Q2 2019 PTT PCL Earnings Presentation (Thai)
Bangkok Jan 9, 2020 (Thomson StreetEvents) -- Edited Transcript of PTT PCL earnings conference call or presentation Friday, August 16, 2019 at 10:59:00am GMT
TEXT version of Transcript
* Arawadee Photisaro
PTT Public Company Limited - Senior EVP of Corporate Strategy
* Chansin Treenuchagron
PTT Public Company Limited - CEO, President, Secretary of the Board & Director
* Pannalin Mahawongtikul
PTT Public Company Limited - CFO
Pannalin Mahawongtikul, PTT Public Company Limited - CFO 
Before, let's start with key business drivers, oil prices Average Dubai prices for first half. It's still lower than last year, but on a Q-on-Q basis, the price is up by 6%, which is quite decent. For the higher price of crude in second half is due to the supply as OPEC and outside of OPEC partners still continue to cut down their production as a result of the agreement as well as the sanctions imposed upon Venezuela, and stricter sanctions on Iran imposed by the United States. So first half, the average price is down resulting from trade war and concerns over slowing global economy. Fuel oil price, which is reference price for the NG prices trade. Again, it reflected the same trend as Dubai. The average Q2 price, similarly, up by about 2%, but for the whole half is 2% higher. This has to do with the demand-supply situation for the first half of the year. For gas prices, the average pooled price in Q2 is slightly down. So 1% Q-on-Q from $7.3 per barrel to $7.2 per barrel. But looking at first half, the pooled gas is up by as much as 14%. So that sends pressure to gas business of PTT. For petrochemical spread. You -- if you look at the graph, it's still heading downwards. The trend is still pointing downwards for both aromatics and olefins due to shrinking demand and slowing economy on the U.S.-China trade war, and also supply -- new production online, particularly from China, resulting in petrochem facing pressure.
Now FX for first half, the baht appreciated by about THB 1.69 to dollar whereas half baht is weaker by about 0.48 satang. So both ways about THB 2, and we will see that profits from FX gain rather high during the first half of the year. But on Q-on-Q basis, actually, baht is appreciating for Q-on-Q. So -- and so FX gain is shown, but I reaffirm that for PTT Group, we prefer weaker baht as our margins, if baht is weak, we gain higher in baht terms. But for stronger baht, an FX gain will come from liabilities. So if baht is strong, it means that we have less liability. But overall, for PTT Group, we still prefer weak baht.
Now this slide is PTT consolidated performance. What we see is that income Q-on-Q is still higher, higher by about 4% on the basis of higher oil prices as well as in this Q, we recognized the revenue of GLOW full performance recognition. And so revenue is higher, whereas for 6 months, it is 1% higher, mainly on the basis of higher trade volumes for gas and higher performance of PTTEP, both volume and pricing, plus that and as well as consolidated GLOW, sending revenue higher in terms of EBITDA, both Q-on-Q and first half year-on-year. EBITDA is downwards, Q-on-Q down by about 8% despite the fact that gas performance has improved, I will explain later. EP also improved because of another factor. The Q1 2019, we have stock gain, but by Q2, a stock loss, it will -- it affected EBITDA both way quite effectively. And Q2, there is recognition of employees benefits for employees and that affected EBITDA as well. For first half, EBITDA is down by 19%. The most affected business is gas, as I explained earlier that petrochem price has gone downward, but the cost of gas is higher. And so margin of the separation plan has been reduced quite considerably. And at the same time, P&R business has slowed as a result of petrochem price as well as reduced GIM plus less stock gain and that has dragged down EBITDA quite significantly, that is 19%. For net income Q-on-Q is down by 12% at THB 25 billion, mainly due to stock loss, as I mentioned, and also higher depreciation after we consolidated GLOW. So we have to recognize the impairment, and EP itself had to pay higher tax as a result of higher performance. And EP has actually gained from FX and derivatives by about THB 6 billion, but still that doesn't help much in terms of Q-on-Q performance.
Now for first half, net income is also down by 21%, apart from the EBITDA reduction, stock loss, stock gain. We also found that depreciation is higher for EP as well as for GLOW because EP has taken GLOW. And so -- but the positive factors have to do with less tax burden compared with first half of last year, and the FX gain is higher. But still, that doesn't help to improve net income, and that's resulted in 20% less.
