12. Financial Position and Result of Operation

1.  Auditor and Significant Accounting Policies

    1.  Auditor

PTTEP has appointed Office of the Auditor General, as the external
auditor of the Company and its subsidiaries and the appointment has been
approved by the Office of Securities and Exchange Commission.  PTTEP and
its subsidiaries have always appointed the Office of The Auditor General
to serve as its independent auditor. There are no relationships or
conflicts of interest among the independent auditor, the Company and its
subsidiaries, the executives, the shareholders, or others related to
those parties.   It was also approved by the Annual General
Shareholders’ meeting with the audit fee of Baht 0.9 million which is
equal to the fee for the years 2007and 2006.

In addition, the Office of The Auditor General has serves as the
independent auditor for Company subsidiaries of 32 companies with an
audit fee for the year 2008 amounting to Baht 2.90 million. There was no
non-audit services fee for the previous year because no other services
were received from the independent auditor.

2.  Summary Auditors’ Report in the past 3 years

The auditor expressed clean opinion in the Auditors’ Report in the past
3 years and expressed the additional opinion that assets, liabilities
and expenses of the joint venture have not been audited by the Company’s
auditor; however they have been audited by the joint ventures’ auditors.

3.  Significant Accounting Policies

    1.  Basis for Preparation of Financial Statements

The Company and consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in Thailand
under the Accounting Act B.E. 2543 and
the interpretations and accounting guidance announced by the Federation
of Accounting Profession, as well as the financial reporting
requirements of the Securities and Exchange Commission under the
Securities and Exchange Act B.E. 2535.

The Group has adopted the International Accounting Standards (IAS) No.
12 “Income Taxes” and IAS No. 19 “Employee Benefits” which have not been
addressed by Thai Accounting Standard yet.

Where the Company has entered into joint interest operations with other
parties to participate in exploration, development and production of
petroleum businesses, the Company records its share of expenses, assets
and liabilities incurred in accordance with the Statement of
Expenditures prepared by the operator of the concession or the Petroleum
Sharing Contract. This Statement of Expenditure has been audited by
another independent auditor on an annual basis and by the joint venture
committee on a regular basis.

The Company and consolidated financial statements, including the
valuation of all financial items, have been prepared under the
historical cost convention except as disclosed in the accounting
policies below,

2.  Adoption of New and Revised Accounting Standards

    1.  In 2007, the Federation of Accounting Profession issued the
        Notification to adopt the new and revised Thai Accounting
        Standards as the replacement of the amended ones. These
        standards have been published in the Royal Gazette and are as
        follows:

  Thai Accounting Standard No. 25 (Revised in 2007) “Cash Flow
  Statements”

  Thai Accounting Standard No. 29 (Revised in 2007) “Leases”

  Thai Accounting Standard No. 31 (Revised in 2007) “Inventories”

  Thai Accounting Standard No. 33 (Revised in 2007) “Borrowing Costs”

  Thai Accounting Standard No. 35 (Revised in 2007) “Presentation of
  Financial Statements”

  Thai Accounting Standard No. 39 (Revised in 2007) “Accounting
  Policies, the Changes in .Accounting Estimates and Errors”

  Thai Accounting Standard No. 41 (Revised in 2007) “Interim Financial
  Reporting”

  Thai Accounting Standard No. 43 (Revised in 2007) “Business
  Combinations”

  Thai Accounting Standard No. 49 (Revised in 2007) “Construction
  Contracts”

Thai Accounting Standard No. 51 “Intangible Assets”

The new and revised Thai Accounting Standards above have become
effective for the accounting period starting on or after January 1, 2008
with the exception of TAS 29 Leases which will be effective for all
lease types with the lease period starting on or after January 1, 2008.
The adoption of these standards has no significant impact on the PTTEP
and subsidiaries’ financial statements

2.  In 2008, the Federation of Accounting Profession issued the revised
    Thai Accounting Standards which have already been published in the
    Royal Gazette and are effective for the accounting period starting
    on or after 1 January 2009. These revised accounting standards will
    not be applied in the current period, however, it is believed that
    the effect of them will not have any significant impact on PTTEP and
    subsidiaries’ financial statements. The particular revised
    accounting standards are as follows:

