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					                                                                                    Petroleum Authority of Thailand

                                                 Case Document

                          PTT: After the Tom-Yum-Kung Disease

                    An evaluation of the November 2001 initial public offering and
                     privatization process of the Petroleum Authority of Thailand

The situations described in this document are intended to serve the learning objectives of this case, and are not necessarily
intended to be a representation of fact.
                                                              Petroleum Authority of Thailand

        The time was 4:15 p.m. in Bangkok when Jarumpron Chotikasathira, an executive vice
president of Siam Commercial Bank, stepped closer to the window to look at his watch. The
afternoon light was quickly fading as a summer storm brewing over the Gulf of Thailand was
fast approaching the city. The impending clouds only deepened Chotikasathira’s suspicion
that a very late night stretched out in front of both him and his staff. It was November 15,
2001 and the following day, Siam Commercial, along with four other Thai banks, were
leading an initial public offering to privatize the Petroleum Authority of Thailand (PTT), the
country’s only fully integrated oil and gas company.

        It was estimated that at the five banks’ combined 2,600 nation-wide branches,
investors would line up to submit application forms to subscribe to PTT shares. The pre-
marketing for the IPO, lead by Credit Suisse First Boston, Lehman Brothers, Merrill Lynch
and SCB Securities, generated positive feedback and word in financial circles was that PTT’s
IPO had potential to be the largest ever in Thailand. Nonetheless, Chotikasathira was
worried as a lot was riding on this IPO. A successful deal was critical for the fortunes of the
Stock Exchange of Thailand and the Thai government, whose previous privatization programs
were abysmal failures. But Chotikasathira’s train of thought was soon interrupted by his
assistant who informed him that the thunderstorm had just knocked out power to 700 of the
10,000 computer terminals need to process the subscription forms for the following day’s
IPO. Any additional time Chotikasathira would spend worrying about the overall success of
PTT’s IPO would have to wait until the computer terminals were back up and running.

Country Background

        Thailand means "land of the free," and throughout its 800-year history, Thailand can
boast the distinction of being the only country in Southeast Asia never to have been
colonized. The first true Thai kingdom was Sukhothai, established in 1238 amidst waning
Khmer dominance of the region. During this early period of Thai history, religion prospered,
culture flourished and King Ramkhamhaeng developed the first Thai script. For nearly 700
years, Thailand was under an absolute monarchy, however this came to an end in 1932 in a
bloodless coup, and a constitutional monarchy similar to that of Britain was soon established.

       Until 1939, Thailand's official name was Siam, but that year the country's name was
changed to Thailand. Postwar military coups and suppression of democracy activists, notably
in 1973, 1976 and 1991, gave way to democratic reform including a new constitution, creating
a country where political and press freedoms are some of the strongest in Asia.

        Thailand experienced strong economic growth and expansion throughout the late
1980s and much of the1990s. However, in July 1997, Thailand found itself in the midst of
one of the worst geographical economic crises. The region’s problems began in Thailand,
where there were numerous signs of an impending crisis long before July 1997.
                                                               Petroleum Authority of Thailand

Macroeconomic indicators pointed to substantial imbalances: the real exchange rate had
appreciated substantially; exports growth had slowed markedly; the current account deficit
was persistently large and was increasingly financed by short-term inflows; and external debt
was rising quickly. These problems, in turn, exposed other weaknesses in the Thai economy,
including substantial, unhedged foreign borrowing by the private sector, an inflated property
market, and a weak and over-exposed banking system. The financial sector suffered from high
levels of non-performing loans, corporate bankruptcies increased, and construction came to a
standstill. The markets also warned of the unsustainability of Thailand’s policies, as seen in
lower equity prices and mounting exchange rate pressure.

        The signs of emerging macroeconomic problems in Thailand, including a loss of
external competitiveness, had been apparent for some time prior to the Asian financial crisis.
These problems, in turn, exposed underlying weaknesses in the domestic economy. In early
July 1997, the Thai government floated its currency, the Baht, which resulted in an immediate
decline in its value. Between July 1997 and February 1998, the Thai Baht lost more than 50
percent of its value against the U.S. dollar, ultimately hitting a record low of Bt 56.45/U.S.
dollar on January 12, 1998. The depreciation of the Thai Baht helped push the Thai economy
into a severe recession. In the absence of sufficient policy measures, the Asian financial crisis
broke and spread to other countries in the region and, ultimately, to financial markets
elsewhere around the globe. For additional information on human, economic and trade
indicators in Thailand see exhibits 1, 2, and 3 respectively.

The International Monetary Fund

        The International Monetary Fund (IMF) was in continuous dialogue with the Thai
authorities for 18 months prior to the floating of the Baht in July 1997. However, after so
many years of outstanding macroeconomic performance, it was difficult, if not impossible, for
the authorities in Thailand—and other countries—to recognize that serious underlying
deficiencies poised a threat to their impressive track record. What occurred was an
unprecedented "denial syndrome," which very quickly spread and which contributed to the
delay in taking convincing policy action until, at last, the crisis broke.

        Following the fall in the Baht, the Thai government looked abroad for financial
assistance and enacted reforms to prevent a similar situation in the future. In August 1997, the
International Monetary Fund (IMF) granted Thailand a $17.2 billion package designed to help
the country institute economic reforms and get the economy back on track. By mid-July
1998, US$1.08 billion in loans were approved to assist Thailand’s financial sector reform,
strengthen economic reform, help with privatization and public enterprise reform, resolve
unviable finance companies, reform public administration, increase competitiveness, and
improve legal regulations for business.1

       With the support of the IMF, Thailand launched a comprehensive program that
addressed market concerns about large external deficits and troubled financial institutions. As
                                                              Petroleum Authority of Thailand

a result, a comprehensive restructuring of the financial sector was implemented. As a
condition for this help, and under orders from the IMF, Thailand’s Chuan Leekpai
government agreed to the sale of some of Thailand's most important public assets, including
the Petroleum Authority of Thailand (PTT), PTT Exploration and Production, and Bangchak
Petroleum. These actions included third party access to natural gas transmission lines, as well
as partial or whole privatizations.

