shareholders’

equity

At31 December

2007

Deferred tax liabilities

Depreciation (1,486,758) 64,540 - (1,422,218)

Provision for hedging on foreign exchange

and forward contracts (27,264) 4,089 - (23,175)

Amortisation of transmission facility

transferred to EGAT (46,285) 6,384 - (39,901)

Gain on remeasurement to fair value

of cross currency swap contracts (22,172) 22,172 - -

Net gain on remeasurement to fair value

of crack spread swap agreements - (17,313) - (17,313)

Total (1,582,479) 79,872 - (1,502,607)

Deferred tax assets

Pension fund 88,660 (1,616) - 87,044

Loss on impairment of assets 119,153 - - 119,153

Others 3,185 55 - 3,240

Total 210,998 (1,561) - 209,437

Net (1,371,481) 78,311 - (1,293,170)



(in thousand Baht)



At1 January

2007

Statementof income


equity

At31 December

2007


Depreciation (1,486,758) 64,540 - (1,422,218)




of cross currency swap contracts (22,172) 22,172 - -

Net gain on remeasurement to fair value

of crack spread swap agreements - (17,313) - (17,313)

Total (1,536,194) 73,488 - (1,462,706)

Deferred tax assets

Pension fund 88,660 (1,616) - 87,044


Others 3,185 55 - 3,240

Total 210,998 (1,561) - 209,437

Net (1,325,196) 71,927 - (1,253,269)



(in thousand Baht)



At1 January

2006

Statementof income


equity

At31 December

2006


Depreciation (1,542,353) 55,595 - (1,486,758)



Amortisation of transmission facility

transferred to EGAT (52,669) 6,384 - (46,285)

Surplus on revaluation of assets (1,199,074) 457,135 (1,103,137) (1,845,076)


of cross currency swap contracts - (22,172) - (22,172)

Total (2,825,449) 501,031 (1,103,137) (3,427,555)

Deferred tax assets

Pension fund 72,361 16,299 - 88,660


Capitalised interest charged

as part of cost of land 12,410 (12,410) - -

Others 2,630 555 - 3,185

Total 206,554 4,444 - 210,998

Net (2,618,895) 505,475 (1,103,137) (3,216,557)

Change in accounting policy (note 30) 1,199,074 (457,135) 1,103,137 1,845,076

Restated balance (1,419,821) 48,340 - (1,371,481)



(in thousand Baht)



At1 January

2006

Statementof income


equity

At31 December

2006


Depreciation (1,542,353) 55,595 - (1,486,758)



Surplus on revaluation of assets (1,199,074) 457,135 (1,103,137) (1,845,076)


of cross currency swap contracts - (22,172) - (22,172)

Total (2,772,780) 494,647 (1,103,137) (3,381,270)

Deferred tax assets

Pension fund 72,361 16,299 - 88,660


Others 2,630 555 - 3,185

Total 194,144 16,854 - 210,998

Net (2,578,636) 511,501 (1,103,137) (3,170,272)

Change in accounting policy (note 30) 1,199,074 (457,135) 1,103,137 1,845,076

Restated balance (1,379,562) 54,366 - (1,325,196)



14. Other non-current assets(in thousand Baht)



2007 2006 2007 2006

Long-term loans to savings co-operative of

employees 532,918 510,338 532,918 510,338

Transmission facility transferred to EGAT, net 133,002 154,282 - -

Deferred natural gas pipeline facilities,

raw water pipeline and the use of land, net 275,407 292,668 137,699 146,488

Deferred land lease arrangement

and registration fees, net 635,010 678,202 635,010 678,202

Deferred charges for interest rate hedging, net 20,807 65,516 20,807 48,640

Other deferred charges, net 857,586 484,981 752,995 362,487

Receivables from cross currency swap contracts 114,176 - - -

Assets held for sale, net 68,288 - - -

Refundable deposits and others 111,823 111,171 42,229 41,758

Total 2,749,017 2,297,158 2,121,658 1,787,913



15. Interest-bearing liabilities (in thousand Baht)



2007 2006 2007 2006

Current

Short - term loans from financial institutions

unsecured 350,000 1,000,000 350,000 1,000,000

Long-term loans from financial institutions

Current portion of long-term loans

secured 804,016 1,133,370 - -

unsecured 295,620 - 295,620 -

1,099,636 1,133,370 295,620 -

1,449,636 2,133,370 645,620 1,000,000

Non-current

Long-term loans from financial institutions

secured 3,425,352 4,384,338 - -

unsecured 10,085,219 6,766,542 4,631,380 6,766,542

13,510,571 11,150,880 4,631,380 6,766,542

Unsecured notes 17,348,899 18,167,918 17,348,899 18,167,918

30,859,470 29,318,798 21,980,279 24,934,460

Total 32,309,106 31,452,168 22,625,899 25,934,460



The periods to maturity of interest-bearing liabilities as at 31 December were as follows:

(in thousand Baht)



2007 2006 2007 2006

Within one year 1,449,636 2,133,370 645,620 1,000,000

After one year but within five years 15,312,360 12,514,436 7,381,380 9,516,542

After five years 15,547,110 16,804,362 14,598,899 15,417,918

Total 32,309,106 31,452,168 22,625,899 25,934,460

Secured interest-bearing liabilities as at 31 December were secured on the following assets:

(in thousand Baht)



2007 2006 2007 2006

Current accounts, savings and

fixed deposits at banks 288,450 1,879,403 - -

Current investments in promissory notes 397,128 252,298 - -

Power plant - carrying value 10,520,179 11,059,246 - -

Total 11,205,757 13,190,947 - -

As at 31 December 2007 the Group and the Company had unutilised long-term credit facilities totalling Baht 6,777 million and

Baht 6,777 million, respectively (2006: Baht 13,604.5 million and Baht 5,434.6 million, respectively).