Well, for PTTEP, you may know that they have a good news by selling prices and the higher volume. So Q-on-Q, average selling price is higher by 4% from liquid prices and natural gases prices. But looking at first half, you would see that the average selling price is higher by 4%, mainly from the prices of natural gas, which is higher by 14%, but liquid is reduced by 7%. But because the proportion is on gas, which is 10%, so weighted price, average selling price is higher. For the volume, Q-on-Q is higher by 5%, and year-on-year is higher by about 10%. So their performance is getting better Q-on-Q. Net income is higher by 10%, both from operating net income from THB 327 million to THB 433 million. And for nonrecurring, it is better at THB 44 million.
For half year, recurring net income is increasing from $640 million to $763 million. For nonrecurring, it is on tug factor as first half last year, they have negative effect, and that's about THB 104 million. But for first half of this year, non-recurring is on a positive side and that's THB 64 million. So back and forth, because of decreasing income totaling in higher net income by 54%. PTT EBITDA breakdown by business showing our EBITDA here. Last year, oil is still with us. So it's still showing here.
Looking at the overview Q-on-Q, gas business, their performance is getting better. But looking at half year, performance of gas is decreasing. Starting from Q-on-Q, S&M, their performance is better by 27%, mainly from the increase in volume by 6%. And for the average selling price is higher linked to FO price minus 3 months, which is higher for the cost of gas is decreased by 1%. So that business is doing better by 27%. For transmission line, S&M is higher. But for transmission line, the pipeline, it's decreased by a little bit as the selling volume, even though it's higher, but also, they have higher expenses, mainly from the maintenance for the construction of the pipeline #4, and that is THB 235 million. So that's why it's reflected in lower performance by a little bit. For GSP, Q-on-Q is better from higher sales volume and also shorter period of shutdown days, while the average selling product prices is higher. Feed cost is higher just a little bit by 2% from USD 209 to USD 214. So when the pool price, #1 is higher, their cost is higher by 2%. For NGV, they have less loss by 20 -- by 12% from Q-on-Q. Right now, their loss is about THB 1 billion only, mainly from 3 things. The first one is that there is the adjustment of public prices. We lifted the price by THB 1 per liter from the 16 of May this year. So the average selling price is higher. And second of all, the feed cost is lower by 1% and also the decrease of selling volume by 4%. So we've -- they face a less loss. For others, mainly is our NG, NGD, and GL, EBITDA is higher by 5%. For NGD, EBITDA is higher by THB 94 million because of less cost and higher average selling price. PTTNGD is higher by THB 15 million. For oil EBITDA, it's decreased by 20% Q-on-Q, even though the gross margin is higher by 14% from THB 1.1 per liter to THB 1.25 per liter. But the volume -- selling volume is reduced by 4%, so oil EBITDA is decreased by 27%. Trading performance is decreased by 41% because of decreased selling volume by 3% to about 19 billion liter. And mainly it is because of higher condensate discounts, and performance of trading is reducing Q-on-Q. For first half, all is decreasing both for the oil gas & trading businesses to gas business. S&M, EBITDA decreased by 6% because of higher feed cost by 14% even though FO price is increased, but it is not up to the acceleration of the cost. And also, the sales volume is increased by 3%. For TM, EBITDA decreased by 8%, mainly from the TDC from EGAT, which is decreased because of the decommissioning of the power plant and also because of the higher expenses. And the construction of pipeline #3, which increased the expenses by about THB 200 million. They also use gas as a feed, and when the price of the gas is higher that results in a lower performance.
For GSP because of higher feed gas -- feed cost, GSP is affected quite a lot. And last year, petchem is quite good. So that's why the EBITDA of GSP is quite high. So when coming to this year, GSP is decreased quite a lot.
For NGV, loss is greater by 2%, mainly from the higher feed cost even though the volume is decreased.