  TAS 36 (revised in 2007) Impairment of Assets

  TAS 54 (revised in 2007) Non-Current Assets Held for Sale and
  Discontinued Operations

3.  The Initial Adoption of International Accounting Standard (IAS)
    No.19 Employee Benefits

As from January 1, 2008, the Group has adopted an International
Accounting Standard No.19, Employee Benefits, for the purpose of
accounting for its retirement benefit obligation. Such obligations are
presented in the balance sheets under provision for employee benefits as
discussed in Note 22. In addition, the transitional liabilities will be
amortized as expenses in the statement of income on a straight-line
basis over 5 years.

The Group’s obligation in respect of the retirement benefit plans is
calculated by estimating the amount of future benefits that employees
will have earned in return for their services to the Company and its
subsidiaries in the current and in the future periods. Such benefits are
discounted to the present value using the rate of government bond
yields. The calculation is performed by an independent actuary using the
Projected Unit Credit Method.

When the benefits under the plans are changed, the portion of the
increased benefits relating to the past services of employees is
recognized in the statement of income on a straight-line basis over the
average remaining period until the benefits become vested. When the
benefits vest, the expense is recognized immediately in the statement of
income.

Salaries, wages, bonuses and contributions to the social security and
provident funds are recognized as expenses when incurred

4.  Significant Accounting Policies

1.  Preparation of Consolidated Financial Statements

The consolidated financial statements consist of subsidiaries,
associates and joint ventures. The major inter-company transactions are
eliminated from the preparation of consolidated financial statements.

  Subsidiaries

Subsidiaries are those entities over which the Group has power to govern
directly or indirectly their financial policies and operations,
generally accompanied by a shareholding of more than one half of the
voting rights. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when assessing
whether the Group controls another entity.

Subsidiaries are consolidated from the date on which control is
transferred to the Group controls and are no longer consolidated from
the date that control ceases.

The investments in the subsidiaries are presented by using the cost
method in the Company’s financial statements.

For detail of subsidiary companies, please refer to Note 12.

  Associates

Associates are those entities over which the Company has significant
influence over their financial policies and operations, but does not
control. Investments in associates are accounted for using the equity
method of accounting in consolidated financial statements from the date
on which the Group gains significant influence and are no longer
consolidated from the date that significant influence ceases.

The Group’s shares of the associates’ post-acquisition profits or losses
are recognized in the income statement, and the share of
post-acquisition movements in reserves is recognized in reserves.

Equity accounting is discontinued when the carrying amount of the
investment in an associate undertaking reaches zero, unless the Group
have incurred obligations or guaranteed obligations in respect of the
associates.

The investment in the associated companies is presented by using the
cost method in the Company’s financial statements.

For detail of associated companies, please refer to Note 12.

  Joint Ventures

The Group’s interests in jointly controlled entities are accounted for
by proportionate consolidation. Under this method, the Group includes
its shares of the joint ventures’ individual income, expenses, assets,
liabilities and cash flows in the relevant components of the financial
statements.

The Group’s interests in jointly controlled assets are accounted for by
proportionate consolidation. Under this method, the Group includes their
shares of the assets, liabilities, expenses and cash flows based on
Joint Operating Agreement in the relevant components of the financial
statements.

Gain or loss from the joint ventures is presented by using the cost
method in the Company’s financial statements.

For details of jointly controlled entities and jointly controlled
assets, please refer to Note 12 and Note 1, respectively.

  Related Parties

Related parties are those entities that directly or indirectly control,
or are controlled by the Company, or are under common control with the
Company. They also include holding companies, subsidiaries, follow
subsidiaries and associates.

In considering relationship between parties, attention is directed to
the substance of the relationship, and not merely the legal form.