Petroleum and Petrochemical Industry Background

       Thailand contains nearly 300 million barrels of proven oil reserves. By 1997, Thailand
was producing approximately 107,000 bbl/d of oil, of which 71,000 bbl/d was crude. The
country's crude production was on the rise since 1995, and has increased 10,000 bbl/d per
year. Approximately 70 percent of Thailand's total petroleum demand is imported and more
than 70 percent its crude oil imports come from the Persian Gulf.2

        The petroleum and petrochemical industry in Thailand is organized into four distinct
industrial segments:

       On-shore and offshore exploration and production;
       Transmission, processing and distribution of natural gas and crude oil;
       Production of refined petroleum and petrochemical products; and
       Distribution, marketing and trading of refined petroleum products.

     Historically, the Thai government regulated the petroleum industry through volume,
distribution, and pricing controls, which were administered by central government ministries
including the NEPC3, NEPO4, the MOI5 and the MOF6. By the 1990s, the Thai government
began regulating domestic wholesale prices and gas sale price (which includes marketing
margins and transmissions tariffs) to private power producers.

    From 1996 to 2000, natural gas consumption increased at a compound annual growth rate
of 14.4 percent, from 228 KBoe/d in 1996 to 3090 KBoe/d in 2000. During the same period,
crude oil in Thailand decreased at a compound annual rate of 4.1 percent (Exhibit 4).
The primary reasons for the increase in natural gas use consist of:

       Increased demand from power producers in response to higher demand for electricity
        in Thailand and a switch to natural gas from alternative fuel sources;
       Higher crude oil prices; and
       New emissions standards that required industrial users to switch to cleaner fuel
        sources for electrical generation. (Exhibit 5)

Natural Gas Industry

       Natural gas is transported through an extensive pipeline system (owned primarily by
PTT) from the natural gas-producing fields in the Gulf of Thailand and from the Thailand-
                                                              Petroleum Authority of Thailand

Myanmar border to gas separation plants or various end users. As of June 30, 2001, the total
length of the offshore gas transmission network was 2,390 kilometers. (Exhibit 6 & 7)

    Gas separation plants extract natural gas products, such as LPG (liquid petroleum gas),
ethane, butane and propane for sale to various customers. LPG is the generic name for
commercial propane and commercial butane. It is used primarily as a cooking fuel, while
ethane and propane are used as petrochemical feedstock. There are currently five gas
separation plants in Thailand (four belong to PTT), and PTT plans to build a sixth gas
separation plant in the Mab Ta Phut, Rayong province.

    Natural gas is delivered either directly or through a distribution system. Large volume
customers, such as power plants, receive gas directly from the transmission networks.
Smaller customers receive gas through a pipeline distribution system, which is linked to the
gas transmission network.

Oil Industry

    In 2000, more than 90 percent of crude oil demand in Thailand was supplied by imports.
By 2001, Thailand’s seven refineries were the principal processors of imported and domestic
crude oil. The refiners are located in the central regions of Thailand where market demand
for refined products is stronger relative to rural regions, thus minimizing distribution costs
which are determined largely by proximity to refining facilities to the consuming market.

    The primary refined products include gasoline, diesel, jet fuel, fuel oil, kerosene, and
LPG. Retailing of refined petroleum products is open to domestic and foreign companies. As
of December 31, 2000, PTT had the largest number of service stations in Thailand. (Exhibit 8)

Exploration and Production

    The Thai government owns all of nation’s petroleum resources as well as the grant rights
that companies need to conduct exploration and production activities in both inshore and
offshore properties. Thailand’s petroleum reserves are dominated by natural gas,
approximately 90 percent of which are located in the Gulf of Thailand. (Exhibit 9) In addition
to PTTEP, a subsidiary of PTT, a number of foreign-owned companies explore, develop, and
produce oil and gas properties in Thailand, including Unocal, Chevron, Esso and Thai Shell.
(Exhibit 10)

Petrochemical Industry

    Thailand has been one of the world’s most rapidly growing producers of petrochemicals in
the last ten years. Thailand, a primary exporter of both ethylene and propylene produces more
than 1,500 kinds of petrochemical products, which are widely used in different industries.
This industry has become more competitive as chief downstream players are integrating with
upstream counterparts. (Exhibit 11)
                                                                     Petroleum Authority of Thailand

The Petroleum Authority of Thailand

        The Petroleum Authority of Thailand (PTT), Thailand’s only fully integrated oil and
gas company, was formed by the 1978 merger of two state-owned behemoths, the Oil and
Fuel Organization and the Natural Gas Organization. Since PTT’s inception, it has been the
industry leader in both the marketing and distribution of gas, oil and petrochemical products,
and is a dominant player in the exploration of these resources. PTT was incorporated on
October 1, 2001 as a result of the Corporatization Act enacted by its predecessor. Prior to its
incorporation, PTT was a state enterprise focused on developing and promoting Thailand’s
petroleum industry and ensuring the security of energy supply to Thailand.

        Over the years, PTT has demonstrated strong combined sales revenues. The following
table highlights sales revenues from 1999, 2000 and 2001:

                      Year Ended December 31,                    Six Months Ended June 30,
 (in millions)        1999    2000     2000                     2000       2001       2001
                       Bt      Bt        $                       Bt         Bt          $
 Sales              228,617     365,106       8,067        157,140       187,829      4,150
Source: PTT Public Company Ltd. Preliminary Offering Circular

PTT Business Model

   PTT maintains a leading position in the marketing and distribution of various crude oil,
condensate, petrochemical and refined petroleum products in Thailand. PTT’s primary
businesses include (Exhibit 12):

       Procurement, transmission, processing, marketing and distribution of natural gas and
        gas products; and
       Exploration, development and production of natural gas, condensate and crude oil
        through PTT subsidiary PTTEP.

   Additionally, PTT maintains strong control over both its upstream and downstream
channels. (Exhibit 13)

PTT’s Natural Gas and Oil Businesses

        Natural gas is the core focus of the PTT business, and PTT is the principal processor
and distributor of natural gas in Thailand. Total operating revenues from PTT’s gas
transmission, processing and marketing business segment increased 53.6 percent to Baht
65,026 Baht (US$293 M) compared to the six months ended June 30, 2000. PTT purchases
                                                              Petroleum Authority of Thailand

natural gas from PTTEP, its subsidiary, and other producers in Thailand and Myanmar for
delivery to customers through its integrated pipeline transmission and distribution system of
more than 2,652 kilometers with a capacity of 3170 MMcf/d. For the six months ended June
30, 2001, approximately 78.3 percent of PTT’s natural gas by volume was sold to EGAT,
Thailand’s largest power producer, and to other private power producers.

