President of Bangchak Petroleum Public Company Limited
Thailand is seen by many as the “Blueprint and Gateway for ASEAN”. Mr. Chaiwat Kovavisarach, President of Bangchak Petroleum Public Company Limited, discusses Bangchak’s history, the energy climate in Thailand, and the relationship between education and the private sector.
FDI Spotlight: For the benefit of the Newsweek readers, how would you describe your current strategy and your current philosophy when it comes to taking Bangchak forward?
Bangchak went public 30 years ago and were the first start up for this refinery. The first five years we focused on refineries before starting marketing by partnering with farmers and trading rice for oil. It was and is still apparent that a lot of farm cooperatives across the country have trouble selling their product. By supplying them with oil, it helps them to sell their product. This was the birth of our corporate social responsibility and around the time when we first started to invest in marketing.
Up until 1997 the company was very healthy until the Asian crisis hit. In 2002 I managed to turn the company around by restructuring the financials and focusing more on green energies. Bangchak have been one of the first companies to introduce low sulphur diesel and the first to introduce Europe four, which are a more environmentally friendly gasoline mixes. We strive to be as carbon neutral as possible and also plan to aggressively expand into renewable energies such as a bio-fuel plants and solar farms. 500 more megawatts of solar energy are required for us to become carbon neutral. Becoming a long term sustainable company that works closely with people and communities is our goal.
Currently, we are working on a few green energy projects including geothermal, which I feel is a forgotten renewable energy.
Geothermal is very good in terms of sustainability along with providing a very reasonable return as well. We have 12 gigga-watts installed across the world. My plan is that if we find the necessary megawatts in three to four years, due to the AEC, we should expand further than just Thailand and become more of a regional green energy company rather than only a Thai oil refinery. Energy security is important not only to Thailand, but also to Bangchak.
Back in the 70s having a refinery was enough to increase the level of energy security in the country but we know today that crude oil resources are probably more important. We have expanded into the Philippines through an Australian listed company to explore opportunities there. We will use that as a platform and will grow that as well to increase the level of energy security in this country.
The last strategy I employ at Bangchak is to help Thai communities and work closer with agricultural cooperatives. We are thinking that since we have about 650 service stations with cooperatives along with 450 full service stations, rather than only focusing on oil products, which now contributes to about 95% of the cross profit, we should expand more into non-oil products using all of our distribution channels. We are developing some non-oil product models where we will focus more on health products. Interlink garden has just been launched which is geared towards the organic lifestyle. For example, the coffee served will be organic and even the cup will be biodegradable. It costs more money but it is sustainable.
In Thailand, I believe that people rely too much on what we call micro based food. This is unhealthy, processed food that is stored in a fridge and quickly heated to eat. This needs to change and this is why we are creating an area where customers can have healthy, freshly cooked food at an affordable price. It was just launched two weeks ago and it was quite successful. Once it is fully integrated into our stores we can have local cooperatives supply us with organic food like veggies, fruits and other groceries.
FDI Spotlight: How high would you say is the level of awareness in Thailand, at the government level and business level, when it comes to the importance of focusing on sustainability, and the level of education when it comes to green energy?
I think Thailand always places an emphasis on renewable energies. This is not only a challenge in Thailand but the whole world is also facing the challenge of switching from fossil fuels to renewable energies. Since the oil price has dropped so drastically, it is discouraging the switch from fossil fuels to renewable energy. Regardless of its financial situation, Bangchack will always hold onto its philosophy of growing sustainably. The reason that solar power farms took off in Thailand is because we have a very attractive climate for it, both financially and geographically.
A power generating solar farm will get an extra eight baht per unit compared to a conventional power plant due to government subsidies. Bangchak has more than 1,500 megawatts installed at the moment for solar farms. To take it forward, solar will probably be less likely to be lucrative in terms of return, but based on the fee that is being introduced by the Ministry of Energy, it is still reasonable. In terms of biomass and bio gas, we are working with the cooperatives to figure out a deal. All of the farmers can use the material they have grown to generate energy by burning it. Ideally we are trying to trade them oil, then they can have a profit sharing of the gas sold, and in return, take some of the organic food to be distributed by our convenience stores. We want to work with them to build solar farms as well, using smaller panels that are one megawatt each. I think that the government’s 25% renewable energy target is challenging, but achievable. If oil prices increased, it would speed up the process of, not only Thailand, but also the world becoming more sustainable.
FDI Spotlight: How confident are you that the various stakeholders in the Thai energy sector are working together in order to ensure energy security for Thailand? How confident would you be speaking to a foreign investor that is asking you this question; will the energy security be there?
I understand that your question has two parts to it; one is the power supply and the other is the upstream, whether that is gas or oil. I see the AEC in 10 years’ time a little bit like the EU where you have a power grid across the region. In the EU, France is basically the main power supply to Europe since they have a lot of nuclear power plants. Other countries are banning nuclear power plants, so everyone gets their power from France. Something similar to this example may happen with the AEC. The fact that Thailand seems to be the heart of this region will be a big benefit for us. To be successful with this, Thailand will need to produce a sustainable amount of power.
Power Demand Procurement is a report where the Ministry of Energy and EGAT discusses how much power Thailand needs to create in order to meet the demand. In the latest report I believe that about 15% of the power to be consumed in Thailand will be supplied from neighbouring countries. At the moment we import quite a fair bit of hydro power from Laos and also import power from Malaysia. When ASEAN is created, we will benefit the most.
The Electricity Generating Authority of Thailand and The Provincial Electricity Authority are now working on a smart grid. This will improve the efficiencies of power supplies across the country, since at the moment, the efficiency losses are huge. The other thing that I think is a missing link to become successful is a pipeline. In Europe, or in the developed world, you can see the pipeline system crisscross across the countries just like a railroad. We don’t have much of that here as everything is still being transported by trucks. This is not very efficient or environmentally friendly. Bangchak wants to look into building big power structures, especially pipelines to help with this. A pipeline would be very beneficial with the creation of the AEC to easily transport oil.
FDI Spotlight: Skills development in Thailand is tied very closely to how the education system and the private sector work together. Is this the model that the Thai private sector needs to take to build closer partnerships to actually produce the graduates that are needed?
With the proper environment and structures we can definitely improve potential Thais to be good leaders. I don’t know if we actually have all the necessary systems in place at the moment yet, but he government is working on it at the moment. This is not a huge issue, but what concerns me more is the labour skills here and of course the language. We don’t speak a lot of English and this needs to change if we want to become an international force.
There are a lot of university graduates in Thailand and the number continues to climb. Over the past 20 years, Thailand has opened roughly 20 universities in different provinces. We have a lot of Bachelor degree graduates but most of them have a degree in either social science or education, and that is not good for work. Vocational school graduates are needed to create technicians and Bangchak is addressing this issue. We give special grants to students to come and train here for three months. After this is completed they are assured that when they get their degree they can come and work here.
FDI Spotlight: I’d like to ask you what makes your proud to be Thai?
Thailand has changed a lot over the last 30 years, especially Bangkok. I grew up here about 35 years ago and almost the whole area was rice paddy fields. It is no longer the case, all the high rises are everywhere. We have come a long way and grown very quickly both economically and as a people.
Thai people are very talented people, but being Thai sometimes means they can be a bit shy. The fact that the majority of Thais can’t speak English holds them back. People here are not as disciplined when compared to other countries like Germany or Korea but there is a lot of creativity here. I believe that there needs to be a balance between the two and use both sides of the brain.