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
123 Suntowers Building B, 16th Floor,
Vibhavadi Rangsit Road, Chomphon,
Chatuchak, Bangkok 10900
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
123 Suntowers Building B, 16th Floor,
Vibhavadi Rangsit Road, Chomphon,
Chatuchak, Bangkok 10900
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
123 Suntowers Building B, 16th Floor,
Vibhavadi Rangsit Road, Chomphon,
Chatuchak, Bangkok 10900
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,
Chatuchak, Bangkok 10900
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
Facsimile: 0-2230-6093
Auditors KPMG Phoomchai Audit Limited
22nd Floor, Empire Tower, 195 South Sathorn Road, Bangkok 10120
Telephone: 0-2677-2000
Facsimile: 0-2677-2222
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
Dispute -none-Conflict of interest -none-
MR. CHERDPONG SIRIWIT
Independent Director andChairman of the Board
Shareholding (%)None
MR. MANU LEOPAIROTE
Independent Director andChairman of the Audit Committee
Shareholding (%)None
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
Dispute -none-Conflict of interest -none-
MR. PRASERT BUNSUMPUN
Director and Member of the Nomination and Remuneration Committee
Shareholding (%)None
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
Dispute -none-Conflict of interest -none-
B OA R DO F D I R ECTO R S
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
Dispute -none-Conflict of interest -none-
MR. CHAKRAMON PHASUKAVANICH
Independent Director and Member of the Nomination and Remuneration Committee
Shareholding (%)None
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
Dispute -none-Conflict of interest -none-
MR. NIBHAT BHUKKANASUT
Independent Director
Shareholding (%)None
B OA R DO F D I R ECTO R S
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
Dispute -none-Conflict of interest -none-
MR. PRAJYA PHINYAWAT
Director and Member of the Corporate Governance Committee
Shareholding (%)0.00723
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
Dispute -none-Conflict of interest -none-
DR. NIT CHANTRAMONKLASRI
Independent Director and Member of the Audit Committee
Shareholding (%)None
B OA R DO F D I R ECTO R S
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
Dispute -none-Conflict of interest -none-
MR. PICHAI CHUNHAVAJIRA
Director
Shareholding (%)None
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
Dispute -none-Conflict of interest -none-
MR. APISAK TANTIVORAWONG
Independent Director andMember of the Corporate Governance Committee
Shareholding (%)None
B OA R DO F D I R ECTO R S
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
Dispute -none-Conflict of interest -none-
LIEUTENANT GENERAL PRAYUT CHAN-O-CHA
Independent Director and Chairman of the Corporate Governance Committee
Shareholding (%)None
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
Dispute -none-Conflict of interest -none-
MR. VIROJ MAVICHAK
Director and Secretary to the Board
Shareholding (%)0.00135
B OA R DO F D I R ECTO R S
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
Dispute -none-Conflict of interest -none-
MR. OLARN CHAIPRAVAT
Independent Director, Chairman of the Corporate Governance Committee
Shareholding (%)None
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
Dispute -none-Conflict of interest -none-
MR. NORKUN SITTIPHONG
Independent Director and Member of the Audit Committee
Shareholding (%)0.00392
B OA R DO F D I R ECTO R S
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
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
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
Operations Manager I
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
Human Resources Manager
M A N AG E M E N T
MANAGEMENT
035
MS. BHAWANA SUPHAVIL AI
Technology Manager
MR. SANTIWA SANA SIRI
Operations Manager II
MS. PAT TAR AL ADA SA-NGA SANG
Strategic Planning Manager
MR. KOSOL PIMTHANOTHAI
Products & Quality Manager
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
(6) 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
(9) Appointed as Director of Thaioil Energy Co., Ltd. on July 25, 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.
2 0 0 7AC H I E V E M E N T S
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.
2 0 0 7AC H I E V E M E N T S
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.
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
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.
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
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.
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
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
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
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.
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
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
051I N D U ST RYOV E RV I E W
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.
052 I N D U ST RYOV E RV I E W
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.
053I N D U ST RYOV E RV I E W
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
054 I N D U ST RYOV E RV I E W
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
055I N D U ST RYOV E RV I E W
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
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
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
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
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%
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
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.
- Thaioil entered into an agreement with Thaioil Power for
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.
- Thaioil entered into an agreement with Thaioil Power for
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.
R E L AT E D PA RT YT R A N S ACT I O N S
071
- Thaioil entered into an agreement with Thaioil Power for
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.
