Q: Why did you reinvest in the upstream business again?
A: This investment in the upstream business was meant to balance BCP’s business portfolio. As can be seen in the past 2 to 3 years, BCP has been focusing on green businesses, however, had the crude price in 2018 been at the 60 to 65 $/BBL level, BCP would not have gone into the upstream business because procurement would have already been relatively inexpensive, however, when crude price reached the 80 $/BBL level, and not being a one-time spike, but a price plateau that has lasted 3 to 4 months, and with everyone seeing price trend being on the rise, BCP would have to mitigate this price risk. The company has been carefully monitoring this business for some time before the decision was made.
Q: The supply source was bought from Shell.
A: The Draugen and Gjoa Field are huge crude oil reserves located in the North Sea, the sites’ underground reserves is estimated to contain about 1.4 million barrels. Whereas in Thailand, oil consumption does not approach 1 million barrels; the reserve has been in production since 1995. Its current production rate is 20,000 Barrels per day. BCP bought the reserves off from A/S Norske Shell through OKEA, a company which BCP has 45% stakes in or THB 3,760 million as investment. As for the reason that Shell sold off the reserves, it can be attributed to their merger with BG which wanted to shed $ 30,000 million worth of assets, thus was the reason for selling this site. Even though it being a world class asset, when compared to Shell’s investment production, 100,000 BBL is not an incredibly ambitious sum, but to BCP this level of crude production is immense, we will develop the oil reserves and continue to capitalize on the site well into 2050.
Q: The investment budget is pretty high.
A: When considering BCP’s energy business, our EBITDA is between THB 13,000 to 15,000 million after tax and interest, part of what is left goes on to pay dividends, the remaining money is used for asset development, refinery maintenance, service stations, and some of it is used to invest in BCP’s new business wherein we will be stepping away from our comfort zone by investing abroad. You will see that in the past 3 to 4 years, BCP has set aside $50 to $100 million, or THB 1,000 to 3,000 million to expand various businesses.
Q: Was this the reason why the Galoc field was sold?
A: Nido Produciton production source (Galoc) in the Philippines was a micro operation with a few years of production left in it. It is natural that BCP would start to see problems with production and complications. Incidentally, there was a company that specialized in drilling, the Tamarind (Galoc) who wanted this particular site, so they took the site of our hands in the amount of THB 660 million because their assessment came to a conclusion that there are sites within its vicinity that can still be explored.
Q: Investments for the future?
A: Even though BCP has invested in upstream businesses, the company has not forgotten about its green business. Recently, BCP was exploring investments in a startup in the United States that makes solid state batteries for electric vehicles, which major car manufacturers or even electronic giants from South Korea had invested in; the startup has the most advance technology. The reason this startup was discovered was due to the scout team that was sent to Silicon Valley every 3 months, residing there for 1 month, to discuss various technologies that stands to impact BCP. BCP do not invest a large sum in future businesses; about 1% or $10 million, but are able to secure technologies that can used to further BCP’s future business i.e. the Lithium battery business.
Q: Connections to the Lithium mine?
A: BCP have 2 Lithium mines in Argentina and another in Nevada, USA which is still going. The mine located in Nevada is the largest Lithium mine in the US, it produces an upward of 60,000 tons, it is currently undergoing EHIA. It is expected to begin operation in the following 2 to 3 years which will be used as the main component of the new battery by the startup; it is not a large investment, but will secure the future because initially $5 million was invested in the Lithium mine with an additional $32 million, currently, its market value is approximately $80 to 90 million. The next agenda is to increase HR capacity.
Q: Investments in the Power Plant business?
A: Bangchak has continued to invest through BCPG to a point where Solar Power Plants starts to become saturated, thus we are looking into other renewables like wind power, should the opportunity arise and the investment has potential, we would be increasing our investment. BCP’s local Solar Power Plant can produce 150 MW, another 150 MW comes from the Japanese location; currently we have completed construction on what amounts to 50 MW, we would have to continue to build, and we also have Wind Power Plant in the Philippines with 30 MW and a Geothermal Power Plant in Indonesia that can produce 200 MW. You can see that the Wind Power Plant’s output is relatively minuscule. Bangchak has just bought a 30 MW Wind Power Plant and also Shiotomo’s in Indonesia with 200 MW, and still has the capabilities to consider investing 10 MW further in Nakorn Srithammarat. As for provinces in Thailand that can sustain Wind Power Plants, they are Petchaboon and Nakorn Srithammarat that has wind channels.
Q: Retail marketing?
A: There has been constructions and renovations of service stations, new investments in non-oil, all of this contribute to BCP’s market share, this past May was the first time we have reach 16% market share (statistics reported by MOE) which we had gradually worked up from 14%. As for our service station target for this year, we plan to open 80 locations, throughout 2018 number of locations will be between 1,150 to 1,160 locations, most of them will be dealer stations, this serves to increase SME incomes, as for the SPAR convenience store, we should have 40 to 50 locations by the end of the year from the previous year’s 20 locations. As for the Inthanin Coffee shop, they have “Inthanin Garden” locations that are larger, we aim to increase 100 to 200 locations for a total of 500 locations, as well as BCP having lease the rights to the Inthanin franchise to Laos PDR and Cambodia. As for the Big C convenience stores in 160 BCP service stations is in the middle of negotiating a joint agreement between Big C and Spar.