Part 1

Executive Summary

1. Summary of Business Nature

PTTEP conducts its core business in petroleum exploration, development
and production. As of 31 December 2006, PTTEP has 11 petroleum
exploration and production projects currently under production out of a
total of 34 projects and 4 additional investment projects as mentioned
in item 2.2.1 and 2.3.

In 2006, PTTEP and its subsidiaries averagely sold 169,348 barrels of
oil equivalent per day (BOED) of crude oil, natural gas, LPG and
condensate, about 10.30% higher than in the previous year. Annual sales
revenue amounted to 86,339 million Baht, a 30% increase from 2005.

PTTEP’s policy is to supply its products from both domestic and overseas
sources primarily to Thai domestic market. In fact, at present, only
Oman 44 Project disposes of natural gas to an overseas market.

In 2006, PTTEP entered into two gas sales agreements (GSAs), first with
Ratchaburi Energy Co., Ltd., for the associated gas from the oil
production at Pratu Tao-A; the other was an amendment to the Yadana
Export GSA to increase the daily contractual quantity (DCQ) to 565
MMSCFD. In 2006, PTTEP also launched gas production and sale from Phu
Horm Project.

PTTEP sells condensate and crude oil on long-term contracts, short-term
contracts, or on the spot market. In 2006, two projects entered into
condensate and crude oil sales agreements, Phu Horm for condensate and
Oman 44 for crude oil.

In Thailand, competition among petroleum producers is generally mild, as
the market is typically secured through long-term sales contracts.
Moreover, demand for petroleum products still exceeds indigenous supply,
which holds advantages over imports thanks to its lower transportation
costs and tax privileges. For overseas projects, PTTEP conducts market
studies in countries of interest in advance to justify each investment.
For instance, the oil derived from Oman 44 Project is in high demand
from refineries in Thailand and Asia.

2. Summary of Major Risk

2.1 Technical and Core Capability

2.1.1 Investment Risks

Because the investment decision making is based of risk and return, the
Company has to develop the risk mitigation measures designed for each
investment to minimize risk into an acceptable level.

2.  Exploration Risks

Those risks resulted from subsurface uncertainties. The Geoscientist
competency improvement and the availability of sufficient data and
detailed geological analyses could reduce this uncertainty and
exploration risks to acceptable levels.

3.  Project Development Risks

Risk that resulted from project delay and cost overrun can be mitigated
by improving project management plan and process.

4.  Production Risks

The production risks result from disruptions caused by ageing production
equipment and from operation errors. To prevent such risks, the Company
pays great attention to production platform designs, production systems,
and production control and preventive maintenance, work procedures,
operation manuals, and training program.

5.  Commercial Risks

Commercial risks resulted from the revenue from natural gas that relies
mainly on the single customer on the domestic market. As a result, PTTEP
has expanded its investments in overseas exploration and production
projects, in particular those with crude oil potential, to increase its
oil reserves and diversify any risk of excessive dependence on natural
gas and to develop long-term gas sales agreements (GSAs) with PTT to
guarantee income over 25-30 years.

6.  Organization Capability Risks

Personnel and business processes are the keys to any organization’s
success. The Company has developed risk mitigation plan focusing on
corporate value, manpower planning, and business processes.

2.2 INHERENT RISKS

2.2.1 Political Risks in Other Countries

Most of the focusing countries inherited substantial political risks,
therefore PTTEP appointed a geopolitical risk team to monitor all these
factors and periodically analyze their developments.

2.2.2 Safety, Security, Health, and Environmental Risks

PTTEP has drawn up a clear policy on safety, security, health, and
environment with a commitment to strict compliance with governing laws
and regulations, or even exceeding them. Work processes are managed and
continually improved and regularly assesses its safety management
systems by third parties to mitigate potential impacts and losses
resulting from accidents.

2.2.3 Litigation Risks

Since non-compliance is illegal and directly causes all forms of damage,
all Directors, management, and employees are responsible for audits,
control, and strict compliance with all related laws and regulations,
and for keeping all parties informed of new and upcoming regulations.
Besides legal regulation risks, there exist risks arising from
contractual matters, ranging from contract drafting, contract
obligation, to contract management. These risks can be mitigated at the
negotiation stage, which calls for knowledgeable and competent personnel
attached to related units

2.3 FINANCIAL RISKS

  2.3.1 Price Volatility

Fluctuations in world oil prices affect revenue and investment planning.
The mechanism found in gas sales agreements (GSAs), will cushion gas
prices from oil price volatility.

2.3.2 Exchange Rate Fluctuations

The pricing of such petroleum sales is linked to the global oil price
denominated in USD. At the same time, part of the Company’s capital and
operating expenditures, including its debt obligations, are also in USD.
The foreign exchange rate fluctuations will effect the company’s revenue
and expenditure structures, therefore the Company has to prudently
manage the fluctuation.

2.3.3 Interest Rate Fluctuations

At present, all of PTTEP’s debts have fixed interest rates, therefore,
the volatility in interest rates will not effect the Company’s interest
obligations. However, a change in interest rate will lead to a higher or
lower cost of borrowings in the future, depending on the market
condition.