- Thaioil entered into an agreement with Independent
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.
- Thaioil entered into an agreement with Independent
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
R E L AT E D PA RT YT R A N S ACT I O N S
072
full in 1998 and Thaioil recorded the recognized revenue
according to the agreement term.
- Thaioil entered into an agreement with Independent
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.
- Thaioil entered into an agreement with Independent
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.
R E L AT E D PA RT YT R A N S ACT I O N S
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.
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
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.
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
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
Committee (Independent)
3. Mr. Norkun Sittiphong * Member of the Audit
Committee (Independent)
* 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.
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
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
Committee (Independent)
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.
Roles and Responsibilities
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
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
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
Committee (Independent)
2. Mr. Chakramon Phasukavanich Member of the Nomination
and Remuneration
Committee (Independent)
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.
Roles and Responsibilities
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
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
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
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
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.
Roles and Responsibilities
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
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
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.
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
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.
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
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
087C O R P O R AT EG OV E R N A N C E P O L I CY
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
088 C O R P O R AT EG OV E R N A N C E P O L I CY
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 :
089C O R P O R AT EG OV E R N A N C E P O L I CY
N
omin
atin
g &
Co
rpor
ate
Re
mun
erat
ion
Gov
erna
nce
Audi
t Co
mm
ittee
Co
mm
ittee
Boar
d M
eetin
g Co
mm
ittee
M
eetin
g M
eetin
g
Dat
e of
At
tend
ance
At
tend
nce
2 At
tend
ance
3 At
tend
ance
4
N
o.
Nam
e Po
sitio
n Ap
poin
tmen
t 1 (7
tim
es/y
ear)
(7
tim
es/y
ear)
(4
tim
es/y
ear)
(2
tim
es/y
ear)
1
Cher
dpon
g S
iriw
it In
depe
nden
t Dir
ecto
r an
d
Apri
l 28,
200
5 7/
7
Chai
rman
of t
he B
oard
2 M
anu
Leo
pair
ote
Inde
pend
ent D
irec
tor
and
Ap
ril 2
8, 2
005
6/7
7/7
Ch
airm
an o
f the
Aud
it Co
mm
ittee
3
Pala
Soo
kaw
esh
Inde
pend
ent D
irec
tor
and
Chai
rman
of t
he
Apri
l 28,
200
5 6/
7
4/4
N
omin
atio
n an
d Re
mun
erat
ion
Com
mitt
ee
4
Pra
sert
Bun
sum
pun
Dir
ecto
r an
d M
embe
r of
the
Ap
ril 1
0, 2
007
7/7
3/
4
Nom
inat
ion
and
Rem
uner
atio
n Co
mm
ittee
5 Ch
akra
mon
Pha
suka
vani
ch
Inde
pend
ent D
irec
tor
and
Mem
ber
of th
e Ap
ril 2
0, 2
006
7/7
4/
4
Nom
inat
ion
and
Rem
uner
atio
n Co
mm
ittee
6 Ap
isak
Tan
tivor
awon
g5 In
depe
nden
t Dir
ecto
r an
d M
embe
r of
the
Apri
l 10,
200
7 5/
7
2/
2
Corp
orat
e G
over
nanc
e Co
mm
ittee
7 Lt
. Gen
. Pra
yut
Chan
-O-C
ha6
Inde
pend
ent D
irec
tor
and
Chai
rman
of t
he
Apri
l 10,
200
7 5/
7
2/
2
Corp
orat
e G
over
nanc
e Co
mm
ittee
8 N
ibha
t Bhu
kkan
asut
In
depe
nden
t Dir
ecto
r
Apri
l 20,
200
6 5/
7
9 P
rajy
a P
hiny
awat
D
irec
tor
and
Mem
ber
of th
e
Apri
l 20,
200
6 6/
7
2/
2
Corp
orat
e G
over
nanc
e Co
mm
ittee
10
Nit
Chan
tram
onkl
asri
In
depe
nden
t Dir
ecto
r an
d
Apri
l 20,
200
6 7/
7 7/
7
Mem
ber
of th
e Au
dit C
omm
ittee
11
P
icha
i Chu
nhav
ajir
a D
irec
tor
Ap
ril 2
0, 2
006
5/7
12
Vi
roj M
avic
hak7
Dir
ecto
r an
d Se
cret
ary
to th
e B
oard
Ap
ril 2
8, 2
005
7/7
Dir
ecto
rs w
ho c
ompl
eted
thei
r te
rms
and
resi
gned
dur
ing
the
year
13
O
larn
Cha
ipra
vat8
Inde
pend
ent D
irec
tor
and
Chai
rman
of t
he
Dec
embe
r 8,
200
4 2/
7
Corp
orat
e G
over
nanc
e Co
mm
ittee
14
N
orku
n Si
ttip
hong
9 In
depe
nden
t Dir
ecto
r an
d M
embe
r of
the
Ap
ril 1
0, 2
007
6/7
5/7
Au
dit C
omm
ittee
Not
es:
1 D
ate
of a
ppoi
ntm
ent r
epre
sent
s th
e da
te o
f whi
ch th
e te
rm w
as c
ompl
eted
and
the
date
of r
e-el
ectio
n or
the
date
of t
he fi
rst a
ppoi
ntm
ent a
s el
ecte
d at
the
annu
al g
ener
al m
eetin
g of
sha
reho
lder
s.2
The
Audi
t Com
mitt
ee c
onsi
sts
of 3
mem
bers
, No.
