Chief executive Tevin Vongvanich told a press conference yesterday the “ROIC” strategy, which stands for rationalisation, optimisation, integration and consolidation, included plans to divest non-core, underperforming and low-potential assets, further cost reductions, and consolidation of PTT’s business units.

Under the asset divestiture programme, PTT will divest its remaining oil-palm business, consider either divesting or investing more in its coal business, and sell its remaining 5-per-cent stake in SET-listed Star Petroleum Refining after the end of the one-year silent period required by the Stock Exchange of Thailand.

“PTT Exploration and Production is also keen to divest several assets,” he said.

Meanwhile, Tevin said PTT was also interesting in jointly investing with Russian state oil companies in exploration and production (E&P) activities, and in LNG (liquefied natural gas) production facilities in Russia.

The PTT chief executive had just came back yesterday from joining in the Thai government’s official visit to Moscow, led by Deputy Prime Ministers Prawit Wongsuwon and Somkid Jatusripitak, where he met with executives of two Russian state-owned oil and gas companies, Gazprom and Rosneft.

“It’s good timing now because they are also looking for partners who can offer them a market. We will study the possibilities and might be able to sign an MoU within the next two or three months,” he said.

Similar to the natural-gas deals made with Myanmar two decades ago, Tevin said PTT would now consider sealing long-term LNG contracts together with E&P investments, as a way to mitigate risks from the fluctuations of gas prices. If gas prices go up, it will gain from E&P but lose from LNG purchases; on the other hand, if gas prices come down, it will gain less from E&P but benefit from LNG.

He said PTT now believed there was little chance of oil prices making a quick rebound and thus had developed two additional scenarios: a “slow recovery” case in which prices average $35 a barrel this year, and the “worst case” where they stay at $20 for two years.

“In the worst case, we will certainly be affected. But we believe there will be other companies that fall before us. We won’t be among the first to fall,” he said.

Chief financial officer Wirat Uanarumit said PTT was now operating under the most likely scenario that oil prices would averaged about $40 a barrel this year, and that it was likely to make a higher profit this year, since no additional impairment cost was expected.

The energy conglomerate booked Bt54.7 billion in impairment charges on its 2015 account, Bt32.57 billion of which came from PTT Exploration and Production, Bt19.43 billion from its coal business, Bt1.46 billion from its oil-palm business in Indonesia, and Bt1.24 billion from PTT Global Chemical’s biochemical investment in the United States.

On the back of the 47-per-cent slide by crude-oil prices last year, PTT Group booked a 66-per-cent drop in net profit, due to the huge impairment losses. Nevertheless, the group’s operating profit decreased by only 15 per cent, and sales revenue dropped by only 22 per cent, thank to its integrated oil and gas businesses.