        PTT purchases natural gas from producers in Thailand and Myanmar under gas
purchase agreements based on take-or-pay provisions which require PTT to pay for minimum
quantities of natural gas each year whether or not it actually takes delivery of that minimum
quantity during that year. The aggregate contracted minimum quantities PTT’s customers are
required to purchase under PTT’s natural gas sales agreements are less than the aggregate
contracted annual minimum quantities that they are required to purchase under the take-or-
pay provisions. As a result of this arrangement, PTT is vulnerable to paying producers and to
finance the related carrying costs for natural gas even if it is unable to take delivery of and
resell such gas to their customers. This has had an adverse affect on PTT because the
company had to make significant payments to gas producers in Myanmar ($ 660MM) for gas
it could not off-take from 1999 –2001. Although this had a serious impact on PTT
historically, the growth in natural gas demand due to additional power plants should mitigate
much of the prior risk. Furthermore, the payments that were made for natural gas that was not
used is now a prepaid expense for additional natural gas supplied from the producers. (Exhibit

        PTT’s oil business unit purchases crude oil and condensate from producers within and
outside of Thailand. PTT retail mainly engages in the distribution of its oil products through
its 1,519 nationwide service stations and operation of storage and distribution facilities.

PTT Exploration & Production

        Exploration and production of natural gas is conducted by PTT Exploration &
Production (PTTEP), a subsidiary of PTT. As of October 2001, PTT held a 61 % equity
interest in PTTEP. Prior to the PPT’s IPO, PTTEP owned approximately 22 percent of
proven natural gas reserves in Thailand. As of December 31, 2000, PTTEP’s net proved
petroleum reserves were 779 MMboe of which approximately 88.5 percent was natural gas.
PTTEP has working interests in thirteen projects, nine of which have proved reserves and are
in production. The other five projects are under exploration. Three of PTTEP’s projects are
located in Thailand and the remainder is located offshore, in the Gulf of Thailand and the Gulf
of Moattama and the Andaman Sea between Thailand and Myanmar. (Exhibit 15)


        EGAT, Thailand’s principal power producer, served as PTT’s largest customer prior to
privatization. PTT’s sale of natural gas to EGAT represented approximately 12.4 percent and
14.7 percent of PTT’s total revenues in 2000 and the first six months of 2001, respectively.
Additionally, approximately 56.3 % and 48.3 % of PTT’s total volume of gas was sold to
EGAT during the same timeframe.
                                                              Petroleum Authority of Thailand

        PTT is highly dependent on sales to EGAT to generate sufficient cash flows to make
payments to their suppliers. Any significant reduction in natural gas sales to EGAT for
example, due to a reduction in demand for electricity or financial difficulties at EGAT could
have a negative impact on PTT’s business and financial condition. In 1998, the Government
announced plans to privatize EGAT in several separate stages. Privatization may adversely
affect EGAT’s demand for natural gas.

        Although recent growth in demand for natural gas products has not been highly
correlated with GDP growth, the demand for energy is generally correlated with GDP.
Therefore, any decrease in Thailand’s GDP could lead to a reduction in the demand for
energy which would then have a material adverse effect on PTT’s financial conditions and
operational results.

Government Regulation

   The Government of Thailand through the National Energy Policy Committee (NEPC) and
National Energy Policy Organization (NEPO) has regulated gas prices and tariffs charged to
EGAT, Independent Power Providers (IPP) and smaller power providers (SPP) since 1996.
The gas price is comprised of two components:

      Gas charge: Based on the gas purchase price plus a marketing margin. The purchase
       price is the average heating value cost of gas derived from one of the three regional
       gas pools. Marketing margin varies by customer and is capped. The marketing
       margin is designed to compensate PTT for supply and marketing costs.
      Transmission tariff: This allow PTT to receive an agreed internal rate of return on
       equity to cover its financing, operating, and maintenance costs. The tariff consists of a
       demand and commodity charge. The demand charge reflects invested costs and fixed
       operating expenses of a pipeline system, and is based on the quantity of contracted gas
       volumes. The commodity charge reflects variable expenses and is based on the actual
       quantity of gas delivered.

        From time to time, the Government has requested that PTT provide it with information
regarding the impact of lowering the marketing margin and transmission tariff on PTT’s
business and financial condition, and could lower either or both. The Thai Government has
also historically intervened with prices to control inflation and/or achieve other social and
economic objectives. Although the Government has stated its intention not to change prices
in the future, it has the ultimate discretion to regulate the prices at which PTT may sell their
gas and oil products.

Energy Industry Act

       To facilitate continued reform, the Energy Industry Act is under draft and is expected
to become law in 2002. The act is expected to form a new independent regulatory body, the
                                                               Petroleum Authority of Thailand

National Energy Regulatory Commission (NERC), to regulate both the electricity and natural
gas supply industries and to ensure fair competition. This agency’s key responsibilities will

      Primarily regulating the electricity supply industry (ESI) and the gas supply industry
      Regulating tariffs, standards and service quality;
      Ensuring competition and preventing abuse of monopoly power;
      Protecting consumers and dealing with consumer complaints; and
      Considering and proposing pipeline network expansion plans to NEPC.

    With the passing of the Energy Industry Act, PTT’s current marketing margins and
transmissions tariffs will be reviewed and, possibly, changed. Such changes would definitely
impact PTT’s profitability.

        In addition to the formulation of a new regulatory body, the Energy Industry Act will
open the doors to new domestic and foreign competition in PTT’s different business
segments. In the gas transmission, marketing and processing segment, the expected creation
of the Third Party Access (TPA) Code, PTT will face increased competition, which it has not
experienced in the past. PTT can expect to face more competition from corporations that
have experience in the gas marketing business. Furthermore, new contracts directly between
suppliers and end users may exclude PTT from the supply and marketing aspect of such
transactions, which will also impact PTT’s dominant position.