2, 1
0 an
d 14
. No.
14 r
esig
ned
on D
ecem
ber
20, 2
007.
3 Th
e N
omin
atio
n an
d Re
mun
erat
ion
Com
mitt
ee c
onsi
sts
of 3
mem
bers
, No.
3, 4
and
5.
4 Th
e Co
rpor
ate
Gov
erna
nce
Com
mitt
ee c
onsi
sts
of 4
mem
bers
, No.
6, 7
, 9 a
nd 13
. No.
13 c
ompl
eted
his
term
on
Apri
l 10,
200
7.5
Repl
aced
Mr.
Ola
rn C
haip
rava
t and
was
app
oint
ed a
s di
rect
ors
at th
e 20
07 a
nnua
l gen
eral
mee
ting
of s
hare
hold
ers
on A
pril
10, 2
007.
6 Re
plac
ed M
r. P
rapu
n N
aigo
wit
and
was
app
oint
ed a
s di
rect
ors
at th
e 20
07 a
nnua
l gen
eral
mee
ting
of s
hare
hold
ers
on A
pril
10, 2
007.
7 Ap
poin
ted
on J
anua
ry 1,
200
6 re
plac
ing
Mr.
Piti
Yim
pras
ert.
8 Co
mpl
eted
his
term
as
Dir
ecto
r an
d Ch
airm
an o
f the
Cor
pora
te G
over
nanc
e Co
mm
ittee
at t
he 2
007
annu
al g
ener
al m
eetin
g of
sha
reho
lder
s on
Apr
il 10
, 200
7.9
Appo
inte
d to
ass
ume
the
vaca
ncy
on D
ecem
ber
22, 2
006
repl
acin
g M
r. So
mch
ai W
ongs
awat
and
res
igne
d as
Dir
ecto
r an
d M
embe
r of
Aud
it Co
mm
ittee
on
Dec
embe
r 20
, 200
7.
090 C O R P O R AT EG OV E R N A N C E P O L I CY
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.
091C O R P O R AT EG OV E R N A N C E P O L I CY
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.
099F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
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
The accompanying notes are an integral part of these financial statements.
100 F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
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
The accompanying notes are an integral part of these financial statements.
101F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
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
The accompanying notes are an integral part of these financial statements.
102F I N A N C I A L STAT E M E N T S
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
The accompanying notes are an integral part of these financial statements.
103F I N A N C I A L STAT E M E N T S
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
The accompanying notes are an integral part of these financial statements.
104 F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
Note 2007 2006 2007 2006(Restated) (Restated)
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
The accompanying notes are an integral part of these financial statements.
105F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
Note 2007 2006 2007 2006(Restated) (Restated)
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
The accompanying notes are an integral part of these financial statements.
106 F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
Note 2007 2006 2007 2006(Restated) (Restated)
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)
STATEMENTS OF CASH FLOWS (Continued)For the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
The accompanying notes are an integral part of these financial statements.
107F I N A N C I A L STAT E M E N T S
(in Baht)
Consolidated financial statements
Separatefinancial statements
Note 2007 2006 2007 2006(Restated) (Restated)
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
STATEMENTS OF CASH FLOWS (Continued)For the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
The accompanying notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
108 F I N A N C I A L STAT E M E N T S
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 -
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
109F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
110 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
111F I N A N C I A L STAT E M E N T S
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
112 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
113F I N A N C I A L STAT E M E N T S
(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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
114 F I N A N C I A L STAT E M E N T S
(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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
115F I N A N C I A L STAT E M E N T S
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).
