VINACHEM

SINGAPORE (ICIS)--Thailand’s state-run PTT is most likely to merge its subsidiaries PTT Chemical (PTTCH) and PTT Aromatics and Refining (PTTAR) as part of a first-phase to consolidate its petrochemical and refinery businesses, industry analysts said on Tuesday.

The energy firm was expected to complete a group consolidation study in the first quarter of 2011 to determine “which pair would be merged first”, said a company spokesperson, citing a recent announcement by PTT president and CEO Prasert Bunsumpun.

“The merged company will emerge by the third quarter this year,” the spokesperson told ICIS.

The proposed consolidation could involve three companies that have operations in in Rayong province, where the Mab Ta Phut industrial estate is located, Bunsumpun was quoted as saying by local media reports on 10 January. He did not name the three firms, the reports said.

PTT affiliates PTTCH, PTTAR and IRPC all have operations in Rayong.

IRPC, which operates the largest integrated complex in southeast Asia, runs a refinery and cracker outside the estate - 30km from PTTAR. PTTAR is the leading producer of paraxylene (PX) in southeast Asia.

PTT was expected to choose two of the three to be merged in the first phase, Bunsumpun said in the reports.

“It is now clear that the two companies would be PTT and PTTAR as IRPC has been removed from the picture due to legal matters,” said Naphat Chantaraserekul, an analyst at brokerage house DBS Vickers Securities in Bangkok.

Outstanding lawsuits lodged by Prachai Leophairatana, the founder of Thai Petrochemical Industry, which PTT took over in a debt restructuring and renamed IRPC, has not been fully resolved, according to Chantaraserekul.

“They do not want the legal liabilities to linger in the new company as they want to compete head to head with Petronas Chemical [Group],” he added.

Thai Oil, another PTT affiliate that was previously announced to be part of the group’s consolidation plans, was also excluded as its refinery is located outside Rayong, said Sutthichai Kumworachai, an analyst with brokerage house KGI Securities.

PTT holds a 36% stake in IRPC and 49% stake each in PTTCH, PTTAR and Thai Oil.

A potential merger between PTTCH and PTTAR, however, would provide limited synergy between the two sides in the short term as they already exchange products with each other in Mab Ta Phut, noted Chantaraserekul.