PTT’s Privatization

         Following the Asian crisis and with encouragement from the IMF, the Thai
government stepped up its efforts to privatize state-run Petroleum Authority of Thailand
(PTT) placing the plans for privatization on the "fast track." The government considered two
methods for the privatization of PTT. The first would transform PTT into a holding company
and list it on the Stock Exchange of Thailand (SET). This would enable investors to invest in
all of PTT businesses and subsidiaries. Over time, the holding company would gradually sell
off its holdings in the subsidiaries. In the second method, PTT would separate its subsidiaries
and allow them to independently seek listings on the SET. Under this method, investors
would have the opportunity to invest in only those businesses that they saw as profitable. The
government hoped to raise up to $14 billion in the first three years through the privatization
process. The money would be crucial in helping ease budgetary pressures as the country tried
to rebound from its economic situation. The plan was to have a privatization plan in place by
the fourth quarter of 1998, but was later scheduled for 2001.

        PTT’s launch of the deal in November 2001 actually occurred some five years after
the company first began to ready itself for market. PTT’s IPO launch was a long-awaited
signal of the government's intention to actively bolster the stock exchange rather than just talk
about doing it. For PTT, which ranked in the Fortune 500 list of global companies at the
                                                              Petroleum Authority of Thailand

beginning of the 1990's, the transaction also marked an acceptance of economic reality and an
opportunity to start cutting government apron strings. The deal was structured as a primary
share offering allowing PTT to use proceeds to pay down debt largely incurred in the post
Asian crisis bailout of government-owned subsidiaries such as Thai Oil and Bangchak
Petroleum. "The whole point of this privatization is not to raise money for the government,
but to free PTT and force it to make its own investment decisions," says one Thai specialist.
"Secondary to this, the government has privatization commitments to meet with the IMF and
World Bank."7

PTT Strengths

         There are many reasons that make PTT’s IPO attractive to the outside investor. The
continued growth in the gas industry in Thailand as an alternative to oil products has spurred
very strong financial results for PTT. For the six months ended June 30,2001, PTT’s total
revenues increased 19.9 percent to 190,724 million Baht($4,214M) and their net income
increased 21.3% to 13,279 Baht ($293 million) compared to the six months ended June
30,2000. EBITDA also increased 21.3 percent to 25,455 million Baht ($562 million) for the
six months ended June 30, 2001 compared to the six months ended June 30, 2000. In addition
to their strong financial results, PTT benefits from the following strengths:

       Dominant position in an established and growing natural gas market. Natural gas
        consumption has grown at a compound annual growth rate of 14.4 percent from 1996
        through 2000 despite the financial Asian crisis. As the sole owner and operator of
        Thailand’s natural gas transmission pipeline network, PTT has a dominant position in
        this growing market.
       Integrated natural gas operations. PTT’s pipeline networks link their upstream
        business through PTTEP, their gas separations plants, and, finally, PTT’s downstream
        marketing operations.
       Gas earnings reduce exposure to oil price volatility. A substantial portion of earnings
        is derived from gas transmissions tariffs (see Regulation section), which are not
        affected to natural gas and oil prices.
       Low cost and growing upstream operations. PTTEP has an established track record
        for growing its low cost production.
       Leading position in petroleum products. PTT operates the largest marketing and
        distribution system for refined oil products in Thailand. Their net margins are further
        enhanced by contracts with large volume customers, which also lowers cost due to
        lower infrastructure costs.
       Experienced management team. PTT’s management has demonstrated proven
        success in maintaining operating profits even during the Asian financial crisis. Most
        of PTT’s key senior management has public-company management experience
        through involvement with PTTEP.
                                                              Petroleum Authority of Thailand

Financial Structure

        PTT is highly leveraged. As of June 30,2001, PTT’s total long-term debt was Baht
152,424 MM ($3,368 million) and their debt to equity value was approximately 79.8 %
(Exhibit 16-18). Due to their high levels of debt, PTT’s exposure to adverse general
economic conditions, such as the financial Asian crisis, are heightened. A concern for PTT is
their exposure to fluctuations in the exchange rate with the Baht against the dollar because a
portion of their debt obligations are denominated in dollars while most of their revenues are
denominated in Baht and only partially linked t the dollar. With the additional infusion in
cash generated from their IPO, PTT plans to make significant debt payments to lower their
current capital structure. PTT’s financial projects are based on their expectation of continued
growth in the natural gas industry that they have experienced up to their IPO.


       Jarumpron Chotikasathira returned to his office after spending several frenetic hours
ensuring the 700 computer were functioning after the summer storm that rolled in. The IPO
was set to happen in nearly twelve hours, and Chotikasathira wondered if the Thai
Government and other involved stakeholders were making the right decision. At this point it
was not a question of whether or not the IPO would occur, it was going to happen, but the
question in Chotikasathira’s mind was whether the IPO was the right move for PTT and the
country of Thailand. Would it be a success?
                                                                     Petroleum Authority of Thailand

Exhibit 1: Thailand Data Profile – Human Indicators

 Human Indicators
                                                            1997            2000          2001
 Population, total (in millions)                            59.4            60.7          61.2
 Population growth (annual %)                                0.7             0.8           0.8
 Life expectancy at birth (years)                           68.2            68.8          -----
 Fertility rate, total (births per woman)                    1.9             1.9          -----
 Mortality rate, infant (per 1,000 live births)             29.0            27.9          -----
 Urban Population (% of total)                              19.5            19.8          20.0
 Illiteracy rate, adult male (% of males 15+)                3.3             2.9           2.7
 Illiteracy rate, adult female (% of females                 7.3             6.1           5.9
Source: World Development Indicators database, April 2002

Exhibit 2: Thailand Data Profile – Economic Indicators

 Economic Indicators
                                                             1997           2000          2001
 GDP (current $, in billions)                                151.1          122.3         114.8
 GDP growth (annual %)                                        -1.4            4.7           1.8
 Inflation, GDP deflator (annual %)                            4.0            1.2           2.1
 Agriculture, value added (% of GDP)                          11.2           10.5          10.2
 Industry, value added (% of GDP)                             38.6           40.0          40.0
 Services, value added (% of GDP)                             50.2           49.5          49.8
 Exports of goods and services (% of GDP)                     47.8           67.0          68.9
 Imports of goods and services (% of GDP)                     46.4           58.9          63.6
 Current revenue, excluding grants (% of GDP)                 18.4           15.9         ------
 Overall budget balance, including grants
                                                             -2.1            -3.1         ------
 (% of GDP)
Source: World Development Indicators database, April 2002
                                                                    Petroleum Authority of Thailand