Others -- I am sorry, trading for others, it is better by 10%, mainly from LNG. Committed volume is increased from 8.4 million to 10 million tons. And for PTTGL, EBITDA is higher by 10%. NGD EBITDA is decreased by THB 500 million because of higher feed costs, which is higher than the average selling price. For oil, EBITDA is decreased because of the higher stock loss. And first half of last year, it is stock gain. So that's why EBITDA of oil for the second -- for this first half is decreased from -- by 3% to about 13 billion liters. Because of LPG and aviation, some of the LPG is bought -- is buying from PTT, resulting in less sales in PTTOR.
For trading because of branches expansion of Amazon Café, trading EBITDA is decreased by 72% overall, mainly from condensate price, sale -- sold domestically. Condensate discount is greatly increased. Anyway, they still make some profit because there is the price formula, and trading would not face loss. And for the selling, our first half is increased by 4% to about 40 billion liters. So this is the EBITDA breakdown of PTT.
Now for P&R, we touched on it a while ago that petrochemical is on its downward trajectory affecting performance of aromatic and olefins and the refinery margin. If we look at GRM of refinery average Q1 and Q2, market GRM actually is on par, $2.44 per barrel. But if we take into account hedging and stock gains loss, it is higher, but not as high as in Q1. And so the account GRM of Q2 is still lower than that of Q1. Half year, likewise, market GRM, in fact, is lower than last year. Now when we combine it with hedging and stock gains loss, then accounting GRM would be higher. But it can still not match that of last year, and there is a gap of $3.41 per barrel, quite high. And that's why for net income, the performance of P&R has gone down quite considerably both Q-on-Q and year-on-year, so about more than 60% lower, so across the board in the whole group.
For coal business. In Q2, we used Newcastle as reference, and Q2 coal prices has gone down to $80 by 17%. Average selling price in Q2, it doesn't -- it's not down as much, only 3%, luckily, partly because we have fixed it in the contract. And that's why average price for Q2 has not reduced as much as the Newcastle reference. For cash costs, we can also reduce it by 5%, and that helped slightly. But looking at sales volume in Q2, it has gone down by 10%, partly because of shipment delay from June to July, resulting in Q2 volume down. So net income Q-on-Q in terms of operating net income is dented slightly from $10 million to $9 million, but in Q1, they happen to gain from tax rebate of $30 million. So looking at absolute figures, so it looks as if their performance is down by 7% or 8%. On year-on-year basis for first half, similarly, the Newcastle price is down by 15%, resulting in average price down by 17%, whereas cash costs is only slightly down by 2% from $54 to $53, volume is less by 9%. So it is predictable that operating net income of coal has gone down from $45 million to $19 million. But in the first half, they received tax return. But last year, it's paying tax. So back and forth, $45 million resulting in the net income. It looks as if the performance is up by 63%.
For GPSC, the performance has improved. Now they have consolidated GLOW, fully recognized in this quarter. So for sales volume, it is higher comparing between Q1, Q2 as well as first half. But if you look at average selling price, it -- for Q-on-Q, they are on par for year-on-year. It is slightly higher, but it ran into the feed costs. First half is higher from THB 263 million to THB 291 million. So that puts pressure on the feed costs for GPSC for plant used gas.
In any case, due to consolidation of GLOW, net income of GPSC is still shown to be higher by 21%. For waterfall for Q-on-Q, as I mentioned, net income is down by about 12%. If we don't account stock gains loans, net operating income is about 11% higher. By categories, we see the gross margins improved by about THB 6 billion for gas, for EP as well as consolidating GLOW as well as higher gross margins for oil. But stock loss, both ways, as I said, is to the tune of THB 9 billion. So -- and OpEx itself is higher to the tune of THB 2 billion as a result of the new Labor Protection Act by about THB 3 billion. And we absorbed OpEx of GLOW so that's become negative factor. So the pre-increase by 1.5%, again due to GLOW acquisition. The other income, 91% better because IRPC gained from the fine reached from the construction, so that's the positive factor. FX and derivatives also contribute as positive factor and due to appreciation of the baht, FX gain is up by about THB 6 billion. In addition to FX gain because in Q1, there is the commodities hedging loss and by Q2, the gain is about THB 3 billion. So all these combined, a positive factor for the performance improvement. In the final column, the interest, tax and other expenses that's negative factor by about THB 1 billion in total due to higher tax for PTTEP due to its improved performance as well as the adjustments of tax benefit because of the functional currency for PTTEP about THB 60 million, whereas NCI decreased by about THB 2 billion, resulting in net income in Q2 lower by 12% compared with Q1.
