Asian oil firms discover benefits of globalization

Asian oil firms discover benefits of globalization

SINGAPORE (Reuter): Asian national oil companies are becoming more involved in all aspects of their industry, stretching from upstream exploration to downstream refining and retailing.

Having fulfilled their key roles as securing national energy supplies, their objectives in the next decade are to compete in the international retail and marketing arena.

Leading the pack are the Petroleum Authority of Thailand (PTT), Indonesia's Pertamina and Malaysia's Petronas.

All have been making headways in their overseas investments and have lured more private sector participation in their country to ease the national burden.

Owners of Malaysia's entire oil and gas reserves, Petronas has become a fully integrated international petroleum corporation and is listed on Fortune 500.

"Its corporate philosophy of vertical integration within its group of companies has spurred it to venture into strategic projects locally and internationally to diversify and expand its business portfolio," a Malaysian source said.

Petronas aims to source 30 percent of its revenue from overseas business by 2005. In the financial year ended last March, it recorded a pre-tax profit of 7.1 billion ringgit (US$2.79 billion), up 12.9 percent on the previous year, on a turnover of 17.1 billion ringgit ($6.73 billion).

As part of its globalisation program, the company launches itself into overseas upstream activities through its wholly owned subsidiary Petronas Carigali (Overseas) Sdn Bhd.

Carigali has interests stretching from Vietnam to Syria and is looking at opportunities in Central Asia, India and the Philippines.

To enhance its increasingly international oil trading activities, Petronas Trading Company (Petco) was established to trade in non-domestic crudes, products and petrochemicals.

Petco has since gained a reputation for making inroads into Africa and the Indian sub-continent.

Its activities are also supported by investments in Yemen with a refinery at Aden processing Mid-East crudes, as well as a terminal in the Seychelles.

Petronas has also ventured abroad to operate gasoline stations in Cambodia and aims to open a network of service stations in Thailand, with Unique Gas and Petrochemicals.

The first gas stations in Thailand are expected to open from early 1996.

Earlier this year, Petronas held talks with Indian firms for a joint-venture refinery in Madras. It is also investing in a Australian $540-million gasoline project in Australia.

Thailand's PTT

Just as ambitious as its southern neighbor, Thailand plans to expand its domestic and overseas ventures in various petroleum- related fields, notably the retail business.

"Our globalisation move is imperative to ensure the growth of PTT, now in its 17th year," a PTT source said. "Within the first 10 years of our establishment, PTT has transformed from a government company to a national oil firm. Now we are entering to become a regional player," he added.

Sources said the company seeks to capitalize on its expertise in service-oriented industry.

Domestically, PTT has established joint-ventures and subsidiaries such as Rayong Refinery Company and the Thai Lube Base Company for upstream and downstream industrial development. It currently enjoys 37 percent share of the Thai market.

In the international arena, PTT made headlines when it entered into a 50:50 venture with U.S. Coastal Corp

PTT took over the stake from Petronas in the middle of this year. The move is seen as part of PTT's strategy to enter the Philippines after the deregulation of the local petroleum industry there.

PTT and Coastal, through their joint firm Subic Bay Petroleum Products Ltd, will also invest US$125 million in 500 service stations in the Philippines over the next five years.

PTT has also spread its roots deeper into its own hinterland, establishing retail gasoline and liquefied petroleum gas (LPG) markets in China, Vietnam, Cambodia, Laos, Myanmar and Philippines.

It opened its first service station in China with China's state refiner SINOPEC in March 1994 in the coastal city of Maoming.

Together they target to open 200 stations within five years in Guangzhou, Maoming, Shanghai, Tianjin and Dalian. PTT's planned investment there is estimated at 350 million baht.

In Vietnam, PTT plans to set up and operate 50 service stations by 1999 in joint-ventures with Vietnamese firms.

Pertamina

Indonesia's Pertamina is seen to be treading more cautiously.

"Pertamina's role as a manager of Indonesia's oil is based on the law," a Pertamina official said. "It will continue to be (so) but facing global free trade in the future, the law needs to be reviewed to give Pertamina more room to maneuver as an oil company."

"Pertamina must turn its vision to becoming a really profitable company," the official added. "If not, it will be left behind and there might be problems developing the oil sector."

Pertamina's nine oil refineries operate at zero profit. Industry watchers say this must change.

Pertamina is slowly opening its oil sector to private firms to manage both upstream and downstream business. The company has taken brave steps to restructure its workforce, aimed at reducing the bureaucracy.

Philippines Petron Corp also hopes to join the ranks of exporters by the turn of the century following its partnership with Saudi Aramco in 1993.

As a first step, Petron plans to build a 200,000 barrels per day refinery in Mindanao, southern Philippines, between 2003- 2008, which will meet domestic demand and leaving surplus for export.