Exhibit 3: Thailand Data Profile – Trade Indicators

 Trade Indicators
                                                            1997          2000             2001
 Trade in goods as a share of GDP (%)                        79.6         107.2            -----
 Trade in goods as a share of goods GDP (%)                 159.7         211.4            -----
 Foreign direct investment, net flows in
                                                             3.9           3.4             -----
 reporting country (current US$ in billions)
 Present value of debt (current US$ in billions)            -----          76.6            -----
 Total debt service
                                                            15.5           16.3            -----
 (% of exports of goods and services)
 Short-term debt outstanding
                                                            37.8           14.9            -----
 (current US$ in billions)
 Aid per capita (current US$)                               10.5           10.6            -----
Source: World Development Indicators database, April 2002

Exhibit 4: Thailand’s Total Commercial Energy Consumption

                                                Percentage of Total Commercial Energy
                    Total Commercial
                                                            Crude     Natural      Hydro
 Year                  Consumption             Coal
                                                             Oil       Gas         Electric
 1996                      1,121               15.6         61.1        20.3         3.0
 1997                      1,176               15.4         58.0        23.9         2.8
 1998                      1,090               13.6         56.1        28.0         2.3
 1999                      1,125               14.1         54.3        29.9         1.7
 2000                      1,155               13.4         50.2        33.7         2.7
Source: NEPO Journal, Volume 51, January – March 2001
                                                            Petroleum Authority of Thailand

Exhibit 5: Sources for Electricity Generation in Thailand

                                Natural                  Coal
                      Total                Fuel Oil                 Hydro    Diesel   Electricity
                                 Gas                  (in GwH)
 Year                                                                                  and SPP
 1996                 87,797     35,453     20,985      17,507       7,241    4,572      2,039
 1997                 93,407     42,768     19,267      18,924       7,109    2,441      2,898
 1998                 91,160     46, 238    17,535      16,475       5,104     989       4,819
 1999                 92,473     47,111     15,431      15,419       3,444     457      10,610
 2000                 98,469     53,855      9,613      15,852       5,917     108      13,123
 Six months ended
                      51,951     31,767     1,480       8,574        3,311     34       6,785
 June 30, 2001
Source: NEPO
                                  Petroleum Authority of Thailand

Exhibit 6: PTT Pipeline Network
                                    Petroleum Authority of Thailand

Exhibit 7: PTT Natural Gas Supply
                                                                                Petroleum Authority of Thailand

Exhibit 8: Number of Service Stations in Thailand as of December 31, 2000

                                          Number of         Market
                                       Service Stations Share (%)
PTT                                               1,519              9.9
Bangchak                                          1,102              7.2
Shell                                               744              4.8
Esso                                                713              4.6
Caltex                                              531              3.4
Other(1)                                         10,789            70.1
                                 Total           15,407             100
    Other service stations include independent operators and other dealers
Source: Thailand Ministry of Commerce

Exhibit 9: Thailand’s Petroleum Reserve Balances

                              Natural Gas                     Crude Oil                 Condensate
                                     Probable &                    Probable &                Probable &
                          Proven        Possible         Proven     Possible        Proven     Possible
  Year                   Reserves      Reserves         Reserves    Reserves       Reserves   Reserves
                                  (Bcf)                       (MMbbls)                   (MMbbls)
  1998                    14,825         23,835           147           316          242          384
  1999                    12,168         17,327           156           241          213          327
  2000                    12,705         21,000           272           447          244          458

  Source: DMR Annual Report 1998 -2000

Exhibit 10: Top Producing Operators in Thailand

Company                                             Production                      Sales
                                                (MMcf)       (%)             (MMcf)       (%)
Unocal                                          4,089,600      57.30           384,756      57.28
PTTEP                                             200,580      28.10           191,938      28.57
Cheveron                                           56,315        7.90           52,793        7.86
Esso                                               26,076        3.70           26,062        3.88
Thai Shell                                         21,557        3.00           16,154        2.40
                                       Total      713,128         100          671,703         100

Source: DMR Annual Report 2000
                                                                Petroleum Authority of Thailand

Exhibit 11: Thailand’s Ethylene Production, Import, Export and Domestic

            Year             Prodcution   Import      Export   Consumption
                                               (in KTA)
            1995                  432      170           --        602
            1996                  633      145           3         775
            1997                  978       47           7        1,018
            1998                 1,104      60           9        1,155
            1999                 1,478       6          203       1,281
            2000                 1,832      --          388       1,444

            Year             Prodcution   Import      Export   Consumption
                                               (in KTA)
            1995                  178      185          --         363
            1996                  293      117          6           4
            1997                  586       59          7          638
            1998                  692      165          2          855
            1999                  881       76          44         913
            2000                 1,083      34          69        1,048

Source: DMR Annual Report 2000

Exhibit 12: PTT Organization Structure
                                               Petroleum Authority of Thailand

Exhibit 13: PTT Value Chain

Exhibit 14:Actual vs. Contracted Myanmar Gas
                                                                            Petroleum Authority of Thailand

Exhibit 15: PTTEP’s Active Projects

                                                                                                      Proposed 2001
                                                 Partners                       Number of    Appraisal&
                                                                   Working                                    Development
  Project         Location       Operator     Working Interest                  Production   Exploration
                                                                    Interest                                     Wells
                                                   (%)                            Wells        Wells
 In Production
              Southern Gulf of
 Bongkot                          PTTEP        Total Thai, BG        44.4          142           --                   18
              Southern Gulf of    Unocal         Unocal Thai
 Unocal III                                                           5.0          376           1                    60
                 Thailand          Thai           MOECO
    S-1                          Thai Shell       Thai Shell         25.0          108           6                    29
 PTTEP-1      Central Thailand    PTTEPI             ----            100           11            1                    --
    E-5                             Esso            Esso             20.0           7            --                   --
                                               Total Myanmar,
              Gulf of Moattama     Total
  Yadana                                      Unocal Myanmare,       25.5          12            --                   --
                (Myanmar)        Mayunmar
                                              Premier, Petronas,
  Yetagun     Gulf of Moattama    Premier        Nippon Oil,         14.2           6            --                   --
                                                Unocal Thai,
              Southern Gulf of    Unocal
   Pailin                                      Amerada Hess,         45.0          86            7                    24
                 Thailand          Thai

