PTTEP axes four Cayman subsidiaries

PTT Exploration and Production Plc (PTTEP), Thailand's sole publicly listed explorer, has shut down four subsidiaries registered in the Cayman Islands after public comments that their establishment was intended to avoid tax payments.

President and chief executive Tevin Vongvanich said yesterday the company closed down the four Cayman subsidiaries, set up for exploration businesses in Egypt, New Zealand, Iran and Bahrain, after oil and gas resources have not been discovered in these countries.

Ten more subsidiaries in the Cayman Islands will also be shut down because they are not viable, said Mr Tevin.

"After acquiring assets overseas, PTTEP normally sets up a subsidiary to manage the assets. If any projects prove unviable, we will shut down the subsidiaries in charge of those assets," he said.

Over the past decade PTTEP has expanded its business to over 10 countries, including the Oil Sands project in Canada, Mozambique's Rovuma petroleum fields and Cash and Maple fields in Australia.

The explorer, which is 65% owned by national oil and gas conglomerate PTT, issued a statement yesterday to assure the public its subsidiaries in the Cayman Islands comply with laws in Thailand and other countries, and that the intention of the subsidiary is not tax evasion.

Of the 30 companies PTT Group established in the Caymans, only one is a subsidiary of PTT, with the majority belonging to PTTEP.

"Companies are not established in the Caymans for money laundering or tax avoidance, but rather for flexibility in operations and investment as well as lowering risk. The Cayman Islands have laws about setting up and shutting down companies, and raising or reducing registered capital is not complicated while management costs there are low," said Mr Tevin.

Establishing overseas subsidiaries is a normal practise for international oil companies to manage assets in different countries. PTTEP has been transparent about releasing such information to the public, he added.

PTTEP has no bank accounts in the Caymans, said Mr Tevin. All bank accounts for its subsidiaries in the Caymans are with Thai banks or in other countries where these firms have operations. Every financial transaction made by the subsidiaries complies with the regulations of the Bank of Thailand or other central banks, he said.

The financial statements of its companies in the Caymans are approved by the Office of the Auditor-General of Thailand, except Taninthayi Pipeline Co LLC, in which PTTEP owns 19.32% and Ernst & Young is the auditor, added Mr Tevin.

"Our company is monitored and audited by the OAG, the Stock Exchange of Thailand and our shareholders. As a result, it is impossible for any corruption to occur," said Mr Tevin.

PTTEP informed the SET its Zawtika block in Myanmar has begun delivering natural gas to PTT Plc for use in Thailand starting on Aug 5.

The project began supplying gas for domestic use in Myanmar this March at a rate of 66 million cubic feet per day (MMCFD).

The subsidiary PTT International Co is the operator of the Zawtika block with 80% participation interest, while the 20% remainder belongs to Myanmar Oil and Gas Enterprise.

Zawtika, PTTEP's largest overseas offshore producing gas field, is ramping up its production to 240 MMCFD, which is the daily contract quantity stipulated in the gas sales agreement.

The Zawtika project is another important milestone for PTTEP in supplying natural gas to strengthen the energy security of both Thailand and Myanmar, said Mr Tevin.

PTTEP shares closed yesterday on the SET at 167.50 baht, up four baht, in trade worth 946 million baht.

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