The Refining Margin is the revenue of the producer or the refinery. It is ascertain from the difference between the averaged Ex-Refinery Prices of every product in respect to their yield ratio, and the crude oil cost (Ex-Refinery Prices refers to wholesales price of products excluding taxes and various fund levies). The aforementioned Refining Margin is the Gross Refining Margin. As for the refining margin of each petroleum products, they would be assessed from the Gross Refining Margin that has been segregated into each product’s individual refining margin in accordance with their yield proportion and their respective Ex-Refinery Price during each period.
The Refinery Transfer Price is defined as the price that refineries offers product to oil wholesalers, it encompasses production cost, with the addition of Excise Tax, Municipal Tax, and Value Added Tax. Furthermore, various government fund levies are also included, i.e. the Oil Fund, the Energy Conservation Promotion Fund. Therefore the Refinery Transfer Price = production cost + various taxes + various fund levies.
Crude oil is transported into the refinery with 3 main methods of transportation utilizing, oil trucks trains, and seafaring oil tankers. Domestic sources utilize the 3 mentioned methods. Whereas imported crude oil is brought in via oil tankers to be discharged at the Sri Racha depot, which the company has leased to store crude oil, to which said crude oil is transported to the BCP refinery Chao Phraya river jetties with the use of smaller oil tankers.
The 3E project or the Efficiency, Energy, and Environment Improvement Project is set to increase the efficiency and capacity of Bangchak refinery, the project comprises of these three following components:
- Co-Gen Power Plant with a 12 MW capacity, dedicated to stabilizing the refinery’s electrical system, acting as replacement for the boiler which was the refinery’s previous source of electricity. As well as serving to lower the refinery’s dependency on electricity from the Metropolitan Electric Authority, through the use of cutting edge technology and employs Natural Gas as production fuel, which is environmental friendly. This project was completed in 2017.
- Installation of the Continuous Catalyst Regeneration Unit (CCR) is the installation of a production unit that will increase the octane of Benzene products which can run constantly, replacing the previous unit. Of which would be beneficial to production efficiency, yielding large portions of high octane Benzene (Reformate yield) increases compared to the previous unit’s yield, and power consumption will also decline.
- Hydrocracking Unit (HCU) Revamping flexibility, expanding production capacity by 10%. The project is expected to be completed in 2020
BCP has a system in place to manage environmental and safety concerns which adheres to ISO14001/ISO50001 and OHSAS18001, respectively. BCP operates with utmost consideration for safety and environmental implications. The company has measures in place to oversee detrimental risks associated with the refinery e.g. strictly adhering to related laws, assessing risks and initiate risk minimizing measures for every operation procedures, maintaining production equipment according to schedule, and hold drills for related personnel to nurture expertise in handling emergency situations, to name a few. This also extends to examining and monitoring the environment, and disclosing information pertaining to the quality of the environment to the public through the screen emplaced in front of the refinery and within communities.
Furthermore, in order to prosper with nearby communities, and being beneficial to society, the company hosts continuous community-relation events e.g. annual assessment of the community demands and its relationship the company, provide community liaison officers to fraternize with the members of the community on location, hold seminars with local community committees/ confer with the educational institution committee/ joint meeting with agricultural cooperative committees. As well as having multichannel communication to receive complaints, via both a hotline and public relation boards.
Due to Singapore being the epicenter of oil trading in the Far East. The price in Singapore is calculated from the agreement to buy and sell between buyers and sellers, both domestic and international. It is believe to be able to reflect the volume and demand of oil within the region accurately. Exports and imports (excess production quantity and demand for oil) between different countries within the region affects the change in price of the Singapore market. The amount of finished product that is bought and sold through the Singapore market will remain high, similar to other major markets; making it difficult for price manipulation between buyers and sellers to occur.
Oil price volatility directly affects businesses that are related oil e.g. the refinery, and marketing business.
As for the refinery, under circumstances where oil price adjusted up, this turn of event would affect the price of the oil stock, leading to the booking of increase in profit from inventory gain in the company financial statement. On the contrary, if the oil price adjusted downwards, the opposite effect (or the inventory loss) will be booked. However, actual performance of the refinery depends more on the spread between crude oil and finished product.
In terms of the marketing business, if the price were to adjust downward, this has positive effects; service station prices generally adjust slower than the declining cost, thus leading to more positive inclination of the marketing margin, so forth
The company’s policy in regards to crude oil and finished product spread hedging is to secure a hedge position of 30 percent of the total production amount. However, increasing and decreasing the hedging position depends on conducive market conditions. Such variations in position must receive an approval from a governing committee that has the company’s chief executive officer sitting as committee chair, and the meetings are constantly being held to decide upon the risk hedging positions for the company to take. As well as, to closely track the result of each executed hedging position.
Currently, the BCP refinery is capable of producing Gasoline Base complying with the Euro 5 standards. However, the ability to produce Diesel products that is in line with the Euro 5 standards can be partially fulfilled. In order to produce the full range Euro 5 Diesel, the refinery would have to invest in augmenting and installing a Gasoil Hydrodesulfurization Unit. It has been estimated that it would take 4 to 5 years to design and construct the unit; assessed to be able to comply with the government’s request for cooperation (estimated to be completed by 2023)