 Under Exploration
 JDA (B17,     Northern Mala      Carigali-
                                                  Petronas           50.0           --           --                   --
   C19)            Basin          PTTEPI
              Southern Gulf of                 Unocal Thai,
   Arthit                         PTTEP                              80.0           --           10                   --
                 Thailand                        MOECO
                                              Unocal Vietnam,
 Block B &                        Unocal
                   Vietnam                    MOECO Vietnam,         10.0           --           1                    --
   48/95                          Vietnam
                                               Petro Vietnam
                                                Unocal SW,
  B 52/97          Vietnam       Unocal SW                           10.0           --           3                    --
                                               MOECO SW
  W 7/38         Andaman Sea                     Kerr McGee          15.0           --           --                   --
Source: PTTEP
                                                                                                  Petroleum Authority of Thailand

Exhibit 16: PTT Consolidated Balance Sheet
                                                                      30-Jun-01           31-Dec-00             31-Dec-99             31-Dec-98
                                                                     (Unaudited)           (Audited)
                                                                      Unit: Baht          Unit: Baht            Unit: Baht            Unit: Baht
Current Assets
Cash on hand and at banks                                             25,584,412,998     22,372,776,997       17,558,574,510          7,841,283,423
Short-term investments                                                   914,604,340      1,054,450,181          881,525,545            327,000,000
Accounts receivable-trade and notes receivable, net                   34,102,750,869     32,876,785,968       24,312,059,426         18,560,717,795
Amounts due from, advances and short-term loans to related parties    22,919,876,915     24,320,623,918       20,725,604,727         13,444,133,608
Invetories                                                            10,186,956,162      8,269,588,253        7,959,820,649          4,420,825,511
Materials and supplies, net                                            1,640,094,437      1,403,170,459        1,385,161,876            819,554,413
Other current assets                                                  19,811,934,579     13,191,985,615        8,173,856,418          4,578,286,509
      Total Current Assets                                           115,160,630,300    103,489,381,391       80,996,603,151         49,991,801,259
Deferred income Taxes                                                    622,081,199        642,098,581          599,238,880
Advances and Loans to Related Parties                                  4,817,778,676      3,777,106,997        1,572,154,855
Investments in Subsidiaries, Associates and Others                    11,800,617,031     13,087,816,266       10,694,179,447         32,397,827,210
Property, Plant and Equipment, Net                                   100,872,961,403    101,611,078,248       99,213,656,724         60,465,151,128
Intangible Assets                                                      3,503,653,664      2,866,020,318        2,624,270,161          3,348,478,473
Advance Payment for Gas Purchased                                     25,598,816,056     10,727,017,624        1,524,194,806    -
Other Assets                                                             678,811,813        417,884,176        2,416,401,064             86,652,270
      Total Assets                                                   263,055,350,142    236,618,403,601      199,640,699,088        146,289,910,340

Liability and Owner's Equity
Current Liabilities
Bank overdraft and loands from banks                                               0        366,380,064        1,965,391,285          1,411,505,193
Accounts payable - trade                                              20,852,640,601     19,258,669,229       12,072,691,891          7,642,114,486
Amounts due to related parties                                         5,006,644,937      6,664,885,126        4,711,203,461          3,328,454,847
Current portion of long-term loans                                     8,942,730,232     10,027,632,392        9,264,287,898          6,778,122,967
Current portion of long-term liabilities from finance leases              56,164,300         35,912,782            1,869,858
Current portion of bonds                                               4,000,000,000                  0
Income tax payable                                                     2,278,229,780      3,622,740,751        1,932,307,759
Accrued appropriation to the Ministry of Finance                       6,819,796,806      4,884,003,812        2,867,597,618          6,649,000,000
Accrued expenses                                                       7,686,471,771      7,530,380,749        5,448,972,251          3,072,960,756
Other current Liabilites                                               8,119,326,621      4,182,187,298        2,656,432,409          2,480,815,835
      Total Current Liabilities                                       63,762,005,048     56,572,792,203       40,920,754,430         31,362,974,084
Deferred Income Taxes                                                  6,001,481,955      5,501,212,094        5,140,699,538                      0
Long-term Loans                                                      121,647,698,452    108,019,993,107       90,800,441,761         65,918,680,071
Finance Lease Liabilities                                                167,227,760        126,003,160           29,993,733             14,892,151
Bonds                                                                 17,833,905,936     21,077,433,192       18,822,924,006
Share of Net Loss Over Investments                                    10,405,543,042     10,174,050,488       18,081,027,186
Deposits on LPG Cylinders                                              2,842,423,712      2,728,235,863        2,456,326,962          2,243,392,185
Other Liabilities                                                      1,828,126,629      1,802,851,320        1,989,393,345             70,376,958
Pension Fund                                                               5,810,440          8,876,820            8,347,780              7,357,610
      Total Liabilities                                              224,494,222,974    206,011,448,247      178,249,908,741         99,617,673,059

Owner's equity
Capital contribution from the Government                               3,291,286,981      3,291,286,981        3,291,286,981          3,291,286,981
Surplus from contributions                                             1,633,297,070      1,633,457,182          973,907,782            866,475,028
Share premium                                                          9,303,288,282      9,303,288,282        9,580,026,634                      0
Ratained earnings
   General reserve                                                       121,713,790        121,713,790          121,713,790            121,713,790
   Reserve for expansion                                              29,283,618,489     29,283,618,489       29,283,618,489         29,283,618,489
   Reserve for Self-Insurance Fund                                       627,698,563        600,639,957          508,969,836            508,969,836
  Unappropriated                                                     (15,956,785,055)   (22,350,094,698)     (29,173,792,832)        13,267,656,925
Unrealized losses from investment in available-for-sale securities      (110,400,000)      (139,200,000)        (145,600,000)                     0
Deferred foreign exchange losses                                                                                                       (667,483,768)
Losses from foreign currency translation                                 (47,723,926)       (47,073,297)         (28,733,664)
Equity before minority interests in subsiciaries                      28,145,994,194     21,697,636,686       14,411,397,016         46,672,237,281
Minority interests in subsidiaries                                    10,415,132,974      8,909,318,668        6,979,393,331                      0
Total Owner's Equity                                                  38,561,127,168     30,606,955,354       21,390,790,347         46,672,237,281
Total Liabilities and Owner's Equity                                 263,055,350,142    236,618,403,601      199,640,699,088        146,289,910,340
                                                                                                               Petroleum Authority of Thailand