Now coming to financial position. Total asset of PTT increased by a little bit by 1% from THB 2.3 billion -- THB 2.3 trillion to THB 2.4 trillion. Asset, cash and ST investment is decreased in the cash flow statement. You would see that we pay quite a lot of expenditures in investment and financial activities. So cash on hand is decreased compared to the end of last year, while AR and other current assets also decreased, mainly from the less trade receivables and PTTEP also from the acquisition of businesses. And also, we got the fund back from the oil fund and the excise tax fund, that's about THB 6 billion. So it would decrease. Others non-current asset is higher, mainly from the intangible asset and recognition of intangible assets, acquisition of GLOW also. PP&E (sic) PNE is higher because of the recognition of GLOW, and that's about THB 75 billion. Also, it's the construction of PTT, like CFP and the construction of GC and also for the increasing investment of PTTEP. So PP&E (sic) PNE at the end of Q2 is higher.
Now to the liability side. Total liability is higher, breakdown to AP and other liabilities is higher by about THB 64 billion, mainly from the short-term loan of GPSC when they acquired GLOW. It's higher by THB 92 billion. Anyway, for the tax payable and other liabilities, it's resulting in decreasing AP and other liabilities. Interest-bearing debt for the short-term loan of GPSC, it is in this category, THB 9.2 billion is right here, resulting in higher interest-bearing debt. And in this category, we would also have the debt of GLOW, which we would have to absorb in our consolidated financial position, and that's about THB 36 billion.
And also for long-term debt of PTTEP, ThaiOil, GC and GPSC, and that's about THB 22 billion. We also repay some debt like PTT. We pay back about THB 26 billion. And also, we have some portion from PTTEP and other subsidiaries. So net interest-bearing debt is higher by THB 60 billion. To total equity is decreased even though the net income is about THB 55 billion, and that's because we paid the dividend, and that's about THB 34 billion. And PTTEP, they also revoked their bond by THB 50 billion. And also the decreasing FX by about THB 15 billion, resulting in the decreased total equity.
Net debt-to-EBITDA is higher. Net debt-to-equity is also higher, and that's because of the loan to acquire GLOW. So net debt is higher, while EBITDA and equity is decreased. So the ratio is increased by a little bit, but it's still lower than our threshold policy.
Our consolidated cash flow statement for the first half of the year, operating cash flow is at about THB 120 billion. Investing side, we paid about THB 63 billion. For the CapEx of the total group, that's THB 69 billion. Investment, this is the acquisition of GLOW by GPSC that's THB 75 billion. And also, the cash from current investments when it reaches its maturity, so it appears as current investment and also dividend and interest received by about THB 7 billion. So total, it's THB 63 billion.
For financing activities, we take a loan, we repay the loans. For the repayment of loans, that's THB 65 billion, interest paid THB 14 billion, dividend paid for the whole group THB 48 billion. We also have some -- take some more loans both -- by PTTEP, ThaiOil, IRPC, GPSC. So we have higher loans. So totaling, cash flow is minus by about THB 10 billion, but we have the beginning cash flow. So at the end of the cycle, we have cash on hand and ending cash at about THB 282 billion. Short-term investment, we also put some money for this category, but totally, we would have about THB 352 billion cash on hand.
Apologies for turning up late. Now I would like to invite Khun Arawadee, SEVP Corporate Strategy to talk about the outlook, what lies ahead.