The currency denomination of interest-bearing liabilities as at 31 December was as follows:

(in thousand Baht)



2007 2006 2007 2006

Thai Baht (THB) 15,384,674 11,475,248 10,777,000 9,100,000


Japanese Yen 2,828,839 - - -

Total 32,309,106 31,452,168 22,625,899 25,934,460



Details of principal features of borrowings as at 31 December were as follows:

(in thousand Baht)



Note 2007 2006 2007 2006

The Company :

1. U.S. Dollars 65 million under U.S. Dollars 65 million

and Baht 2,600 million Syndicated Loan Facility

agreement in 2005 repayable in six (6) semi-annual

installments commencing in September 2008

(interest at LIBOR plus a margin of 1.18%) 15.1 - 2,355,002 - 2,355,002

2. Thai Baht under U.S. Dollars 65 million and Baht

2,600 million Syndicated Loan Facility agreement

repayable in six (6) semi-annual installments

commencing in September 2008 (interest at the

average Baht 6-month time deposit rate plus a

margin of 2.75% in 2006 and at MLR less 1.625%

for 2 years from the year 2007 and at MLR-1.25%

for the last 2 years) 15.1 4,927,000 2,600,000 4,927,000 2,600,000

3. U.S. Dollars 50 million in 2006 under

U.S. Dollars 200 million Revolving Credit Facility

agreement, principal will be repayable in full at the

fifth anniversary of the date of the agreement

(interest at LIBOR plus a margin of 0.36%),

prior to maturity date, it’s Company’s own discretion

whether to make a drawdown or repayment

within the availability period as well as decision to

select the interest period of the amount drawdown

under the relevant terms and conditions under

the loan agreement 15.1 - 1,811,540 - 1,811,540



(in thousand Baht)



Note 2007 2006 2007 2006

Subsidiaries:

Thaioil Power Co., Ltd. 15.2

Onshore loans

- Tranche A 450,235 681,493 - -

Independent Power (Thailand) Co., Ltd. 15.3

Onshore loans

- Tranche A1 (U.S. Dollars 24 million in 2007

and U.S. Dollars 26.4 million in 2006) 813,240 956,493 - -

- Tranche A2 614,109 675,520 - -

- Tranche A3 561,430 617,573 - -

- Tranche A5 222,341 244,574 - -

- Tranche E 134,559 156,088 - -

Offshore loans

- Tranche B (U.S. Dollars 42.3 million in 2007

and U.S. Dollars 60.3 million in 2006) 1,433,454 2,185,967 - -

Thai Paraxylene Co., Ltd. 15.4

Onshore loans

- Tranche A1 15.4 a 2,625,000 - - -

Offshore loans

- Yen 9,438.4 million in 2007 15.4 b 2,828,839 - - -

Total 14,610,207 12,284,250 4,927,000 6,766,542

Less: current portion of long-term loans (1,099,636) (1,133,370) (295,620) (-)

Net 13,510,571 11,150,880 4,631,380 6,766,542



15.1 The Company:

In 2005, the Company entered into U.S. Dollars 65 million and Baht 2,600 million Syndicated Loan Facility agreement and U.S.

Dollars 200 million Revolving Credit Facility agreement dated 3 June 2005 and issued ten-year-term notes at pricing rate of

99.884 % of face value of U.S. Dollars 350 million, maturing on 9 June 2015 at the interest rate of 5.10% per annum payable

semi-annually in arrears of each year, commencing on 9 December 2005. The loan agreement and the Offering Circular

agreement for notes have certain covenants pertaining to maintenance of certain financial ratios in the financial statements

and percentage of shares held by the major shareholder. Subsequently in 2006, the Company has repaid U.S. Dollars 100

million of loan principal under U.S. Dollars 200 million Revolving Credit Facility Agreement.

In 2006, the Company issued three-year-term and seven-year-term debentures to institutional investors for the Company’s

business operations totaling Baht 5,500 million at par value of Baht 1,000 each, maturing on 31 October 2009 and 2013 and

bearing interest at the rate of 5.39% per annum and 5.70% per annum, respectively, which will be payable on every 30 of

April and 31 of October in arrears.

In 2007, the Company entered into the Amendment Agreement relating to long-term agreement to convert U.S. dollars loans

to Baht loans and adjust interest rate from average Baht 6 month time deposit rate plus a margin to MLR less margin.

During the year, the Company made a repayment of loans of U.S. dollars 50 million under U.S. dollars 200 million Revolving

Credit Facility Agreement.

As at 31 December the outstanding balances of notes were as follows:

(in thousand Baht)



2007 2006 2007 2006

Notes 17,359,750 18,180,780 17,359,750 18,180,780

Less Discount on notes (10,851) (12,862) (10,851) (12,862)

Net 17,348,899 18,167,918 17,348,899 18,167,918

At the annual general meeting of the shareholders of the Company held on 10 April 2007, the shareholders approved the

Company to issue and to offer notes in the amount equivalent to U.S. Dollars 500 million to both local and foreign investors.

As at 31 December 2007, the Company had not issued the additional notes.



15.2 Thaioil Power Co., Ltd.

On 25 December 2003, Thaioil Power Co., Ltd., a local bank and a local financial institution entered into a new credit facilities

agreement to obtain loan and credit facilities to repay its long-term loans and to use for general business purpose. In January

2004, the company drew down tranche A from such credit facilities to repay the former loans. As at 31 December 2007 and

2006, the details were as follows:

Onshore loans

Facilities Interest

Tranche Currency (in million) Purposes Years Rates (%) Repayment Terms

A Baht 1,971 Repay local 1 - 2 4.00 Semi-annual

long- term loan 3 - 9 6 month- installments at

fixed deposit varying amounts

rate plus 2.75 commencing 30

March 2004

B Baht 200 Short-term loan - 6 month-fixed -

business for deposit rate

general purposes plus 3.25

C Baht 75 Guarantee for - 1.50 -

cancellation

before maturity

of the agreement

In 2006, Thaioil Power.Co., Ltd., repaid the above loans before maturity amounting to Baht 204 million.

15.3 Independent Power (Thailand) Co., Ltd.

On 13 February 1997 and 21 March 1997, Independent Power (Thailand) Co., Ltd. entered into a Master Facilities Agreement

and other related agreements with a group of banks and financial institutions to obtain loans and credit facilities to finance

project costs and to use as working capital. As at 31 December 2007 and 2006, the details were as follows:



Onshore loans

Facilities Interest


A1 U.S. Dollars 40 Project cost 1 - 7 SIBOR plus Semi-annual

margin of 1.375 installments

8 - 9 SIBOR plus at varying amounts

margin of 2.75 commencing 21 March

9 - 11 SIBOR plus 2000

margin of 1.625

11 - 12 LIBOR plus

margin of 1.15

13 - 17 LIBOR plus

margin of 1.25

A2 Baht 1,000 Project cost 1 - 5 11.75 Semi-annual

6 - 7 7.00 installments

8 - 9 MLR at varying amounts

9 - 11 MLR less 1.25 commencing 21 March

11 - 12 MLR less 1.625 2000

13 - 17 MLR less 1.00

A3 Baht 920 Project cost 1 - 4 MLR less 0.375 Semi-annual

5 - 8 MLR less 0.25 installments

9 MLR less 0.125 at varying amounts


11 - 12 MLR less 1.625 2000

13 - 17 MLR less 1.00

A5 Baht 371.4 Project cost 1 - 4 MLR less 0.375 Semi-annual

5 - 8 MLR less 0.25 installments

9 MLR less 0.125 at varying amounts


11 - 12 MLR less 1.625 2000

13 - 17 MLR less 1.00

D1 Baht 520 Working capital 1 - 17 MOR -



Facilities Interest


D2 Baht 60 Working capital 1 - 17 MOR -

D3 Baht 20 Guarantee of 1 - 17 1.50 -

facilities

E Baht 308.6 New 1 - 4 MLR less 0.375 Monthly installments

transmission 5 - 8 MLR less 0.25 at fixed amounts

facility 9 MLR less 0.125 commencing

9 - 11 MLR less 1.25 1 December 1999

11 - 12 MLR less 1.625

13 - 17 MLR less 1.00

F1 Baht 620 Debt service 1 - 7 MOR less 0.25 -

shortfall of 8 - 17 MOR

Tranche A and/or -

Tranche E

Offshore loans

Facilities Interest


B U.S. Dollars 144 Project cost 1-3 LIBOR plus 0.75 Semi-annual

4-15 LIBOR plus 0.95 installments

at varying amounts

commencing 21 March

2000

F2 U.S. Dollars 32 Debt service 1-15 LIBOR plus 0.95 -

shortfall of

Tranche B

- MLR is the average minimum lending rate of 4 Thai banks.

- MOR is the average minimum overdraft rate of 3 Thai banks (in the case of Tranche D1).

- MOR is the average minimum overdraft rate of each lender (in the case of Tranche D2 and Tranche F1).



15.4 Thai Paraxylene Co., Ltd.

Onshore loans

In 2006, Thai Paraxylene Co., Ltd. entered into loan agreements with two local financial institutions as follows:

a) Tranche A a loan facility of Baht 2,625 million for project expansion. The loan bears interest at rate of MLR less 1.375%

per annum and can be drawn down from 2007 to 2008. This loan is repayable in 10 equal installments commencing on

30 April 2009, and terminates on 30 October 2013.

b) Tranche B a revolving loan of Baht 1,125 million for working capital. This loan bears interest at the rate of MLR less

1.375% per annum. This loan can be drawn down within 7 years ending on 1 November 2013.

Offshore loans

c) On 7 December 2006, Thai Paraxylene Co., Ltd. entered into syndicated loan agreements with two foreign financial

institutions to use for expansion project and for working capital, totaling Yen 9,438 million at the interest rate of LIBOR

JPY 3 months plus 0.30% and entered into cross currency swap contracts of U.S. dollars 80 million at the rate of LIBOR

USD 3 months plus 0.40%. These loans were drawn down in 2007 and are repayable in 7 equal installments commencing

on 16 January 2009, and will terminate on 16 January 2012.

16. Trade accounts payable(in thousand Baht)



Note 2007 2006 2007 2006

Related parties 4 17,250,863 8,384,193 18,199,523 9,257,404

Other parties 8,799,615 4,553,180 7,235,149 3,961,613

Total 26,050,478 12,937,373 25,434,672 13,219,017



The currency denomination of trade accounts payable as at 31 December was as follows:

(in thousand Baht)



2007 2006 2007 2006

Thai Baht (THB) 18,399,721 8,450,799 18,125,214 11,909,716


Others - 4,619 - -

Total 26,050,478 12,937,373 25,434,672 13,219,017

17. Other current liabilities

(in thousand Baht)



2007 2006 2007 2006

Accrued operating expense 228,853 206,132 114,747 91,831

Oil Fuel Fund payable 216,310 504,772 216,310 504,772

Other payables 954,207 1,337,792 637,489 1,277,129

Value-added tax payable 14,039 67,670 - -

Others 595,491 322,449 236,314 313,097

Total 2,008,900 2,438,815 1,204,860 2,186,829



18. Other non-current liabilities(in thousand Baht)



2007 2006 2007 2006

Deposit and rental receive in advance 36,059 41,715 263,313 276,989

Pension Fund 200,818 153,086 200,818 153,086

Debts under Business Reorganization

Plan, net of current portion shown under

other current liabilities 32,055 33,262 - -

Total 268,932 228,063 464,131 430,075

As at 31 December 2007 debts under Business Reorganization Plan, net, amounting to Baht 32.1 million (2006: Baht 33.3 million),

are the remaining debts following debt restructuring under the Business Reorganization Plan dated 16 October 2003 of Thai

Lube Base Public Company Limited. These debts are repayable from 3 years to 10 years with interest rates as stipulated

in the Plan.

19. Share capitalPar value (thousand shares / thousand Baht)per share 2007 2006

(in Baht) Number Amount Number Amount

Authorised

At 1 January

- Ordinary shares 10 2,040,028 20,400,279 2,040,028 20,400,279

At 31 December

- Ordinary shares 10 2,040,028 20,400,279 2,040,028 20,400,279

Issued and fully paid

At 1 January

- Ordinary shares 10 2,040,028 20,400,279 2,040,028 20,400,279

At 31 December

- Ordinary shares 10 2,040,028 20,400,279 2,040,028 20,400,279



20. Reserves

Share premium

Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in

excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for

dividend distribution.

Legal reserve

Section 116 of the Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of

its annual net profit, less any accumulated losses brought forward (if any), to a reserve account (“legal reserve”), until this

account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for

dividend distribution.

21. Segment information

Segment information is presented in respect of the Group’s business. The primary format, business segments, is based on

the Group’s management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated

on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing

loans, borrowings and expenses, and corporate assets and expenses.

Business segments

The Group comprises the following main business segments:

Segment 1 Oil refining

Segment 2 Lube base oil refining

Segment 3 Petrochemical

Segment 4 Power generation

Segment 5 Oil and chemical products transportation



Business segment results (Restated)

(in thousand Baht)

Oil refining Lube base oil refining Petrochemical Power generation Oil and chemical products transportation Eliminations Total

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

Revenue from sale of

goods and rendering of

services 253,958,677 280,148,126 21,582,189 17,647,116 33,246,919 41,603,888 12,202,605 11,820,032 731,137 518,041 (60,670,729) (72,628,078) 261,050,798 279,109,125

Gain (loss) on foreign

exchange 1,433,058 2,887,030 (23,101) (18,373) (80,402) 97,686 191,087 523,963 (486) (925) - - 1,520,156 3,489,381

Other income 5,341,092 3,232,647 177,837 131,162 265,012 206,151 204,663 462,884 4,010 4,053 (4,730,858) (2,927,645) 1,261,756 1,109,252

Total revenue 260,732,827 286,267,803 21,736,925 17,759,905 33,431,529 41,907,725 12,598,355 12,806,879 734,661 521,169 (65,401,587) (75,555,723) 263,832,710 283,707,758