Exhibit 17: PTT Consolidated Income Statement

                                                                                       2001*               2000                1999              1998
Sales                                                                               187,828,893,782    157,139,530,121    228,617,105,852    212,769,245,014
Other Income                                                                          2,895,068,977      1,973,154,024      4,388,800,025     10,000,240,140
Gains (Losses) on Exchange rate                                                         771,042,465       (553,958,462)
Share of net income of subsidiaries
Total Revenue                                                                       191,495,005,224    158,558,725,683    233,005,905,877    222,769,485,154

Cost of sales                                                                       158,032,067,920    133,216,817,278    193,411,582,685    193,314,130,576
Selling and Administrative expense                                                    5,040,933,368      3,441,246,998      9,329,509,736      6,798,708,648
Exploration expenses                                                                     79,242,101        152,884,193        189,011,341
Depreciation and amortization                                                         4,119,127,648      3,673,082,406      6,655,191,975      3,998,126,454
Impairment losses                                                                        44,000,000                  0      1,404,978,544
Losses on disposal of investments                                                                                                       0
Loss on withdrawal from joint ventures                                                                                                  0
Interest expenses                                                                     5,177,242,620      4,010,062,880      6,973,728,376      5,301,928,268
Losses on foreign exchange                                                                                                  3,651,431,145      1,110,553,444
Income taxes                                                                          2,799,879,969      2,090,384,724      2,237,154,158
Share of net loss of associates                                                         653,810,443        234,366,010     13,693,005,409
Total Expenses                                                                      175,946,304,069    146,818,844,489    237,545,593,369    210,523,447,390
Net income before amortization of deferred foreign exchange losses                                                                            12,246,037,764
Less Amortization of deferred foreign exchange losses                                                                                            667,483,768
Income before minority interests                                                     15,548,701,155     11,739,881,194     (4,539,687,492)    11,578,553,996
Income of minority interests in subsidiaries                                         (2,269,332,306)      (793,929,086)    (1,840,950,688)                 0
                                                                       Net income    13,279,368,849     10,945,952,108     (6,380,638,180)    11,578,553,996

*PTT statements of income 6 month period from Jan 1 to June 30, 2001 (in Baht)
                                                                                                                           Petroleum Authority of Thailand

Exhibit 18: PTT Consolidated Statement of Cash Flows
                                                                                                      2001               2000               1999                    1998
                                                              Cashflow from Operating activities
Net income                                                                                         13,279,368,249     10,945,952,108      (6,380,638,180)       11,578,553,996
Adjustment to reconcile net income to net cash provided by (used in) operating activities
Depreciation, depletion, and amortization                                                           4,294,332,993      3,881,736,284      7,300,977,229          4,693,054,222
Impairment losses                                                                                      44,000,000                  0      1,404,978,544     -
Losses on disposal of assets                                                                              196,272            301,770     (1,254,935,670)            16,817,763
Adjustment to write off assets                                                                          2,201,165          6,539,148         17,190,648             51,935,114
Obsolescence of material and supplies                                                                           0            114,212         26,161,343
Share of net (income) loss of subsidiaries and associates                                             653,810,443        234,366,010     13,693,005,409
Income of minority interests in subsidiaries                                                        2,269,332,306        793,929,086      1,840,950,688
Losses on disposal of investments
Loss on withdrawal from joint ventures
Contribution to reserve for Pension Fund                                                                                                                           (49,602,123)
Losses on foreign exchange                                                                            199,717,281        798,419,482      3,608,504,733          1,351,006,265
Bad debt expenses                                                                                   1,090,198,316        101,225,753      1,406,938,977            150,740,696
Recovery from bad debts                                                                               (31,909,778)       (27,996,375)       (21,851,756)           (48,974,795)
Amortization of exploration cost                                                                       12,403,485        119,330,312        119,234,523
Amortization of bond and share issue expenses                                                           8,476,353         36,552,351         72,513,406
Amortization of bond discount                                                                             554,424            554,424          1,108,849
Deferred income taxes                                                                                 520,289,086        140,624,818        301,380,094
Amortization of deferred interests from financial lease                                                11,151,260          1,801,392          3,401,771
Dividend income                                                                                       (30,432,000)       (27,200,000)       (20,600,000)
Adjustment for leasehold rights                                                                          (244,480)        (2,400,000)                 0
Adjustment of directors' fee                                                                                    0            110,400            195,600                189,300
Adjustment to capitalize interest expenses as construction in progress                                                                                             237,416,810
Adjustment for insurance premium paid in advance                                                                                                                    (1,357,134)
Gain on sale of investment                                                                                                                                      (5,992,028,188)
Net income from operating activities before change in operating assets and liabilities             22,323,445,375     17,003,961,175     22,118,516,208         11,987,751,926
Gain on sale of investment
Changes in Operating assets and liabilities
(increase) decreasein accounts receivable - trade and notes receivable                              (1,299,227,379)      395,058,176      (6,773,706,857)         8,448,796,158
(increase) decrease in amounts due from, advances and short-term loans to related parties                4,972,092    (3,602,820,475)     (7,329,040,440)        (1,432,587,196)
(increase) decrease in inventories                                                                  (1,917,367,908)    1,279,720,520      (3,489,056,975)         1,720,085,672
(increase) decrease in materials and supplies                                                         (204,958,658)       13,821,626         164,487,261            (24,946,443)
(increase) decrease in other current assets                                                            (32,724,638)       37,230,451         434,742,708            161,244,667
(increase) decrease in prepaid expenses                                                                (30,145,533)       40,070,228        (172,275,236)           (16,590,887)
Increase in advance payment for gas purchased                                                      (14,871,798,432)                0      (1,526,228,720)   -
Increase in accrued income                                                                          (3,069,165,997)     (417,383,623)     (2,492,099,182)           442,409,958
Increase in other accounts receivable                                                               (4,641,879,991)   (8,860,909,017)       (124,654,387)        (1,165,875,792)
Increase in advance payment for related parties                                                     (1,231,888,396)                0
Increase in other assets                                                                              (270,129,146)       (9,051,418)     (2,097,917,013)          132,364,822
Decrease in income tax payable                                                                      (1,344,510,971)      (39,729,883)        489,491,401
Increase in accrued appropriation to the Ministry of Finance                                           105,792,994        96,065,519          45,597,618
Increase in accounts payable - trade                                                                 1,682,782,276     2,673,865,137       3,730,492,632         (3,415,097,874)
Increase (decrease) in amounts due to related parties                                               (1,058,764,749)      315,113,279       2,050,121,953         (3,473,797,609)
Increase (decrease) in accrued expenses                                                                226,283,872       141,363,039         302,585,701           (482,224,217)
Increase (decrease) in other current liabilities                                                       163,374,158        66,610,257        (148,415,425)          (364,565,413)
Increase in deposits of LPG cylinders                                                                  114,187,849       111,244,165         212,934,777            117,216,658
Increase (decrease) in Pension Fund                                                                     (3,066,380)          529,040             990,170    -
Increase in other accounts payable                                                                   4,936,415,413     9,153,074,361        (451,059,544)          198,945,383
Increase (decrease) in other liabilities                                                                25,275,309     2,196,547,029       1,529,462,324            15,827,826
Prior year appropriation to the Ministry of Finance                                                 (5,029,000,000)   (1,000,000,000)     (6,650,000,000)       (2,048,584,960)
Net cash provided by (used in) operating activities                                                 (5,422,098,840)   19,594,379,586        (175,031,026)       10,800,372,679