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
116 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
117F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
118 F I N A N C I A L STAT E M E N T S
(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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
119F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
120 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
121F I N A N C I A L STAT E M E N T S
Significant transactions for the years ended 31 December 2007 and 2006 with related parties were as follows:
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
2007 2006 2007 2006
Major shareholder
Revenue from sale of goods and
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
Revenue from sale of goods and
rendering of services - - 30,153,732 38,770,292
Purchase of crude oil and feedstock - - 29,120,601 32,852,446
Purchase-sale of crude oil and
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
122 F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
2007 2006 2007 2006
Associate
Expenses 40,109 16,514 40,109 16,514
Other related parties
Revenue from sale of goods and
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
Purchase-sale of crude oil and
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
123F I N A N C I A L STAT E M E N T S
Balances as at 31 December 2007 and 2006 with related parties were as follows:
Trade accounts receivable from related parties
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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
Other related parties
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
124 F I N A N C I A L STAT E M E N T S
Accounts receivable from subsidiary, associated and related parties
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
2007 2006 2007 2006
Major shareholder
PTT Public Co., Ltd. 273,759 4,080 273,357 4,080
Subsidiaries
Thaioil Power Co., Ltd. - - 23,237 23,138
Thai Paraxylene Co., Ltd. - - 17,025 11,784
Thai Lube Base Public Co., Ltd. - - 28,916 17,073
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)
Consolidated financial statements
Separatefinancial statements
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 -
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
125F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
2007 2006 2007 2006
Major shareholder
PTT Public Co., Ltd. 17,140,340 8,323,271 16,040,108 6,655,321
Subsidiaries
Thaioil Power Co., Ltd. - - 117,834 152,992
Thai Paraxylene Co., Ltd. - - 1,658,170 2,172,438
Thai Lube Base Public Co., Ltd - - 316,486 215,899
Other related parties
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
126 F I N A N C I A L STAT E M E N T S
Accounts payable to subsidiary, associated and related parties
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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 -
Thai Lube Base Public Co., Ltd. - - 3,259 1,187
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
127F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
128 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
129F I N A N C I A L STAT E M E N T S
(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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
130 F I N A N C I A L STAT E M E N T S
(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)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
131F I N A N C I A L STAT E M E N T S
6. Other investments(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
132 F I N A N C I A L STAT E M E N T S
Other non marketable equity securities
Consolidated financial statements
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
(%) (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 - - - -
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
133F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
134 F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
135F I N A N C I A L STAT E M E N T S
The currency denomination of trade accounts receivable as at 31 December was as follows:
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
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).
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
136 F I N A N C I A L STAT E M E N T S
9. Other current assets (in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
137F I N A N C I A L STAT E M E N T S
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
(%) (in thousand Baht)
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
(%) (in thousand Baht)
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
138 F I N A N C I A L STAT E M E N T S
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)
(%) (in thousand Baht)
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).
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
139F I N A N C I A L STAT E M E N T S
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.