Cost of sales of goods and

rendering of services (235,396,177) (271,411,036) (19,898,744) (14,953,489) (29,908,412) (35,968,741) (11,041,256) (10,100,796) (657,196) (433,595) 61,451,759 73,835,358 (235,450,026) (259,032,299)

Selling and

administrative expenses (1,367,602) (494,529) (223,650) (224,752) (114,159) (176,771) (108,311) (176,680) (59,624) (55,666) 103,907 59,175 (1,769,439) (1,069,223)

Share of loss from

investments accounted for

using the equity method - - - - - - - - - - (633) (633) (633) (633)

Total expenses (236,763,779) (271,905,565) (20,122,394) (15,178,241) (30,022,571) (36,145,512) (11,149,567) (10,277,476) (716,820) (489,261) 61,555,033 73,893,900 (237,220,098) (260,102,155)

Profit before interest

financial and income

tax expense 23,969,048 14,362,238 1,614,531 2,581,664 3,408,958 5,762,213 1,448,788 2,529,403 17,841 31,908 (3,846,554) (1,661,823) 26,612,612 23,605,603

Interest and financial

expenses (1,411,189) (1,393,653) (148) (179) (7,795) (96,157) (319,091) (427,722) (4,749) (1,437) 15,357 2,423 (1,727,615) (1,916,725)

Income tax expense (4,693,666) (2,823,605) (484,629) (169,023) - - (129,499) (210,045) - - - - (5,307,794) (3,202,673)

Minority interest - - - - - - (275,873) (692,568) - - (125,701) (134,608) (401,574) (827,176)

Net profit 17,864,193 10,144,980 1,129,754 2,412,462 3,401,163 5,666,056 724,325 1,199,068 13,092 30,471 (3,956,898) (1,794,008) 19,175,629 17,659,029



Business segment financial position (Restated)

(in thousand Baht)

Oil refining Lube base oil refining Petrochemical Power generation Oil and chemical products transportation Eliminations Total

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

Trade accounts

receivable 21,181,925 16,434,350 1,149,039 1,137,750 2,998,843 4,677,234 2,180,761 2,148,748 63,671 58,724 (4,613,298) (5,702,556) 22,960,941 18,754,250

Inventories 29,568,886 18,163,812 2,475,185 1,845,891 506,544 422,205 187,741 175,759 89,780 74,251 (26,376) (26,376) 32,801,760 20,655,542

Other current assets 4,401,742 3,487,300 1,981,792 1,780,867 882,844 1,837,405 1,498,576 2,455,412 189,448 109,988 (1,740,716) (123,077) 7,213,686 9,547,895

Investment accounted

for using the equity

method 6,989,637 8,238,421 - - - - - - - - (6,844,653) (8,194,054) 144,984 44,367

Property, plant and

equipment 37,789,019 34,369,040 3,738,190 3,813,683 17,748,225 9,442,562 11,123,218 11,742,403 1,859,487 384,731 (818,388) (458,897) 71,439,751 59,293,522

Other non-current

assets 2,374,999 2,049,476 102,685 116,379 161,622 66,930 447,923 488,101 69,220 988 (654,783) (693,163) 2,501,666 2,028,711

Total assets 102,306,208 82,742,399 9,446,891 8,694,570 22,298,078 16,446,336 15,438,219 17,010,423 2,271,606 628,682 (14,698,214) (15,198,123) 137,062,788 110,324,287

Trade accounts

payable 25,434,672 13,219,017 1,573,181 46,131 2,470,478 3,548,235 1,072,597 1,719,228 33,096 22,621 (4,533,546) (5,617,859) 26,050,478 12,937,373

Other current liabilities 4,603,730 4,476,051 405,757 308,965 626,529 58,637 1,029,544 1,428,982 1,635,252 15,894 (1,804,996) (197,348) 6,495,816 6,091,181

Long-term loans 4,631,380 6,766,542 - - 5,453,839 - 3,425,352 4,384,338 - - - - 13,510,571 11,150,880

Notes 17,348,899 18,167,918 - - - - - - - - - - 17,348,899 18,167,918

Other non-current

liabilities 1,926,836 1,966,269 32,055 33,262 - - 39,901 269,844 - - (227,254) (458,833) 1,771,538 1,810,542

Total liabilities 53,945,517 44,595,797 2,010,993 388,358 8,550,846 3,606,872 5,567,394 7,802,392 1,668,348 38,515 (6,565,796) (6,274,040) 65,177,302 50,157,894



22. Other income(in thousand Baht)



Note 2007 2006 2007 2006

Gain on insurance claims - 392,847 - -

Interest income 378,224 309,198 190,750 102,792

Gain on cross currency swap contracts 629,382 80,661 515,206 80,661

Land lease income 8,906 10,383 48,217 48,129

Income from service and supply to related parties 28,891 25,897 667,385 1,087,776

Dividend income - - 2,253,187 1,688,990

Gain on decrease in preferred shares of subsidiary 10 - - 1,528,404 -

Negative goodwill amortisation 29,249 29,249 - -

Others 187,105 261,017 137,943 224,299

Total 1,261,757 1,109,252 5,341,092 3,232,647

23. Selling and administrative expenses(in thousand Baht)



2007 2006 2007 2006

Advisory and legal fee 32,293 43,731 27,912 17,356

Employee cost 356,727 333,893 241,544 222,261

Depreciation 48,337 142,069 11,971 12,378

Net loss on crack spread swap agreements 838,597 - 838,597 -

Loss on disposal of property, plant and equipment 6,143 51,826 6,757 -

Others 487,342 497,704 240,821 242,534

Total 1,769,439 1,069,223 1,367,602 494,529



24. Personnel expenses (in thousand Baht)



2007 2006 2007 2006

Wages and salaries 1,337,518 1,303,618 1,083,079 1,007,048

Contribution to defined contribution plans 97,791 64,892 82,349 51,815

Retirement gratuity fund 107,770 168,271 107,770 168,271

Others 282,968 213,648 178,119 186,976

Total 1,826,047 1,750,429 1,451,317 1,414,110

(number of employees)

Number of employees

as at 31 December 1,201 1,166 790 765

The defined contribution plans comprise provident funds established by the Group for its employees. Membership to the funds

is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 3% to 15% of their basic

salaries and by the Group at from 5% to 15% of the employees’ basic salaries. The provident funds are registered with the

Ministry of Finance as juristic entities and are managed by a licensed Fund Manager.

The Company has a retirement gratuity fund plan to provide retirement and gratuity benefits to all of its employees. Benefits

are payable upon retirement, disability, death or resignation. Provisions are computed on the benefit formula assuming all

employees are terminated at the balance sheet date.