                                                             Cash flow from investing activities
Cash received from disposal of assets                                                                    2,121,003            473,201          3,869,664              4,430,631
Payment of property, plant, and equipment                                                           (4,221,432,471)    (5,052,677,869)    (9,777,483,591)        (9,488,989,373)
Payment of intangible assets                                                                           (94,553,549)       (95,207,521)      (417,167,317)          (231,397,141)
(increase) decrease in loan to related parties                                                         273,827,665        (67,831,957)      (568,046,878)
(Increase) decrease in investments in subsidiaries, associates, and others                             441,397,805    (10,399,054,637)    (3,938,508,250)          463,024,826
Cash refund from investments in other companies                                                         28,151,076          2,637,165          6,559,110            61,102,675
Increase in short-term investments                                                                     (10,154,158)       (15,002,769)      (554,525,545)           35,000,000
Cash received from sell of short-term investments                                                      150,000,000                  0
Dividend received                                                                                      618,432,000         27,200,000         20,600,000
Ner cash used in investing activities                                                               (2,812,210,629)   (15,599,464,387)   (15,224,702,807)        (9,156,828,382)

                                                           Cash flow from financing activities
Cash received from bond issue                                                                      19,000,000,000     10,000,000,000       4,000,000,000
Cash received from short-term loans                                                                   889,910,963        720,724,545      20,404,767,743        12,944,870,552
Cash received from long-term loans                                                                                                        13,774,644,166         3,930,000,000
Cash received from government bond issue . .                                                                                              11,800,000,000
Repayment of long-term loans                                                                        (3,573,991,227)    (2,526,186,432)    (1,523,434,125)        (3,652,313,015)
Repayment of bond                                                                                   (3,315,000,000)                 0     (5,221,000,000)
Repayment of short-term loans                                                                         (889,910,963)    (2,740,607,966)   (19,261,864,027)       (12,380,353,134)
Payment of finance lease liabilities                                                                   (29,646,181)        (5,473,311)        (9,171,023)            (2,373,229)
Increase (decrease) in bank overdraft                                                                 (366,380,064)       (40,732,982)      (493,792,506)           450,234,333
Dividend paid                                                                                         (759,856,536)       (42,509,875)      (301,663,650)
Bond issue expense                                                                                                                           (20,752,313)
Net cash provided by financing activities                                                          10,955,125,992      5,365,213,979      23,147,734,265         1,290,065,507
Effects from exchange rate in cash and cash equivalents                                               491,471,950        522,919,755         (41,332,702)
Losses from foreign currency translation                                                                 (652,472)        (7,074,571)         (1,547,598)

Net increase in cash and cash equivalents                                                           3,211,636,001      9,875,974,362      7,705,120,132          2,933,609,804
Cash and cash equivalents at beginning of the period                                               22,372,776,997     17,558,574,510      9,853,454,378          4,905,894,211
Effects of exchange rate changes                                                                                                                                     1,779,408
Cash and cash equivalents at end of the period                                                     25,584,412,998     27,434,548,872     17,558,574,510          7,841,283,423

Supplemental cash flow information
Cash paid during the year
Interest expenses                                                                                   4,850,596,275      4,488,954,217      8,215,703,221          6,342,563,279
Income taxes                                                                                        7,248,363,424      1,989,842,814      1,430,433,389

*PTT statements of cash flow 6 month period from Jan 1 to June 30, 2001 (in Baht)
                                                                                                Petroleum Authority of Thailand

  Information gathered from IMF website.
  From U.S. Energy Information Administration Working Document, April 1998.
  NEPC, National Energy Regulatory Commission, is the government agency primarily responsible for establishing and overseeing energy
policy in Thailand. NEPC resolutions are the definitive statement of the Government on energy policy.
   NEPO, National Energy Policy Organization, is the secretary office of the NEPC and responsible for studying and analyzing energy
   policies as well as implanting NEPC resolutions.

    MOI is responsible for regulating the petroleum industry in Thailand. Exploration and production of petroleum is based on concessions
    granted by the industry Minister and approved by the Cabinet.

    The MOF has the responsibility to monitor the financial condition and maintain the financial integrity of state enterprises.
    PTT Begins Pre-Marketing, Jackie Horne, Oct. 16, 2001,


Jay Bhutani and Oleg Lebedev, June 2002, PTT: High-Quality Assets and Double Digit Earnings Growth,
Lehman Brothers Global Equity Research

PTT Public Company, Analyst Briefing, June 2002

PTT Public Company Ltd. Preliminary Offering Circular, April 2002

Supavud Saicheua, March 2002, Thailand Strategy, Merrill Lynch Equity Research

Wanikpun, Traviati, and Adrian Loh, June 2002, PTT Public Company Limited; Compelling Valuation With
Improving Outlook, Merrill Lynch Equity Research

Website References

EIU website (country reports)

Financial Times website

International Monetary Fund website

World Bank Website

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