President of IRPC Public Company Limited
Thailand's energy sector is one of the biggest contributors to the growth of their economy. Sukrit Surabotsopon, President of IRPC Public Company Limited, discusses energy sustainability, energy security, and Thailand’s integration into ASEAN.
FDI Spotlight: What has been your long term development strategy?
When I first joined IRPC it was almost two years ago and at the time the company didn’t make any profit. Crude oil was more than 100$ a barrel and our refineries were not run very efficiently. This created very high operating costs which ate up our profits. Myself and our management researched how and where to invest to fix this and come up with two projects. The first project, called Phoneix, invested 65 billion baht over the next 5 years to help bring the company into profitability. PTT group, which we are a subsidiary of, helped to find the funding and loans to make this possible. Our second project was focused more at the operational side rather than financial.
IRPC implemented the second project, called Delta, which consisted of three dimensions. We used various consultants to help us improve our operations, commercial aspects, and human resources. As this company was initially family owned, the human resources system was not strong as it should have been. We wanted to get it up to an international standard similar to the PTT Group. Once this project was completed last year, our margins increased by 2 billion baht and we plan to increase our margin by another 4 billion baht this year. My goal is to improve the internal performance and lead the company into profitability. These two projects will make IRPC very strong in the future.
FDI Spotlight: How will IRPC be seen within the ASEAN economic community? What is your ultimate objective?
Our vision is to be the leading integrated petrochemical refinery in the region. The uniqueness of IRPC is that we produce all kinds of petrochemical products where as others do not. I also have a plan to improve the energy efficiency so that when the price of oil increases, we will be ready for it.
FDI Spotlight: What is your outlook when it comes to sustainability of the energy sector?
We put in a lot of effort into improving the environment. Since we are located very near the city center of Rayong, it means we have to be more concerned with the environment as there are many people living near us. Before PTT group took over IRPC, there were a lot of environmental complaints in the past. People used to protest in front of the company which drove us to reduce emissions and improve the overall energy efficiency of the company. For example, we replaced oil fuel power pants with gas powered power plants. We keep track of complaints from the surrounding community and they have significantly dropped over the last few years. IRPC has also joined a program called the Eco Industrial Zone and comply with all of their requirements. The goal of our plant is to be run 365 days a year with zero environmental impacts and so far our entire 6000 rai complex has been covered with environmental protection.
FDI Spotlight: In your opinion how would you rate Thailand’s energy security level? Are you overly still relying on foreign energy and is that a concern for you?
My opinion is that Thailand is in a good situation compared to other nearby countries since we only import about 50% of our energy. We are still behind Malaysia, Singapore and Indonesia. In terms of energy security, I believe we don’t have a problem since we are a net exporter of the finished product and import only raw materials. The main concern is that we rely too much on gas. Thailand does not accept the use of coal, due to environmental standards, which is the cheapest form of energy creation. Coal technology has changed a lot over time and has got rid of a lot of the environmental problems associated with it. We call it clean coal power plants. Our teams have been sent to Japan and Germany to see how the plants work efficiently, but it is still not accepted by the people of Thailand.
FDI Spotlight: Do you consider diversification of resources important?
Coal will be necessary in the future since we will eventually use up all of our oil. Whoever can use it earlier will get the advantage. For example, China uses a lot of coal which is why they have such cheap utility costs. This is the reason industries move manufacturing into China and acquire a financial advantage from that. If Thailand’s utility and labor cost are too high it will not attract foreign investments.
FDI Spotlight: Do you believe Thailand is prepared for ASEAN?
My personal opinion is that the country that is more advanced in manufacturing will get the advantage. Thailand is among those countries because we are a net manufacturing exporter already and have a strong industry. Thailand has over 50 years’ experience in the refinery industry, 30 years in the petrochemical industry, and produce all kinds of products. Thailand is in the center of the automotive industry and are ready to expand outside of the country. The AEC will help, but we have to invest in the right countries so their economies will grow and provide a larger market for our products. We are ready since we have money, know how, technology, operational experience, and are ready to move up.
FDI Spotlight: Overall, do you believe Thailand is producing the human capital and necessary graduates to take the next step up the manufacturing value chain?
The current graduates are no problem, but we lack vocational students. People tend to go to university, instead of learning a trade, to try and make more money. The manufacturing market in Thailand is very saturated, especially petrochemical, already exporting 50% of the products created. If this expands any further, there will be no safety advantage as it will already all be exported. Our plan is to invest in other countries where there is a local market support with cheap labor costs to gain a competitive advantage. PTT Group has made a big investment in Vietnam called the Victory project. We partnered with Aramco and plan to build the world’s first fully integrated petrochemical refinery to sell to the domestic market. In terms of engineering, Thai people will be used at the beginning of the project, but near the end local people will be recruited to run the plant and Thailand will then benefit from the low cost labor. If you ask me, in terms of man power, we don’t have a problem.
FDI Spotlight: Do you think that this launch of the AEC has acted as a catalyst to build the confidence of Thai business and create a more outward looking mindset compared to its inward mindset of the past?
It did help but it varied from industry to industry. With petrochemical, we can transport to other countries and the tax is still very low except for some countries that still impose an import tax. In Vietnam for example, they still have an import tax to protect their own refineries since they do not produce enough oil to serve the whole country. If a new facility is built and has to compete with countries like Singapore that have a very low operating cost, they will fail. They need some sort of protection and the government still supports this. The AEC will cover food and agricultural products etc. but currently not oil. There is a plan to free this up when all of the countries are prepared.
The AEC stimulates the thinking of the people that are ready, people who have money and facilities already set up in Thailand. It is becoming harder and harder to grow business in Thailand, especially with export products. They are looking for the location to create a competitive advantage for their business. When companies realize that they have no competitive advantage or cheap labor costs in Thailand, compared to 20 years ago, they only have two options; Either they stop operations or move to another country where labor costs are cheaper, such as Indonesia. But for companies that want to be competitive, they must move towards specialty items and away from commodities. For example, in petrochemical when we say we want to invest outside of Thailand, we must move towards specialty products when selling in Thailand so that we do not compete with other Thai companies.
FDI Spotlight: What message of confidence would you send to the readers about Thailand to highlight to the world?
I would say that Thailand is ready! Ready to be one of the leading countries in Asia. We are ready and we have strong geographic location. We have to support nearby countries to grow their economies so that we can grow together. The AEC will not mean anything if we still think with the border. People will just do the same as before. When one country grows it consumes more products which benefits everyone in the region. Free flow of goods, capital labor, products, and investment will benefit everyone in the AEC.