2.  Foreign Currency Transactions

Foreign currency transactions are translated into Baht at the exchange
rates ruling on the transaction dates. Monetary assets and liabilities
denominated in foreign currency remaining at the year-end date are
translated into Baht at the average buying and selling rates as
determined by the Bank of Thailand. Gains or losses arising from
currency translation are recognized as revenues or expenses in the
period in which they occur.

The monetary assets and liabilities of foreign subsidiaries are
translated into Baht using average buying and selling rates determined
by the Bank of Thailand at year-end, whereas the income statement is
translated using the exchange rates ruling on the transaction dates.
Gains or losses from such translation are recognized as revenues or
expenses in the period in which they occur.

The assets and liabilities of foreign jointly controlled entities are
translated into Baht using average buying and selling rates determined
by the Bank of Thailand at year-end, whereas the income statement is
translated using average exchange rates during the period. Differences
from such translation have been presented under the caption of “Currency
translation differences” in shareholders’ equity.

3.  Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and at banks, and other
short-term highly liquid investments with maturities within 3 months or
less.

4.  Trade Accounts Receivable

Trade accounts receivable are carried at anticipated realizable value.
An allowance for doubtful accounts is provided, based on the company’s
the review of all outstanding receivable amount at year end. The amount
of allowance is the difference between the carrying amount of the
receivable and the amount expected to be collected. Bad debts are
written off during the year in which they are identified.

5.  Inventories

Inventories are valued at the lower of weighted average cost or net
realizable value. Cost is determined by the weighted average method. Net
realizable value is the estimated selling price in the ordinary course
of business less the costs of completion and selling expenses.

6.  Materials and Supplies

Materials and supplies are valued on the average cost basis. Allowances
have been provided for obsolete and unserviceable items.

7.  Borrowing Costs

Interest costs on borrowings to finance the construction of property,
plant and equipment are capitalized, during the period of time that is
required to complete and prepare the asset for its intended use. All
other borrowing costs are expensed.

8.  Property, Plant and Equipment

Property, plant and equipment are presented at cost, after deducting
accumulated depreciation and provision for impairment of assets.

-   Oil and Gas Properties

The Company follows the Successful Efforts Method in accounting for its
oil and gas exploration and production activities as follows:

Cost of Properties

Costs of properties comprise total acquisition costs of petroleum right
or the portion of costs applicable of properties as well as the
decommissioning costs.

If exploratory wells establish proved reserves, and are included in the
development plan in the near future, exploratory drilling costs (both
tangible and intangible) are initially capitalized, otherwise the
related costs are charged to expenses.

Exploratory costs, comprising geological and geophysical costs as well
as area reservation fees during the exploration stage, are charged to
expenses as incurred.

Development costs, whether relating to the successful or unsuccessful
development of wells, are capitalized.

  Depreciation, Depletion and Amortization

The capitalized acquisition costs of petroleum rights are depleted and
amortized using the unit of production method, which is based on
estimated proved recoverable reserves. Depreciation, depletion and
amortization of exploratory wells, development equipment and operating
costs of support equipment as well as the decommissioning costs, except
unsuccessful projects, are calculated on the unit of production method,
which is based on estimated proved recoverable reserves and proved
developed reserves. Changes in reserve estimates are recognized
prospectively.

Proved recoverable reserves and proved developed reserves are calculated
by the Group’s own engineers and information from the joint ventures.

-   Pipelines and Others

Costs of properties comprise purchase prices and other direct costs
necessary to bring the asset to working condition suitable for its
intended use.

Depreciation of pipelines and others are determined on the straight-line
method with an estimated useful life of 5 – 30 years.

The provision for impairment of assets is reviewed whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an asset’s net selling price and its value in use, and
is recorded in the income statement. For the purpose of assessing
impairment, the assets are grouped at the lowest level for which there
is a separately identifiable cash flow.

Gains and losses on disposal are determined by referring to their
carrying amount and are taken into account in net income.

Expenditure for addition, renewal and betterment which result in a
substantial increase in an asset’s current replacement value, are
capitalized. Repair and maintenance costs are recognized as expenses
when incurred.