140F I N A N C I A L STAT E M E N T S
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
141F I N A N C I A L STAT E M E N T S
(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
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)
At 31 December 2006 and
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
142F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Separate financial statements (Restated)
Land Buildings
Refineryplant
and plantequipment
Machinery,equipment
and plantequipment
Furniture,fixtures,
officeequipmentand others Vehicles
Constructionin progress Total
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
143F I N A N C I A L STAT E M E N T S
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
(in thousand Baht)
Separate financial statements (Restated)
Land Buildings
Refineryplant
and plantequipment
Machinery,equipment
and plantequipment
Furniture,fixtures,
officeequipmentand others Vehicles
Constructionin progress Total
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)
At 31 December 2006 and
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
144 F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
145F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Consolidated financial statements
ComputerLicence fee software Total
Accumulated amortisation
At 1 January 2006 489,770 30,038 519,808
Amortisation charge for the year 34,133 2,769 36,902
Disposals - - -
At 31 December 2006 and 1 January 2007 523,903 32,807 556,710
Amortisation charge for the year 33,048 1,660 34,708
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)
Separate financial statements
ComputerLicence fee software Total
Cost
At 1 January 2006 560,460 29,728 590,188
Additions 2,941 6,330 9,271
Disposals - - -
At 31 December 2006 and 1 January 2007 563,401 36,058 599,459
Additions 9,663 1,072 10,735
Disposals - - -
At 31 December 2007 573,064 37,130 610,194
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
146 F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Separate financial statements
ComputerLicence fee software Total
Accumulated amortisation
At 1 January 2006 489,673 22,764 512,437
Amortisation charge for the year 34,036 2,421 36,457
Disposals - - -
At 31 December 2006 and 1 January 2007 523,709 25,185 548,894
Amortisation charge for the year 32,951 1,423 34,374
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)
Consolidated financial statements
Separatefinancial statements
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
147F I N A N C I A L STAT E M E N T S
Movements in deferred tax assets and liabilities during the year were as follows:
(in thousand Baht)
Consolidated financial statements
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
148 F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Separate financial statements
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)
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 (1,536,194) 73,488 - (1,462,706)
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 (1,325,196) 71,927 - (1,253,269)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
149F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Consolidated financial statements
Charged / (credited) to
At1 January
2006
Statementof income
(note 26)Shareholders’
equity
At31 December
2006
Deferred tax liabilities
Depreciation (1,542,353) 55,595 - (1,486,758)
Provision for hedging on foreign exchange
and forward contracts (31,353) 4,089 - (27,264)
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)
Gain on remeasurement to fair value
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
Loss on impairment of assets 119,153 - - 119,153
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
150 F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Separate financial statements
Charged / (credited) to
At1 January
2006
Statementof income
(note 26)Shareholders’
equity
At31 December
2006
Deferred tax liabilities
Depreciation (1,542,353) 55,595 - (1,486,758)
Provision for hedging on foreign exchange
and forward contracts (31,353) 4,089 - (27,264)
Surplus on revaluation of assets (1,199,074) 457,135 (1,103,137) (1,845,076)
Gain on remeasurement to fair value
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
Loss on impairment of assets 119,153 - - 119,153
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
151F I N A N C I A L STAT E M E N T S
14. Other non-current assets(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
152 F I N A N C I A L STAT E M E N T S
15. Interest-bearing liabilities (in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
153F I N A N C I A L STAT E M E N T S
The periods to maturity of interest-bearing liabilities as at 31 December were as follows:
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
2007 2006 2007 2006
Thai Baht (THB) 15,384,674 11,475,248 10,777,000 9,100,000
United States Dollars (USD) 14,095,593 19,976,920 11,848,899 16,834,460
Japanese Yen 2,828,839 - - -
Total 32,309,106 31,452,168 22,625,899 25,934,460
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
154 F I N A N C I A L STAT E M E N T S
Details of principal features of borrowings as at 31 December were as follows:
(in thousand Baht)
Consolidated financial statements
Separate financial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
155F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Consolidated financial statements
Separate financial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
156 F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
Separatefinancial statements
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
157F I N A N C I A L STAT E M E N T S
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:
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
158 F I N A N C I A L STAT E M E N T S
Onshore loans
Facilities Interest
Tranche Currency (in million) Purposes Years Rates (%) Repayment Terms
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
9 - 11 MLR less 1.25 commencing 21 March
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
9 - 11 MLR less 1.25 commencing 21 March
11 - 12 MLR less 1.625 2000
13 - 17 MLR less 1.00
D1 Baht 520 Working capital 1 - 17 MOR -
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
159F I N A N C I A L STAT E M E N T S
Facilities Interest
Tranche Currency (in million) Purposes Years Rates (%) Repayment Terms
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
Tranche Currency (in million) Purposes Years Rates (%) Repayment Terms
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).
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
160 F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
161F I N A N C I A L STAT E M E N T S
The currency denomination of trade accounts payable as at 31 December was as follows:
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
2007 2006 2007 2006
Thai Baht (THB) 18,399,721 8,450,799 18,125,214 11,909,716
United States Dollars (USD) 7,650,757 4,481,955 7,309,458 1,309,301
Others - 4,619 - -
Total 26,050,478 12,937,373 25,434,672 13,219,017
17. Other current liabilities
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
162 F I N A N C I A L STAT E M E N T S
18. Other non-current liabilities(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
163F I N A N C I A L STAT E M E N T S
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
164F I N A N C I A L STAT E M E N T S
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
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
165F I N A N C I A L STAT E M E N T S
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
166 F I N A N C I A L STAT E M E N T S
22. Other income(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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)
Consolidated financial statements
Separatefinancial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
167F I N A N C I A L STAT E M E N T S
24. Personnel expenses (in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
168 F I N A N C I A L STAT E M E N T S
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
169F I N A N C I A L STAT E M E N T S
Reconciliation of effective tax rate
Consolidated financial statements
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
Separate financial statements
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.