25. Interest expense and financial expenses(inthousandBaht)

Consolidatedfinancialstatements

Separatefinancialstatements

Note 2007 2006 2007 2006

Interest expense and payable to:

related parties - 6,641 - 8,450

financial institutions and others 1,815,967 1,854,047 1,365,415 1,335,044

Financial expenses 55,037 56,037 45,774 50,158

1,871,004 1,916,725 1,411,189 1,393,652

Capitalised as cost of

assets under construction 11 (143,389) - - -

Net 1,727,615 1,916,725 1,411,189 1,393,652

26. Income tax(inthousandBaht)

Consolidatedfinancialstatements

Separatefinancialstatements

Note 2007 2006 2007 2006

Current taxexpense

Current year (5,386,104) (3,251,013) (4,765,593) (2,877,971)

Deferredtaxexpense 13

Movements in temporary differences 78,311 48,340 71,927 54,366

Total (5,307,793) (3,202,673) (4,693,666) (2,823,605)



Reconciliation of effective tax rate


2007 2006 (Restated)

Rate (in thousand Rate (in thousand(%) Baht) (%) Baht)

Profit before tax 24,884,997 21,688,879

Income tax using the Thai corporation tax rate 30% 7,465,499 30% 6,506,664

Income tax reduction (4.53%) (1,127,893) (2.99%) (648,429)

Income not subject to tax (4.11%) (1,023,755) (9.34%) (2,026,786)

Expenses not deductible for tax purposes 0.01% 3,737 0.02% 4,889

Utilisation of previously unrecognised tax losses (0.04%) (9,795) (2.92%) (633,665)

Total 21.33% 5,307,793 14.77% 3,202,673


2007 2006 (Restated)

Rate (in thousand Rate (in thousand(%) Baht) (%) Baht)

Profit before tax 22,557,859 12,968,586

Income tax using the Thai corporation tax rate 30% 6,767,358 30% 3,890,576

Income tax reduction (5%) (1,127,893) (5%) (648,429)

Income not subject to tax (4.21%) (949,144) (3.26%) (423,372)

Expenses not deductible for tax purposes 0.02% 3,345 0.04% 4,830

Total 20.81% 4,693,666 21.78% 2,823,605

Income tax reduction

Royal Decree No. 387 B.E. 2544 dated 5 September 2001 grants companies listed on the Stock Exchange of Thailand after

6 September 2001 a reduction in the corporate income tax rate from 30% to 25% for taxable profit for the five consecutive

accounting periods beginning on or after enactment. The Company has, accordingly, calculated income tax on its taxable

profit for the years ended 31 December 2007 and 2006 at the 25% corporate income tax rate. However, its subsidiaries have

calculated income tax on their taxable profit for those years at the 30% corporate tax rate.

.



27. Basic earnings per share

The calculation of basic earnings per share in the consolidated and separate financial statements for the year ended 31 December

2007 was based on the consolidated and separate net profit attributable to ordinary shareholders of Baht 19,176 million and

Baht 17,864 million, respectively, (2006: Baht 17,659 million and Baht 10,145 million, respectively) and the number of shares

outstanding during the year ended 31 December 2007 of 2,040,028 thousand shares (2006 : 2,040,028 thousand shares).

28. Promotional privileges

By virtue of the provisions of the Industrial Investment Promotion Act of B.E. 2520, the Company and certain subsidiaries

have been granted privileges by the Board of Investment relating to power generation, petrochemical product production, and

Petroleum and liquid chemical products transported by marine. The privileges granted include:

a) The Company and three subsidiaries have been exempted from payment of import duty on machinery and equipment as

approved by the Board.

b) Four subsidiaries have been exempted from payment of corporate income tax for promoted operations for a period of

eight years from the dates on which the income is first derived from such operations.

As promoted companies, the Company and its subsidiaries must comply with certain conditions and restrictions provided for

in the promotional certificates.



Summary of revenue from promoted and non-promoted businesses:

(in thousand Baht)


2007 2006

Promoted businesses

Non-promoted

businesses TotalPromoted

businesses

Non-promoted

businesses Total

Export sales 5,168,215 24,143,202 29,311,417 5,793,065 29,910,867 35,703,932

Local sales 37,024,720 255,391,779 292,416,499 45,038,660 271,000,935 316,039,595

Eliminations (60,677,117) (72,634,402)

Total Revenues 261,050,799 279,109,125

(in thousand Baht)


2007 2006

Promoted businesses

Non-promoted businesses Total

Promoted businesses

Non-promoted

businesses Total

Export sales - 20,007,933 20,007,933 - 27,124,971 27,124,971

Local sales - 233,950,745 233,950,745 - 253,023,155 253,023,155

Total Revenues 253,958,678 280,148,126



29. Dividends

a) At the meeting of the Board of Directors of the Company held on 14 September 2007, the Board approved the appropriation

of interim dividends of Baht 1.75 per share, amounting to Baht 3,570 million, from the net profit for the six-month period

ended 30 June 2007. The dividend was paid to shareholders during 2007.

b) At the annual general meeting of the shareholders of the Company held on 10 April 2007, the shareholders approved

the appropriation of dividends of Baht 3.50 per share, amounting to Baht 7,140 million, from the net profit of 2006 after

deducting the interim dividends of Baht 1.50 per share, amounting to Baht 3,060 million paid to shareholders during 2006

from the six-month period ended 30 June 2006. The balance of dividend, amounting to Baht 4,080 million, was paid to

shareholders during 2007.

c) At the annual general meeting of the shareholders of the Company held on 20 April 2006, the shareholders approved

the appropriation of dividends of Baht 3.50 per share, amounting to Baht 7,140 million, from the net profit of 2005.

The dividend was paid to shareholders during 2006.

d) At the meeting of the Board of Directors of the Company held on 8 September 2006, the Board of Directors approved

the appropriation of interim dividends of Baht 1.50 per share, amounting to Baht 3,060 million, from the net profit of the

six-month period ended 30 June 2006. The dividend was paid to shareholders during 2006.

30. Change in accounting policies

(a) Investments in subsidiaries and associates

The following change of accounting policy by the Company has no effect on the consolidated financial statements of the

Group.

Until 31 December 2006, the Company accounted for its investments in subsidiary companies and associates in its financial

statements using the equity method.

During 2007, the FAP issued the following new TAS which are effective for accounting periods beginning on or after 1 January

2007:

TAS 44 (revised 2007) Consolidated and Separate Financial Statements

TAS 45 (revised 2007) Investment in Associates

TAS 46 (revised 2007) Interest in Joint Ventures



These revised TAS require a parent company which has investments in a subsidiary company, an entity under joint control, or

an associate company, which is not classified as a “held for sale” investment, to record such investment in accordance with

either the cost method or with the recognition and measurement basis for financial instruments (when a TAS on financial

instruments is issued and becomes effective), instead of the equity method currently used.