Arawadee Photisaro, PTT Public Company Limited - Senior EVP of Corporate Strategy 
Good afternoon. Today, we are looking forward after having heard the performance of Q2 and first half. So what does the future hold for us? We just finished our strategic planning workshop group-wide last month. We also foresee that we need to take into account global outlook because for energy business, we have to look beyond ourselves and our own backyard. In terms of economic outlook, I'd say unless we all see very clear that GDP, 5 years down the road would stagnate or shrink. India remains healthy. China reduced to grow to the tune of 10% over the last decade. China's growth is slowing, 6% is good enough. Looking at Europe and North America, USA itself or Thai -- Thailand, they will hover around 3% to 4%. So decent growth can be seen within our neighborhood, the big markets of China, India with their own large, massive population, the 2 most populated countries in the world. So what is next? We look at 10 years' time frame. We look to 20 -- well from 2020, so what are the major economic issues? So will they go on like this or heading down the bottom, maybe they are listening differently? No one can tell because none of us is fortune teller. We cannot foretell the future. There remains some protracted risks, i.e., the trade wars, the 2 giants. Next year will Trump stay on? But if we look at policy wise, Trump can still win the hearts of a large chunk of American people, Americas first. And his populist policy is likely to remain. So we have to watch very closely the kind of leader like Trump and Chinese leadership. What will the impact of trade war is on the rest of the world, especially for a small country like us? We are definitely going to be affected. Europe itself having been together for 26 years, they are taking stock, and euro sceptics are on the rise. So major countries like Germany, Italy or even U.K. itself, they feel -- they start to be skeptical about the flow of refugees, and their voters are becoming more skeptical about having to carry the burden of smaller countries. And that's why euro skeptics have become more powerful as we can see it.
Now the oil situation, Saudi Arabia remains a prominent player, but it's still getting weaker due to slumping oil prices and other issues. OPEC itself is not as strongly galvanized as before in terms of keeping its influence in the world oil market. So that's the broad economic outlook. I try to focus on global issues as impacting energy.
When we chart the strategy, we take into account main global trends as well as such as urbanization, aging population, and global warming. The green trend back to demand-supply for energy. We are witnessing real energy transition due to the force of technology and the less and less use or role of fossil fuel. Fossil fuels are no longer the prominent player. The -- what is coming up strong is green and nature, renewables. Nuclear is out of picture for Thailand, but globally, they pay a lot of attention to clean energy. So that's very long-term outlook for nuclear. Fossil is here to stay even in 2035, would it be peak oil demand? It is moving downward, coal and oil, high CO2, they still remain. But growth will be on the lower side, whereas clean renewables, their growth is more robust. So that's the demand side. We have to look at what people demand as well.
Now on the supply side. Many major players, the darker sides to the right -- actually to the left, the U.S., they can produce themselves with surplus for export. They no longer have to import. Russia has large gas reserves, but they face the challenges of transport. To the Middle East, it is surrounded by hotspots such as Iraq, Iran, Libya. These countries are facing volatile domestic situations. And so, the way we read into it, the uncertainty of supply are caused by smaller countries. Whether bigger countries are doing well or not, if these -- if those countries have no problem, there will be surplus and dragging down oil price. But if uncertainties, volatility remain long-term, price will stay there, and the pushing factor would be the pressure from clean energy renewables. It will change the trend of pricing. We look at 4 big mega trends, the technology, clean energy, what do we see? There are 4 key words for trend, first, electrification. So that is the true energy for the future. In the past, when we talk energy, we think about oil, gas, coal. Electricity is more like downstream. But these days, electricity is the buzz word. The transport system, rail, everything, it has gone electric. Globally, they use less and less diesel. We -- in Thailand, we see more EVs, the Tuk-tuks, the rickshaws, motorbikes, they have gone electric as -- and consumers, we will no longer see liquids, oils, petrol stations. So electrification devices, we mainly depend on electricity. So that's new energy.
The second key word is decarbonization, nobody likes carbon emissions. So green is going to characterize shift of energy in the future. And third, decentralization. There are no longer large utilities. There will be more prosumers because we can supply, we can source from nature. Thanks to technologies -- enabling technologies. So smaller traders, community-based supply improved connectivity with the help of technology to make this happen. So many countries going forward -- actually, some countries have already implemented decentralization of energy. So no more dominant players in the market.
And finally, intelligence solutions, richer range, richer variety players, big utilities -- big players such as Shell started talking about solutions instead of talking investment in energy purchase. They are eyeing intelligent solutions. So these are trends for energy transition. How they are going to leverage? What they have in hand for the future? (foreign language).
And then coming back to PTT, we pay attention to 2 things as an organization even though PTT or other subsidiaries. We all agree that we should do something in order to have no regrets. First of all, we have to do digitalization. So we have to build our own culture and our own knowledge. So we have to make it happen, not only the culture, but knowledge. Everyone should understand well about this. And also, we have to pay more attention to result based approach. And third of all, we need organization transformation to be more agile. To cope with any dynamic and flexibility in the future because the transition might affect us in any aspect. So we have to get ourself well prepared. And PTT and all subsidiaries already started our start.