3. Summary of PTTEP Group’s Structure

PTTEP sets up structuring policy for PTTEP group companies with the aim
of utmost effectiveness of resource management, a transparent
management, strong long-term business strategy and good corporate
governance. On December 31, 2006, PTTEP invested the total of 25
companies, comprising 19 subsidiary companies and 6 associated companies
as presented in the shareholding structure in item 2.2.3.

4. Summary of Connected Transaction

4.1 Regular commercial items

(1) The petroleum products about 82.82 % amounted Baht 71,510.28 million
were sold to PTT Public Company Limited or PTT.

(2) The advance discount payment amounted Baht 330.69 million was
deducted from sales revenue.

(3) The up-front payment amounted Baht 145.64 million was amortized.

4.2 Property lease

(1) The office space was leased to PTT and the Aromatics (Thailand)
Public Company Limited amounted Baht 18,660,384 and Baht 2,721,276
respectively.

(2) The land of 2.72 Rai was leased from PTT amounted of Baht 616,965.

4.3 Service Agreement

The PTTEP Board of Directors passed the resolution for PTTEP to sign the
service agreement with PTT ICT Solution Company Limited to provide all
information and communication technology services for a 5-year term,
starting from July 1, 2006. Total service charge for PTTEP will be
approximately Baht 702 million.

5.  Summary of Financial Position and Operation Result

    5.1 Financial position

As of December 31, 2006, PTTEP and its subsidiaries had total assets of
Baht 157,813 million, or Baht 14,496 million (10%) higher than at the
end of 2005. This increase was mainly due to an increase in oil and gas
properties of Baht 22,281 million, mainly from the higher investment in
the Arthit, Oman 44, S1, Pailin, Vietnam9-2, Vietnam 16-1, MTJDA and
Myanmar M7&M9 projects.

PTTEP and its subsidiaries had total liabilities of Baht 69,288 million,
which were lower than at the end of 2005 by Baht 2,332 million, mainly
resulting from bond repayment amounting to Baht 8,259 million. However,
there was additional revision of provisional decommissioning liability
amounting to Baht 3,693 million and the higher accrued expenses of Baht
2,236 million.

PTTEP and its subsidiaries had total shareholder’s equity of Baht 88,524
million, which were higher than at the end of 2005 by Baht 16,827
million or 23%.

In addition, on April 12, 2006 PTTEP amended its par value from 5 Baht
to 1 Baht per share in accordance with the resolution of the 2006
General Shareholders Meeting. The adjustment of the Company’s par value
resulted in an increase in its ordinary shares from 664,400,000 shares
to 3,322,000,000 shares

5.2 Results of Operations

For the results of operations for the year 2006, PTTEP and its
subsidiaries’ net profit was Baht 28,047 million or Baht 8.53 per
share-diluted, an increase of Baht 4,312 million or 18% when compared
with the year 2005 net profit of Baht 23,735 million or Baht 7.24 per
share-diluted. Return on shareholders’ equity for this year was 35.01%

For the year 2006, total revenues of PTTEP and its subsidiaries amounted
to Baht 91,723 million, an increase of Baht 22,140 million or 32% when
compared with Baht 69,583 million for the previous year. This increase
was mainly due to an increase in sales of petroleum of Baht 19,981 or
30%, resulting from the higher average petroleum sales price to USD
36.52 per BOE when compared with last year at USD 29.37 per BOE and
sales volume increased to 169,348 BOED when compared with the last year
(153,531 BOED). The higher sales volume derived mainly from the crude
oil sales volume from the B8/32 & 9A and S1 projects and the natural gas
sales volume from the Pailin, Bongkot and Yadana projects.

PTTEP and its subsidiaries incurred expenses for this year amounting to
Baht 40,937 million, an increase of Baht 13,083 million or 47% when
compared with Baht 27,854 million last year.

For more detail of financial position and result of operation please see
section 12. Financial position and Result of Operation.

6.  Any facts that are critical for the business operation and may
    significantly affect the shareholders’ benefits.

None

7.  Summary of PTTEP Securities

PTTEP amended its par value from 5 baht to 1 baht per share on April 12,
2006 in accordance with the 2006 General Shareholders Meeting’s
resolution. The adjustment of the Company’s par value resulted in an
increase in its ordinary shares from 664,400,000 shares to 3,322,000,000
shares. Currently, PTTEP has its registered share of Baht 3,322 million
consists of 3,322 million ordinary shares at the par value of 1 Baht per
share. The Company’s registered paid-up capital was at Baht 3,286
million which was increased from the year 2005 by Baht 11.34 million
(11.34 million shares at Baht 1 each), from the exercise of warrants to
purchase the Company’s common shares by the management and employees
according to the 2002-2005 Employee Stock Ownership Plan or ESOP.

In Referring to the 5-year Employees Stock Ownership Plan (2002-2006) or
ESOP, the PTTEP’s General Shareholders’ Meeting consented to issue and
offer the total of 12,400,000 units of warrants to its directors (only
ESOP for the year 2002), management and employee. At the end of 2006, a
total of 5,200,400 units of warrants had been exercised.

As reported on the SET website as of January 22, 2007, the Company’s
common shares of NVDRs issued and outstanding amounted to 59,581,026
shares or 1.81% of total registered paid-up shares, which amounted to
3,286,002,000 shares. The NVDR holders will not participate and vote in
shareholder’s meeting, except in the case where a listed company wishes
to delist its shares from the SET.