Starting from 1 January 2007, the Company has, accordingly, changed its accounting policy for its investments in subsidiary

companies and associate companies in its financial statements from the equity method to the cost method. The change in

accounting policy has been applied retrospectively and the Company’s 2006 financial statements, which are included in the

Company’s 2007 financial statements for comparative purposes, have been restated accordingly.

(b) Inventories

The following change of accounting policy effects both the consolidated and separate financial statements.

Starting from 1 January 2007, the Company and its subsidiaries have changed their accounting policy for valuing crude oil

and feedstock and finished and semi-finished products from last-in, first-out and first-in, first-out to weighted average.

The change in method of valuation has been applied retrospectively and the Group’s 2006 financial statements, which are

included in the Group’s 2007 financial statements for comparative purposes, have been restated accordingly.

(c) Property, plant and equipment

The following change of accounting policy effects both the consolidated and separate financial statements.

During 2007, the Company has changed its accounting policy for valuing property, plant and equipment from revaluation to

cost. The change in method of valuation has been applied retrospectively and the Group’s 2006 financial statements, which

are included in the Group’s 2007 financial statements for comparative purposes, have been restated accordingly.



The effects of the changes in accounting policy on the 2007 and 2006 consolidated and separate financial statements are as

follows:

(in thousand Baht)


2007 2006


Balance at 1 January before change in accounting policy 44,367 -

Increase in retained earnings - -

Net increase - -

Balance at 1 January after change in accounting policy 44,367 -

Inventories

Balance at 1 January before change in accounting policy 20,168,136 19,000,931

Increase in retained earnings 351,152 671,922

Increase in income tax payable 134,225 235,414

Increase in minority interests 2,028 1,485

Net increase 487,405 908,821

Balance at 1 January after change in accounting policy 20,655,541 19,909,752

Property, plant and equipment


Decrease in retained earnings (425,042) (438,402)

Decrease in revaluation surplus (14,419,606) (16,248,146)

Net decrease (14,844,648) (16,686,548)




(in thousand Baht) Consolidated

financial statements

2007 2006




Net decrease (1,845,076) (1,199,074)


Retained earnings


Decrease in cost of sale of goods 487,405 908,821

Decrease in property, plant and equipment (425,041) (438,402)

Increase in income tax (134,225) (235,414)

Increase in minority interests (2,028) (1,485)

Net increase (decrease) (73,889) 233,520


Net profit

Net profit before change in accounting policy 16,779,543 16,595,034

Decrease (increase) in cost of sale of goods 1,389,290 (421,416)

Decrease in depreciation expenses 1,841,901 1,841,901

Reversal of charged deferred tax liabilities (457,135) (457,135)

Decrease (increase) in income tax (377,900) 101,189

Increase in net profit of minority (70) (543)

Net increase 2,396,086 1,063,996

Net profit after change in accounting policy 19,175,629 17,659,030

Increase in earnings per share (Baht) 1.17 0.52



(in thousand Baht)


2007 2006



Decrease in retained earnings (18,103,301) (10,694,573)

Net decrease (18,103,301) (10,694,573)


Inventories


Increase in retained earnings 266,535 679,265

Increase in income tax payable 99,205 235,414

Net increase 365,740 914,679


Property, plant and equipment



Decrease in deferred tax liabilities (1,845,076) (1,199,074)

Net decrease (14,419,606) (16,248,146)





Net decrease (1,845,076) (1,199,074)




(in thousand Baht)


2007 2006

Retained earnings


Increase in dividend received from subsidiaries and associates 2,237,642 548,652

Decrease in share of profits from investments accounted for

using the equity method, net (20,340,943) (11,243,225)

Decrease in cost of sale of goods 365,740 914,679

Increase in income tax (99,205) (235,414)

Net decrease (17,836,766) (10,015,308)


Net profit

Net profit before change in accounting policy 16,653,778 16,595,033

Increase in dividend received from subsidiaries and associates 2,253,187 1,688,990

Decrease in share of profits from investments accounted for

using the equity method, net (3,564,623) (9,097,718)

Decrease (increase) in cost of sale of goods 1,537,934 (548,940)

Decrease in depreciation expenses 1,828,540 1,828,540

Reversal of charged deferred tax liabilities (457,135) (457,135)

Decrease (increase) in income tax (387,488) 136,210

Net increase (decrease) 1,210,415 (6,450,053)

Net profit after change in accounting policy 17,864,193 10,144,980

Increase (decrease) in earnings per share (Baht) 0.59 (3.16)



31. Financial instruments

Financial risk management policies

The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and

from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial

instruments for speculative or trading purposes.

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an

acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors

the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

Interest rate risk

Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations

and its cash flows. Hence, the Group has hedging agreements with various investment-grade financial institutions to protect

against the risk of rising interest rates.

The effective interest rates of loans to as at 31 December and the periods in which those assets mature were as follows:


Effectiveinterest rate

Within1 year

After1 year Total

(% per annum) (in thousand Baht)

2007

Non-current

Loans to savings co-operative of employees MLR less margin 35,651 532,918 568,569

Total 35,651 532,918 568,569

2006

Non-current


Total 34,037 510,338 544,375




Effectiveinterest rate

Within1 year

After1 year Total

(% per annum) (in thousand Baht)

2007

Current

Loans to subsidiary company MMR rate not exceeding

the average MLR of

5 banks less margin 1,518,000 - 1,518,000

Non-current


Total 1,553,651 532,918 2,086,569

2006

Non-current


Total 34,037 510,338 544,375

The effective interest rates of loans from financial institutions and notes as at 31 December 2007 and 2006 and the periods

in which those liabilities mature or reprice were disclosed in note 15.

Foreign currency risk

The Group is exposed to foreign currency risk relating to purchases and long-term debts which are denominated in foreign

currencies giving rise to significant foreign exchange translation exposure from changes in foreign exchange rates. The

Company’s major revenue is U.S. dollars or in U.S. dollar linked while a significant portion of expenses is also U.S. dollar

linked or in U.S. dollars. This acts as a natural hedge against long-term debt exposure to foreign currencies. The Group enters

into short-term currency hedging contracts for short term foreign currency exposures to manage the timing difference in the

receipt and expenditure of foreign currency linked items when appropriate.