Now second of all, in the past, we have many other alternatives. But right now, there is no way out, only one solution in that for the development of our product and services, we need to use applied technology. So we have sustained competitive advantage by the upstream businesses, power plants. We would focus more on low carbon energy. Direction of our investment, we see that these will help us for a sustainable environment. We would also make sure that, overall, everything would be better like for GHG for example. And for downstream, we need to connect our group together, like strive on group optimization. The whole group must go together. And for the important strategy, which can be considered as national agenda or the global agenda, it should be GCG, circular economy and green business.
We have to reduce waste. What do we use and also, we have to focus more on green businesses. So this is our direction we would go. When applied with strategies, we go with 3P, people, planet and prosperity.
For people, we talk about digitalization. We have to adjust our core businesses. As an organization, traditional people should become hybrid and agile. So people organization should be agile. We might be starting from a small point, a small step, but in the future, it would be built upon. So we focus on at least 10 years span, 2023, we should see something concrete. Apart from us, we should join hands with others as well. So we cooperate with others also because an ecosystem is desirable, like to join hand with someone in Thailand and other countries, then we grow together. Like Thailand should be a hub of innovation and PTT, ourselves, we see that innovation can be -- help materialize with these EECi.
For planet side, some of the job was done in BAU. But right now, we start out in the national level business model. Should we achieve more towards a circular economy, we look into the working process and the products used. We change more and incorporate more into circular economy. For bio business, we invested in GC. We have bio complex. Greenhouse gas, to reduce greenhouse gas from our operations. We target that we can do better every time that we expand our production or to increase our volume. We should focus on the reduction of GHG to be more than 20% in the next 10 years.
Now what about our growth? We are talking about prosperity here. In order to grow, we should be strengthened from inside, optimization, productivity improvement, and to build business integrity to focus on transparency when working with all stakeholders.
LNG infrastructure is expanded. And for the PTT, we are now waiting for the approval for the expansion of our core businesses. We move towards high-value products, specialty products. We also would like to invest in social issues. CSR is one of the things. But right now, we would invest more for society. And that's Design Now. For Design Now, we are talking and seeking for the new business model, like for the business lifestyle, life science development, smart city, new energy. So we decide and prepare the budget for that already (foreign language).
In any case, for investment, the core consideration is disciplined investment, having spoken about Do Now, Design Now. For PTT itself, we are a state-owned enterprise. Its core mission that PTT sustains is to look after to ensure energy security and prepare to expand to neighboring countries. And if it's new business, it has to start at PTT. So we will be the leader, the spearhead. We also look at establishing new subsidiary. So natural gas, the focus remains on LNG infrastructure. PTT has strong LNG terminals, infrastructure, and it has excess capacity. It can function as a regional hub. For trading business, apart from Thailand, we have to look to go with the flow of the future. Looking U.S. -- towards U.S., Europe, and going forward, we may do trading in the U.S. as well along with other members of the group.
For new business strategy, as I said, the mother company remains the pioneer, the spearhead to work in new areas. We talked about smart city, rail business, logistics is something we are eyeing on, and it is something that can grow alongside smart city and the group's infrastructure. And third is something called PTT, it's -- we haven't gone out yet because we're not clear, but we want to strengthen ourselves so that we can accelerate and upscale in the future, working with our research arms, such as VISTEC and start ups in our network in order to develop and commercialize new businesses. If they grow in the future, it will work very well because new business development takes time.
Within our group, the direction will be along the line of what I've mentioned. Some of you may have already attended the session -- briefing session. For PTTEP, they are confident about the home base. They continue to work on their core strength that is Thailand and the neighborhood. For the Downstream, GC, IRPC, ThaiOil, the focus is on move forward from commodity to specialty products, and expanding its clean fuel repertoire and petrochemical base. When we talked about why oil is still there, in the future it will be the feed for petrochemical. For GPSC, we'll go renewables, for example, battery. They will work with other team members of PTT and OR will focus on retail nationwide and developing new brands within the region.