.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
170 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
171F I N A N C I A L STAT E M E N T S
Summary of revenue from promoted and non-promoted businesses:
(in thousand Baht)
Consolidated financial statements
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)
Separate financial statements
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
172 F I N A N C I A L STAT E M E N T S
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
173F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
174 F I N A N C I A L STAT E M E N T S
The effects of the changes in accounting policy on the 2007 and 2006 consolidated and separate financial statements are as
follows:
(in thousand Baht)
Consolidated financial statements
2007 2006
Investments in subsidiaries and associates
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
Balance at 1 January before change in accounting policy 74,138,170 71,300,909
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)
Balance at 1 January after change in accounting policy 59,293,522 54,614,361
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
175F I N A N C I A L STAT E M E N T S
(in thousand Baht) Consolidated
financial statements
2007 2006
Deferred tax liabilities
Balance at 1 January before change in accounting policy 3,427,555 2,825,449
Decrease in revaluation surplus (1,845,076) (1,199,074)
Net decrease (1,845,076) (1,199,074)
Balance at 1 January after change in accounting policy 1,582,479 1,626,375
Retained earnings
Balance at 1 January before change in accounting policy 30,842,300 23,831,084
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
Balance at 1 January after change in accounting policy 30,768,411 24,064,604
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
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
176 F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Separate financial statements
2007 2006
Investments in subsidiaries and associates
Balance at 1 January before change in accounting policy 26,341,722 18,887,994
Decrease in retained earnings (18,103,301) (10,694,573)
Net decrease (18,103,301) (10,694,573)
Balance at 1 January after change in accounting policy 8,238,421 8,193,421
Inventories
Balance at 1 January before change in accounting policy 17,798,072 16,471,823
Increase in retained earnings 266,535 679,265
Increase in income tax payable 99,205 235,414
Net increase 365,740 914,679
Balance at 1 January after change in accounting policy 18,163,812 17,386,502
Property, plant and equipment
Balance at 1 January before change in accounting policy 48,788,646 46,836,764
Decrease in revaluation surplus (12,574,530) (15,049,072)
Decrease in deferred tax liabilities (1,845,076) (1,199,074)
Net decrease (14,419,606) (16,248,146)
Balance at 1 January after change in accounting policy 34,369,040 30,588,618
Deferred tax liabilities
Balance at 1 January before change in accounting policy 3,381,271 2,772,780
Decrease in revaluation surplus (1,845,076) (1,199,074)
Net decrease (1,845,076) (1,199,074)
Balance at 1 January after change in accounting policy 1,536,195 1,573,706
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
177F I N A N C I A L STAT E M E N T S
(in thousand Baht)
Separate financial statements
2007 2006
Retained earnings
Balance at 1 January before change in accounting policy 30,842,300 23,831,084
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)
Balance at 1 January after change in accounting policy 13,005,534 13,815,776
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
178 F I N A N C I A L STAT E M E N T S
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:
Consolidated financial statements
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
Loans to savings co-operative of employees MLR less margin 34,037 510,338 544,375
Total 34,037 510,338 544,375
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
179F I N A N C I A L STAT E M E N T S
Separate financial statements
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
Loans to savings co-operative of employees MLR less margin 35,651 532,918 568,569
Total 1,553,651 532,918 2,086,569
2006
Non-current
Loans to savings co-operative of employees MLR less margin 34,037 510,338 544,375
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
180 F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
Separatefinancial statements
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
181F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
182 F I N A N C I A L STAT E M E N T S
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)
Consolidated financial statements
Separate financial statements
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)
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
183F I N A N C I A L STAT E M E N T S
32. Commitments with non-related parties
(in thousand Baht)
Consolidated financial statements
Separatefinancial statements
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
184 F I N A N C I A L STAT E M E N T S
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.
NOTES TO THE FINANCIAL STATEMENTSFor the years ended 31 December 2007 and 2006Thai Oil Public Company Limited and its Subsidiaries
185F I N A N C I A L STAT E M E N T S
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