At 31 December, the Group was exposed to foreign currency risk in respect of financial assets and liabilities denominated in

the following currencies:

(in thousand Baht)



Note 2007 2006 2007 2006

U.S. Dollars

Cash and cash equivalents 5 300,585 28,774 8,243 356

Trade accounts receivable 7 5,732,826 3,039,682 4,219,436 1,739,757

Other receivables - 191,294 - -

Trade accounts payable 16 (7,650,757) (4,481,955) (7,309,458) (1,309,301)

Other payables (98,416) (313,000) (15,344) (313,000)

Interest-bearing liabilities 15 (14,095,593) (19,976,920) (11,848,899) (16,834,460)

(15,811,355) (21,512,125) (14,946,022) (16,716,648)

Other currencies

Cash and cash equivalents 5 44 249 - 249

Other receivables - 105 - 105

Trade accounts payable 16 - (4,619) - -

Other payables (53,105) (148,538) (47,911) (146,480)

Interest-bearing liabilities 15 (2,828,839) - - -

(2,881,900) (152,803) (47,911) (146,126)

Gross balance sheet exposure (18,693,255) (21,664,928) (14,993,933) (16,862,774)

Cross currency swap 114,176 80,661 - 80,661

Net exposure (18,579,079) (21,584,267) (14,993,933) (16,782,113)



Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and

contractual obligations to the Group as and when they fall due. The Group has no significant credit risk with any single

counterparty or group of counterparties since the Group maintains business with large customers in petroleum and power

industries and requires full first class collateral for the rest.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management

to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

Fair values

The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing

parties in an arm’s length transaction.

The following methods and assumptions are used by group to estimate the fair value of each class of financial instrument.

The fair value of cash and cash equivalents, trade and other short-term receivables is taken to approximate the carrying value

due to the relatively short-term maturity of these financial instruments.

The fair value of investments in equity securities, which are available for sales, are determined by reference to their Net

Asset Value at the balance sheet date.

The fair value of bank overdrafts and short-term loans from financial institutions and accounts payable, are taken to approximate

their fair values due to the relatively short-term maturity of these financial instruments.

The fair value of long-term loans to and long-term debts carrying a floating rate, which is considered to be market rate are

taken to approximate their fair values.

The fair value of interest rate swaps is based on broker quotes at the balance sheet date. Those quotes are tested for

reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using

market interest rates for a similar instrument at the balance sheet date.



The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not

available, then fair value is estimated by discounting the difference between the contractual forward price and the current

forward price at the balance sheet date for the residual maturity of the contract using a risk-free interest rate (based on

government bonds).

The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the

present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date

or based on market price, if available.

Fair values of notes, together with the carrying values shown in the balance sheets at 31 December were as follows:

(in thousand Baht)



Fairvalue

Carryingvalue

Fairvalue

Carryingvalue

2007

Non-current

Notes (16,866,887) (17,348,899) (16,866,887) (17,348,899)

2006

Non-current

Notes (18,315,030) (18,167,918) (18,315,030) (18,167,918)



32. Commitments with non-related parties

(in thousand Baht)



2007 2006 2007 2006

Capital commitments

Construction projects 1,923,909 13,742,512 1,329,680 5,858,512

Total 1,923,909 13,742,512 1,329,680 5,858,512

Non-cancellable operating lease commitments

Within one year 174,426 158,621 174,426 158,621

After one year but within five years 705,734 697,706 705,734 697,706

After five years 2,094,796 2,277,251 2,094,796 2,277,251

Total 2,974,956 3,133,578 2,974,956 3,133,578

Other commitments

Technical services agreement 626,331 122,037 626,331 122,037

Bank guarantees 341,687 317,887 197,495 173,744

Crude oil purchase agreements 51,534 28,254 51,534 28,254

Total 1,019,552 468,178 875,360 324,035

Long-Term Maintenance Agreements

In 2001, a subsidiary company entered into two long-term combustion turbine maintenance agreements with two companies.

The agreements were named Scheduled Outage Parts and Repairs Agreement (for the supply and repair parts for the yearly

scheduled outage) and Scheduled Outage Service Agreement (for the provision of maintenance services for the yearly scheduled

outage). The subsidiary company is committed to pay for the parts and maintenance service cost as per the price specified in

the agreements. These two agreements will begin on the signing date and continue until the second Major Scheduled Outage

or the twelfth yearly Scheduled Outage.



33. Contingent liabilities and contingent assets

a) As at 31 December 2007, a subsidiary company had various hedge agreements with two Thailand branches of overseas

banks to reduce the risk of movement in interest rates covering U.S. Dollar loans obtained for the construction of plant,

amounting to U.S. Dollars 43.9 million. For the duration of the agreement, the subsidiary company has commitments to

receiving payments from or making payments to the other party whenever the interest rates vary from the agreed rates

based on the terms and conditions stipulated in the agreements. However, the subsidiary is still liable for commitments

with the lender if the counterparty is unable to comply with terms and conditions of such agreements.

b) As at 31 December 2007, the Company had commitments under interest rate knockout cap agreements with certain

foreign banks to hedge interest rate risk in respect of its U.S. Dollars 450 million long-term loans. These loans, which

originally had floating interest rates of LIBOR plus margin, are capped under the agreements at maximum interest

rates of 6.0% and 6.5% per annum with a knockout rate of 7.5% per annum. Under the terms of the agreements, the

Company is entitled to be paid by its hedging counter-parties the excess of LIBOR and the maximum interest rate for

the each determination interest period for periods of 7 to 10 years.

c) During 2002 and 2001, the Customs Department and Excise Department sent letters to a subsidiary company to claim

payment of excise tax including penalty and surcharge for certain shipments of imported reduced crude oil totaling Baht

253.7 million. The subsidiary company’s management sent a letter to the Appeal Committee of the Excise Department

to appeal this decision. On 18 April 2003, the Appeal Committee of the Excise Department took a decision to dismiss

the subsidiary company’s appeals and ordered the subsidiary company to pay a penalty. On 22 May 2003, the subsidiary

company filed a petition against the Excise Department, the Customs Department and the Revenue Department (the

Defendants) to the Central Revenue Court to reclaim excise tax which had been charged and to deny the excise tax assessed

by the Excise Department. On 15 July 2004, the Central Tax Court ruled in favor of the subsidiary company and ordered

the Defendants to return the tax charged plus interest and bank guarantee and to release machinery belonging to the

subsidiary company which was being held in encumbrance. The Defendants requested and were granted permission from

the Court to extend the appeal period to 15 September 2004. On 14 September 2004, the Defendants sent an application

to the Supreme Court to appeal the Central Tax Court’s decision and to suspend the execution of that decision. On 19

October 2004, the subsidiary company’s management sent a letter to the Supreme Court to object to the appeal and to

request for suspended execution of the decision to be reversed. In addition, on 25 August 2005, the Excise Department

was ordered to release such machinery and bank guarantee. As at 31 December 2007, this matter was in the process

of consideration by the Supreme Court.

d) During 2007, the Revenue Department sent a letter considering on the appeal filed by a subsidiary concerning about tax for

1999 and 2000 revenues that would effect tax loss carry forwards already utilised in subsequent years. As at 31 December

2007, the management of the subsidiary is in the process of objection to case to be filed with the Central Tax Court.