9.  Carried Cost under Petroleum Sharing Contract

Under Petroleum Sharing Contracts in which the government has
participation interest, some contracts require the contracting parties,
excluding the government, to fund the costs of all exploration
operations until the first development area is determined. During the
exploration period, the contractor parties will carry government’s
exploration costs (carried costs) upon agreed proportion. When the
project commences production, such carried costs shall be fully recouped
without interest by the contractor parties under the agreed procedures
from the production of petroleum.

The Group classifies the transactions of carried costs through various
accounts under the Successful Efforts Method. They are mainly recorded
in oil and gas properties in balance sheet and exploration expense in
the statement of income. (For detail please refer to Note 14.)

10. Intangible Assets

Expenditures incurred for licenses acquired for computer software are
capitalized and amortized using the straight-line method over the life
of the software, or a maximum of ten years. The carrying amount is
reviewed and adjusted for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.

11. Deferred Income Taxes

Deferred income tax is provided in full, using the balance sheet
liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial
statements. The principal temporary differences arise from depreciation
on property, plant and equipment, amortization of decommissioning costs
and, on the difference between the fair values of the net assets
acquired and their tax base.

Tax rates enacted or substantively enacted by the balance sheet date are
used to determine deferred income tax.

Deferred tax assets are recognized to the extent that it is probable
that future taxable profit will be available against which the temporary
differences can be utilized.

Deferred income tax is provided on temporary differences arising on
investments in subsidiaries, associates and joint ventures, except where
the timing of the reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not reverse in the
foreseeable future.

Deferred income tax assets and liabilities are offset when they relate
to the same legal tax authority.

12. Borrowings

Borrowings are recognised initially at the proceeds received.
Transaction costs incurred are recognized as deferred assets and
amortized through the income statement over the period of the
borrowings.

13. Provision for Decommissioning Costs

The Group records provision for decommissioning costs whenever it is
probable that there is an obligation as a result of the past event and
reliable amount of obligation.

The Group recognizes provision for decommissioning costs, which are
provided at the onset of completion of the project, for the estimate of
the eventual costs that relate to the removal of the production
facilities. These costs were included as part of the oil and gas
properties and were amortized based on proved reserves on a unit of
production basis. The estimates of decommissioning costs have been
determined based on reviews and estimates by the Group’s own engineers
and managerial judgment.

14. Capital Risk Management

The Group’s objectives when managing capital are to safeguard the
Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.

15. Reserve for Expansion

The Group has a reserve for expanding its investments in new projects in
the exploration phase, which are generally susceptible to high risk, and
for finding additional petroleum reserves. The reserve for expansion is
set aside at no more than 35% of net taxable profits from exploration
and production activities.

16. Income Recognition

Sales are recognized upon delivery of products and customer acceptance.

Service income from gas pipeline construction is recognized on the basis
of percentage of completion.

Interest income is recognized on a time proportion basis, taking into
account the effective yield on the asset.

Revenues other than the above mentioned are recognized on an accrual
basis.

17. Income Taxes

The Group’s expenditures and revenues for tax purposes comprise:

-   Current period tax which is calculated in accordance with the
    Petroleum Income Tax Act B.E. 2514 and Amendment B.E. 2532 and the
    Revenue Code

-   Income tax in the Union of Myanmar

-   Deferred income taxes, which are calculated as disclosed in Note 15.

18. Earnings per Share

Basic earnings per share are calculated by dividing the net income
attributable to shareholders by the weighted average number of outside
ordinary shares in issue during the year.

Diluted earnings per share are calculated by the weighted average number
of outside ordinary shares in issue adjusted to assume conversion of all
dilutive potential ordinary shares. The Company has one category of the
dilutive potential ordinary shares: share options.

19. Segment Reporting

The segment details are primarily presented by the business operations
and secondly by the geographical areas.

20. Provident Fund and Provision for Employee Benefits

The provident funds are funded by payments from employees and by the
Company which are held in a separate trustee-administered fund. The
Company contributes to the funds at a rate of 3-15 % of the employees’
salaries which are charged to the income statement in the period to
which the contributions relate.