Now money-wise, 5 years down the road, these figures, we have sought board approval last year. But these are not modified or adjusted yet on the basis of new businesses. It's -- this is pretty much business as usual, infrastructure business, the acquisition of GLOW, everything. So all together about -- so this is something that PTT can control. In total, for the group, that doesn't count PTT for the next slide, minus PTT.
So 5 years, for the group, these are major contributors. The upstream, the -- we have to invest a lot in reserve. So that includes Murphy, Partex that we have already taken, including Bongkot Erawan preparation, parts of what we have provisioned for nearly THB 1 trillion. When we talk about investment direction, we have to provision the money and that is the 10 years' window. PTT's portfolio may have to be adjusted. In the past we talk about E&P, about -- taking about 50% -- 60%, that's quite sizable, but we are going to incline towards upstream. So that's a group picture. But now, the group picture will become more diversified, starting with resource-based sourcing reserve and then gas and power that we have to grow. This already includes -- this is what we are doing, including infrastructure. We will have to grow in this neighborhood, and P&R downstream remains visible. It will grow new energy and new businesses. Something we are not familiar with energy solution that will be about 13% share. And eventually, when we talk digitalization, improved productivity, that is inputting money in it. Smart meter devices, smart devices, and finally, we have to do social investment. So the PTT's portfolio is more diversified, albeit with greater clarity. So it will paint a picture for you 10 years from now where we are heading.
We look at the second half of the year, you would see what's positive and negative factors, but we have both of them, both positive and negative. In the U.S., they have the strong labor markets. But at a same time, there are some concerns with their trade war with China. They would like to impose more import tax. Even so, the policy is not clear, but it affects the markets. In that domestic market, the production in the U.S. is problematic and reducing. For China itself, likewise, they face the same problems. But China, they would also increase more tax for the imports from the U.S. as well. So both of them would be affected by these trade issues. To the euro zone, some factors are improving. They pay attention to renewable energy. The market is quite good. Energy-wise, they are quite independent from fossil fuel. But the market is not so much growing with uncertain political landscape like Brexit, euro skepticism. So euro is not so good, but they have some positive factors.
To Asian market, Japan, for the positive factors, they have more investment, more spending. They would build many things to accommodate Tokyo Olympics in 2020 to increase investors confidence. So they are doing construction for many things.
For India, right now, people change their attitudes towards India. People might think that they were not livable, but right now, there are many new markets and a lot of growth. Their GDP growth is quite good.
Now coming to Thailand. We already have our general election. And we believe that the government can boost the economy, they pay attention to the grassroots and community and PPP projects, like in core infrastructure. So with this continued economic policies, everything is quite positive.
Now coming to the oil price. For the first half of the year, the average price of Dubai is at about $65. It was better down a little bit. And what about in the future? We think they would be in this range. So it should be around $60 to $65 or $60 to $68 around. Well, probably $58 is too low. If there is -- nothing happened, it would keep the price at this level, around like $65. For the refinery or the cracking, each product has different figures. It's remained stable, but the cracking spread of each item, GRM, gross refinery margin of each products like MoGas, gas oil, fuel oil, it's not plummeting and some are picking up. For LNG and gas, the dotted line is getting better. At the end, second half of the year, it is getting better for gas.
To olefins, aromatics and polystyrene, which is the major products of PTT, petchem, the price would be -- remain the same because of the economic condition, but we believe that we can improve productivity even though the price is not so good, but because production costs of PTT would be better, resulting in higher margin, even the average selling price is downtrend.
For the guidance of 2019, PDP 2018 is already finalized. The cabinet already approved PDP 2018. And then for the power demand, if it is so, gas is another important factor. PDP of 2018 gas demand is the red bars, which is still better. So we are working out on gas plan to be finalized within this year, and PTT would be the leader working out on gas plan with the Ministry of Energy.
In quarter 4 of this year, we would have our shutdown of GSP by 1 week, but it doesn't affect much on our performance. For GC, we would have a planned shutdown at the end of the year. And it would take a little bit longer, and volume would be reduced by a little bit, but it might be a good opportunity because the average selling price is not so good. So shutdown might be a positive factor for us. But we would find the timing for the shutdown period. PTTEP acquired some businesses. We recognized some profit in Q4. ThaiOil would also have a major shutdown of its refinery in Q3 and also the shutdown of aromatics unit in Q3 as well. IRPC, it would have their COD, the Catalyst Cooler Phase III. And this would help in their productivity improvement for GPSC, COD CUP4 for expansion and a COD of Xayaburi, we invested several years in Xayaburi, that COD is in Q4.