34. Insurance policy

The Group has an All Risks and Loss of Profit Insurance Policy (ALOP) from a syndicate of insurers and reinsurers for a total

insured value of approximately U.S. Dollars 5,636 million. Such ALOP is renewed on an annual basis. Certain subsidiary companies

have assigned their rights to proceeds from insurance claim under the ALOP to the lenders under the loan agreements.

35. Insurance Claims

On 19 January 2006, one of the two gas turbines, CT1, of a subsidiary company was interrupted as a result of an electric

short circuit of a step-up transformer. By 20 June 2006, this fault had been rectified and the turbine resumed operations at

normal capacity. During 2006, the subsidiary successfully settled the dispute with its insurers at the claimed amount of U.S.

Dollars 10.6 million (approximately Baht 392.8 million), comprising U.S. Dollars 8.9 million (approximately Baht 326.9 million)

for business interruption and U.S. Dollars 1.7 million (approximately Baht 65.9 million) for damaged property.

36. Revised Thai Accounting Standards (TAS)

The following TAS have been issued as of the balance sheet date but are not yet effective. These TAS will become effective

for financial periods beginning on or after 1 January 2008.

TAS 25 (revised 2007) Cash Flows Statements

TAS 29 (revised 2007) Leases

TAS 31 (revised 2007) Inventories

TAS 33 (revised 2007) Borrowing Costs

TAS 35 (revised 2007) Presentation of Financial Statements

TAS 39 (revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors

TAS 41 (revised 2007) Interim Financial Reporting

TAS 49 (revised 2007) Construction Contracts

TAS 51 Intangible Assets

37. Reclassification of accounts

Certain accounts in the 2006 financial statements have been reclassified to conform to the presentation in the 2007 financial

statements.

186

Audit Fees of the Auditors 2008

1. Audit Fees

The Company, subsidiaries and Thaioil Group Registered Provident Fund paid for the audit fees to the audits’ company for

the latest account period amounting to Baht 4,279,500 (Four million two hundred seventy nine thousand and five hundred

baht only)

2. Non-Audit Fees

The subsidiaries paid for non-audit fees for monitoring the performance compliance with the condition of the BOI Promotion

Certificate amounting Baht 30,000 (Thirty thousand baht only) to the audits’ company for the latest account period.

F I N A N C I A L STAT E M E N T S

187

ABBREVIATIONS AND ACRONYMS

Unless otherwise stated, abbreviations and terms used in this annual report shall have the following meaning:

AGM Annual General Meeting of Shareholders

ARC Alliance Refining Company Limited

bpd barrels per day

CCR Continuous Catalyst Regeneration Platformer

CDU-3 Crude Distillation Unit 3

CG Corporate Governance

COSO The Committee of Sponsoring Organizations of the Tread way Commission

EBITDA Earnings before interest, taxes, depreciation and amortization

EGAT Electricity Generating Authority of Thailand

EIA Environmental Impact Assessment

Fitch Ratings Fitch Ratings (Thailand) Limited

GDP Gross domestic product

GLP/DIW Good Laboratory Practice/ Department of Industrial Works

GRM Gross Refinery Margin

IMO International Maritime Organization

IPP Independent Power Producer

IPT Independent Power (Thailand) Company Limited

IRPC IRPC Public Company Limited

ISO International Organization of Standardization

KBD thousand barrels per day

KM Knowledge Management

KPIs Key Performance Indicators

Moody’s Moody’s Investors Service

MTBE Methyl Tertiary Butyl Ether

MX Mixed Xylene

PCA Poly Cyclic Aromatic

PMS Performance Management System

POSITIVE Corporate Values: P = Professionalism O = Ownership and Commitment

S = Social Responsibility I = Integrity T = Teamwork and Collaboration

I = Initiative V = Vision Focus E = Excellence Striving

PTT PTT Public Company Limited

PTTEP PTT Exploration and Production Public Company Limited

A B B R E V I AT I O N S A N D AC R O N Y M S

188 A B B R E V I AT I O N S A N D AC R O N Y M S

PX Paraxylene

QSHE Quality, Safety, Health and Environment

RMIS Risk Management Information Systems

RMSC Risk Management Steering Committee

S&P’s Standard & Poor’s Ratings Services

SBM Single Buoy Mooring

SEC The Securities and Exchange Commission

SET The Stock Exchange of Thailand

SGS Shell Global Solutions

SGSI Shell Global Solutions International

SPP Small Power Producer

TDAE Treated Distillate Aromatic Extract

TEC Thaioil Energy Company Limited

Thappline Thai Petroleum Pipeline Company Limited

TISI Thai Industrial Standards Institute

TLB Thai Lube Base Public Company Limited

TM Thaioil Marine Company Limited

TOP / Thaioil / the Company Thai Oil Public Company Limited

TP Thaioil Power Company Limited

TPX Thai Paraxylene Company Limited

P R O F E S S I O N A L I S MP R O F E S S I O N A L I S M

E X C E L L E N C E S T R I V I N GE X C E L L E N C E S T R I V I N G

V I S I O N F O C U SV I S I O N F O C U S

I N I T I AT I V EI N I T I AT I V E

T E A M W O R K A N D C O L L A B O R AT I O NT E A M W O R K A N D C O L L A B O R AT I O N

I N T E G R I T YI N T E G R I T Y

S O C I A L R E S P O N S I B I L I T YS O C I A L R E S P O N S I B I L I T Y

O W N E R S H I P A N D C O M M I T M E N TO W N E R S H I P A N D C O M M I T M E N T

Bangkok of fice :123 Suntowers Building B, 16th Floor, Vibhavadi Rangsit Road, Chomphon, Chatuchak, Bangkok 10900, Thailand. Tel. 66-2299-0000, 66-2617-8300 Fax : 66-2299-0024

Sriracha of fice and Refiner y plant :4 2/1 Moo 1, Sukhumvit Road Km. 124, Tungsukla, Cholburi 20230, Thailand Tel. 66-3840-8500, 66-3835-9000 Fax. 66-3835-1554, 66-3835-1444 TELE X : 85802 THAIOIL TH

w w w.thaioil.co.th

Documents

THAIOIL GROUP : ULTIMATE SUSTAINABLE GROWTH EXPANSION · CDU-3 project completed ahead of schedule New gas turbine project and second Single Buoy Mooring project Thaioil expanded