Shell to help IRPC reduce costs

POST REPORTERS

The petrochemical producer IRPC Plc will hire Shell Global Solutions to review its capacity expansion plan to optimise investment, according to IRPC president Piti Yimprasert. The Shell consulting unit will also study the efficiency improvement of IRPC's petrochemical production facilities as a whole with a view to reducing operating costs and raising productivity and efficiency.

Shell Global Solutions has done consulting for several energy companies in Thailand, particularly companies affiliated with PTT Plc, which is the largest shareholder in IRPC, formerly known as Thai Petrochemical Industry (TPI).

Based on an earlier study, Mr Piti said, IRPC planned to expand production capacity to 260,000 barrels per day from 220,000 barrels with an budget of US$1.1 billion, which was considered too high.

This year, IRPC expects to raise its production capacity by just 10,000 bpd, to 190,000 bpd, due to volatility of refining margins and a general economic slowdown. As a result, the company decided to review the capacity expansion plan to ensure that it would not be investing more than was reasonable.

Mr Piti said the overall goal was to reduce operating costs by 5-10%. One strategy would involve more pooling of operations with other petroleum and petrochemical companies under the PTT umbrella, particularly Thai Oil Plc.

Operations that could be pooled include logistics and crude oil procurement, which are expected to help cut IRPC's operating cost by two billion baht this year.

Mr Piti said the cost-reduction programme would help IRPC achieve total revenue equal to or higher than last year's figure of 200 billion baht, despite the fact that petrochemical and petroleum prices were expected to weaker than they were last year.

He also said IRPC would move forward with a debenture issue worth US$800 million for refinancing. Half of the issue would be in baht and half in foreign currencies following the decision by the Bank of Thailand to relax its 30% reserve rule for companies that hedge their foreign-exchange transactions.

The debentures were expected to be issued in June and July, he added.

IRPC shares closed yesterday on the Stock Exchange of Thailand at 6.10 baht, up 15 satang, in trade worth 568.5 million baht.

Bangkok Post
Sunday February 11, 2007