Thai Oil Plc (TOP), the country's biggest oil refiner in terms of capacity, is expected to open bidding in the second quarter for an engineering, procurement and construction firm (EPC) to upgrade its existing refinery and oversee expanded capacity.
The upgrade and expansion are worth a combined US$3.7 billion (136.4 billion baht), said president and chief executive Atikom Terbsiri.
The project is named Clean Fuel Products, which aims to switch from refining heavy oil with low margins to producing more higher-margin products, including diesel and jet fuel.
Thai Oil further plans to gradually cut production of low-margin heavy oil like bunker oil, which currently accounts for 7% of total production.
According to the plan, Thai Oil will increase its refining capacity to 400,000 barrels a day, up from 275,000. The expanded capacity will require expansion of its refinery area in Sri Racha by an additional 200 rai.
The new oil refinery unit is set to cut operating costs sharply, while helping increase the crude premium to be in the range of $3-4 a barrel.
All documents for the international tender are due to be finalised and approved by the company's executive board by March, said Mr Atikom.
Last year, London-based Amec Foster Wheeler won Thai Oil's front-end engineering design contract.
Once the bidding process wraps up, the winning EPC will begin work this year. Commercial operations are expected to start in 2021-22.
"The capital expenditure for our oil refinery revamp constitutes our largest budget since 1995, when Thai Oil expanded capacity from 175,000 barrels a day to 275,000," he said.
As a result, the company's two ageing crude distillation units will be replaced with upgraded ones.
The upgraded refinery units will allow Thai Oil to source crude from many different sources instead of buying crude from a single source, helping it generate better margins, said Mr Atikom.
Half the total investment budget for the project -- 60 billion baht -- will come from cash on hand, while the rest will come from banks loans and debenture issuance.
Last week, Thai Oil announced that this year's capital expenditure of 6 billion baht had primarily been earmarked for capacity expansion of its crude oil tanks, jetties and oil truck loading system. Other funds have been allocated for the development of new offices at its refinery complex in Sri Racha, Chon Buri province.
TOP shares closed yesterday on the Stock Exchange of Thailand at 72.25 baht, down one baht, in trade worth 235.6 million baht.