So GPSC would recognize some profit. For NGV, we can lift the price 2 months ago by THB 1 per kg. So the discrepancies between the selling price is decreasing. And then in October, we would uplift the price by another THB 1. So NGV business, we would see lower loss, but because gas price in the past was higher. If the gas cost is reduced, then we would have lower loss in the future. Right now, the cost is higher than the selling price.
Chansin Treenuchagron, PTT Public Company Limited - CEO, President, Secretary of the Board & Director 
(foreign language). Thank you. I just take a couple of minutes to present the beginning part of the presentation, which has to do with the health and safety performance and process. Our only concern is the red one. One person working with our contractor had injury from an accident. Otherwise, we are fine. The next -- we received a lot of awards and recognition. We received the Asian Excellence Award, PTT, ThaiOil as well as the Best CFO prize, Best IR and the ESG prize, and EP also won the prize. So these are the recognition and awards that we are proud of. Institute of Directors also awarded PTTEP for company with market value more than THB 100 billion. We received the award. This is our seventh consecutive year. I thank you all of us for being part of these recognitions.
In the resource sector for the money and banking magazine, we received this award. And another award, which is very important for a big organization like ours. We may not be 100% perfect in every business process, but our efforts have been recognized by the National Anti-Corruption Commission. We received the first transparency award and within our group, EP, GC, IRPC. And we received the most popular choice that is the result of the survey among analysts. And we also -- we were also cited the best of the best last year. And business plus magazine awarded us top business strategies award, and the award from the 0 accident campaign as a result of 0 accident effort. So all 4 companies received these awards. So those were awards and recognitions.
Activity highlights in second quarter. Even though the last 6 months have been terrible time. If we look at the world, the conflict between U.S. and Venezuela, U.S. and Iran, U.S.-China, the trade war, Korea-Japan, a conflict starting to emerge, China and Hong Kong, all these issues impact tourism. They impact petrochemical product use and to the extent of slowing the global economic growth, resulting in surplus stock and affecting GIM of gasoline, gas oil, not good at all compared with the first half last year. Also affecting spread, product to feed. All of them don't look good at all compared with last year. 24 petrochemical -- out of 24 products, only 1 rose, the rest of them fell. So these are uncontrollable factors. But still, we have a lot of good news that we have adjusted our portfolio. NGV, the price rise is normal, but another price is we have to subsidize the public transport fleet. NGV has been an ongoing policy. When oil price rose, we had to do it in order to subsidize public transport, and it's good for the environment. Now we are gradually closing that gap, resulting in the gap remaining at only about THB 2 to THB 3 in terms of subsidizing the public transport fleet. And we have to work on techniques. We will not feed to outside the pipeline. We will seek more value-adding by optimizing on retailing. So that end, it is -- we are getting close to improved performance.
For PTTGE, we have divested. We have divested the last palm plantations, we already received the payment for it. For EP, we have completed -- well, actually, we are working on Partex -- actually, at the end of the year, we will see results coming in FID Mozambique completed, Murphy Oil acquisition completed, and the acquisition of Sinphuhorm project in the Northeast. IRPC Catalyst Cooler project done and dusted, lower sulfur fuel oil that will enable us to sell to international shippers for a shipment done. We have done and GPSC, we adjusted the port expanding. We don't do normal energy. We do electricity alongside the operations of industry estate. That's our competency area because we've been working in industry estates for long. We have done right offering, and our project in Lao PDR Nam Lik is already online. So those are highlights. And low lights, you heard about shutdown product to feed and shut down.
So what have we done for the future? We have been on the lookout for markets beyond China. We try to cut costs, and we try to divest unproductive assets. We divest some of them. And we try to resolve liabilities, lawsuits. So that's cost cutting. And some good news in terms of credit ratings as well. Shutdowns constitute low lights, and the cost of compensating from 300 days to 400 days, that's the cost of compliance with the new Labor Relations Act, but that's onetime cost.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]