11. Connected Transactions

1.  Connected Transactions in 2006

In 2006, some of the Company’s transactions qualified as items under the
Stock Exchange of Thailand (SET) announcement on disclosure of
information and operations of listed companies on connected transactions
B.E. 2546 (2003) and B.E. 2547 (2004) (Amendment No.2), enforced since
21 July 2004. In compliance with this announcement, the Board of
Directors or Company management, or both, considered the rationale,
suitability, and maximum benefit to the Company, including the
disclosure of these items, detailed below:

11.1.1 Regular commercial items endorsed by the Board of Directors or
the management

  (1) Petroleum product sales

According to the sales agreements, petroleum product sales between PTT
and PTTEP take place instantly upon production, and petroleum delivery
is covered for the life of each project.
In 2006, about 82.82% of its petroleum products were sold to PTT at the
same prices as those sold by its partners.

+-------------------------------------+---------------+---------------+
| Product                             | 2006          |               |
+-------------------------------------+---------------+---------------+
|                                     | Volume        | Value         |
|                                     |               |               |
|                                     |               | (million      |
|                                     |               | baht)         |
+-------------------------------------+---------------+---------------+
| Crude Oil (million barrels)         | 7.74          | 17,164.54     |
+-------------------------------------+---------------+---------------+
| Natural Gas (million cubic feet)    | 239,527.00    | 38,731.03     |
+-------------------------------------+---------------+---------------+
| LPG (metric tons)                   | 96,518.00     | 1,060.62      |
+-------------------------------------+---------------+---------------+
| Condensate (million barrels)        | 6.28          | 14,554.09     |
+-------------------------------------+---------------+---------------+

In addition, PTTEP and it’s joint venture partners (Sellers) and PTT
(Buyer) signed the Amendment Agreement to the Export Gas Sales Agreement
(EGSA) of the Yadana Project to increase the Daily Contract Quantity
(DCQ) from 525 million standard cubic feet per day (MMSCFD) to 565
MMSCFD (an average increase of 40 MMSCFD), effective from September 1,
2006

(2) Advance Discount Payment

On October 21, 2005, the Board agreed to provide the up-front payment of
Baht 1,500 million to PTT from the future gas price reduction to
subsidize the automatically adjusted formula for electricity fees rate
(Ft) in order to promote the government’s policy. However PTTEP will
recover the Net Present Value of the transaction at the price prior to
discount. In 2006, advance discount payment amounted Baht 330.69 million
was deducted from sales revenue.

(3) Up-front payment per Gas Sales Agreement – Bongkot Project

On July 13, 2005, the joint-venture partners of Bongkot Project signed
an amendment of Bongkot Gas Sales Agreement. The Development Area will
be expanded to cover the current total concession area of the Bongkot
Project, and PTT will purchase an additional gas volume of 61 billion
cubic feet during the period from April 1, 2005 to October 1, 2008.
PTTEP made an up-front payment to PTT of about Baht 444.45 million. In
2006, the up-front payment amounted Baht 145.64 million was amortized.

11.1.2 Property lease:

In 2003, PTTEP leased 2,800 square meters of office space and provided
related services to PTT under a three-year contract, effective from
August 15, 2003, to August 14, 2006. The extended Contract is in the
process. In 2004, an additional 201-square-meter office lease contract
was signed with PTT, and a 333-square-meter contract with The Aromatics
(Thailand) Plc (ATC). The lease term was also three years, starting from
October 1, 2004, and ending on September 30, 2007. PTT leased 2.72 Rai
of Land to PTTEP. In 2006, the rental was the amount of Baht 616,965.

The rental and service fee are considered reasonable when compare with
market price. The rent details appear below:

+----------------+--------------+-------------+-----------------------+
| Organization   | Affiliation  | Item        | 2006 Lease and        |
| / Company Name |              |             | Service Fee           |
|                |              |             |                       |
|                |              |             | (Baht)                |
+----------------+--------------+-------------+-----------------------+
| PTT            | PTT hold     | Office      | 18,660,384            |
|                | 66.10%       | Space Lease |                       |
|                | shares in    | and Service |                       |
|                | PTTEP        |             |                       |
+----------------+--------------+-------------+-----------------------+
| ATC            | PTT, the     | Office      | 2,721,276             |
|                | major        | Space Lease |                       |
|                | shareholder  | and Service |                       |
|                | of PTTEP,    |             |                       |
|                | hold 49.82   |             |                       |
|                | shares in    |             |                       |
|                | ATC          |             |                       |
+----------------+--------------+-------------+-----------------------+

11.1.3 Service Agreement with PTT ICT Solutions Company Limited

Reference is made to PTT ICT Solutions Company Limited (PTT ICT), a
subsidiary which PTTEP has a 20% participation interest. (PTT and PTT’ s
Affiliates, including ATC, PTT Chemical Public Company Limited, Thaioil
Public Company Limited, each hold 20% shares in PTT ICT) The PTTEP Board
of Directors, at Meeting No. 10/2549/254 on September 29, 2006, passed
the resolution for PTTEP to sign the service agreement with PTT ICT to
provide all information and communication technology services (ICT
Services) for the Company for a 5-year term, starting from July 1, 2006.
Total service charge for PTTEP portion will be approximately Baht 702
million.

11.2 The Procedure for Approving Connected Transactions

PTTEP’s Board considers all transactions involved with conflict of
interest, including related or connected transactions in compliance with
sound business ethics and meet the scrutiny of the Audit Committee, as
well as supervises to meet the criteria of SET and the Securities and
Exchange Commission. Information disclosure on potential conflicts must
be considered by the Board to ensure accurate and adequate disclosure.

PTTEP has clearly set up the policy on conflict of interest, covering
the procedures to report such conflicts, in order to ensure the Board
and employees strictly comply with the principles. In addition, for any
transactions in which directors, employees or related person could
derive personal benefit from entering into transaction with the company,
the Board and employees are not permitted to participate in the approval
of such transaction, and the price must be properly defined in a manner
consistent with that offered to general person.

11.3 Comments of the Audit Committee

PTTEP’s Audit Committee reviewed and determined that the decisions and
action taken by
the Board of Directors or the Management, or both, based on the
appropriateness and fairness of all connected transaction occurred in
2006

11.4 Future Connected Transactions

The future connected transactions will be conducted as part of the
normal course of business, with no special favors and no transfers of
benefits between PTTEP and its subsidiaries or any connected person.
PTTEP will strictly comply with the regulations of the Stock Exchange of
Thailand and other regulatory authorities related to connected
transactions based on the reasonableness, appropriateness and fairness,
and for the utmost benefit of all shareholders and stakeholders in
consistent with PTTEP good corporate governance policy.