The obligation is presented in the balance sheets under provision for
employee benefits as discussed in Note 22. In addition, the transitional
liabilities will be amortized as expenses in the income statement on a
straight-line basis over 5 years.

The Group’s obligation in respect of the retirement benefit plans is
calculated by estimating the amount of future benefits that employees
will have earned in return for their services to the Company and
subsidiaries in the current and in the future periods. Such benefits are
discounted to the present value using the rate of government bond
yields. The calculation is performed by an independent actuary using the
Projected Unit Credit Method.

When the benefits under the plans are changed, the portion of the
increased benefits relating to the past services of employees is
recognized in the income statement on a straight-line basis over the
average remaining period until the benefits become vested. The expense
is recognized immediately in the income statement when the benefits are
paid.

Salaries, wages, bonuses and contributions to the social security and
provident funds are recognized as expenses when incurred

21. Deferred Income under Take-or-Pay Agreements

The Group has certain obligations in respect of the supply of gas under
gas sales agreements with its customers. Under these agreements, the
customer is required to pay for certain minimum quantities of gas in a
given year. Should the customer be unable to take the minimum contracted
quantities in a given year, the volume of gas that the customer has paid
for but has not taken in that year can be taken free of charge in
subsequent years subject to certain conditions as stipulated in the
agreements. The Group recognizes their obligations under Take-or-Pay
Agreements on an accrual basis based on its best estimate of volumes to
be taken in the year. Payments received in advance under these
agreements are recognized as deferred income. This deferred income is
recognized in the income statement when the gas is subsequently taken.
(For detail please refer to Note 21)

The Group made prepayment for royalty related to cash received in
advance under Take-or-Pay Agreement to the government of Myanmar. The
prepayment will be amortized when the deferred income is recognized.
(For detail please refer to Note 16)

1.  Critical Estimates and Judgments

In order to prepare the consolidated financial statements in conformity
with the Accounting standards, management is required to use estimates
and make judgments which impact assets, liabilities, income and
expenses. The data relating to the major assumptions and uncertainties
in the estimate which may have an impact on the assets and liabilities
presented in the financial statements are as follows:

Estimate for Petroleum Reserves

Oil and gas reserves are key elements in the Group’s investment
decision-making process which is focused on generating value. They are
also an important element in testing for impairment. Changes in proved
oil and gas reserves will also affect the standardized measure of
discounted cash flows and the unit-of-production depreciation charges to
income.

Proved reserves are the estimated quantities of petroleum that
geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing
economic and operating conditions including government’s rules and
regulations. The proved reserves have to be examined and assessed
annually by the Group’s geologists and reservoir engineers according to
the government policy.

Exploration Costs

Capitalized exploration drilling costs more than 12 months old are
expensed unless (1) proved reserved are booked or (2) they have found
commercially producible quantities of reserves and they are subject to
further exploration or appraisal activity. In making decisions about
whether to continue to capitalize exploration drilling costs for a
period longer than 12 months, it is necessary to make judgments about
the satisfaction of each condition in the present event. If there is a
change in one of these judgments in a subsequent period, then the
related capitalized exploration drilling costs would be expensed in that
period.

  Impairment of Assets

For oil and gas properties with no proved reserves, the capitalization
of exploration costs is explained above. For other properties, the
carrying amounts of major property, plant and equipment are reviewed
whenever events or changes in circumstances indicate that the carrying
amounts for those assets may not be recoverable. If assets are
determined to be impaired the carrying amounts of those assets are
written down to their recoverable amount, which is the higher of fair
value less costs to sell and value in use determined as the amount of
estimated discounted future cash flows. Impairments, except those
relating to goodwill, are reversed as applicable to the extent that the
events or circumstances that triggered the original impairment have
changed.

Expected future production volumes, which include both proved reserves
as well as volumes that are expected to constitute proved reserves in
the future, are used for impairment testing because the Group believes
this to be the most appropriate indicator of expected future cash flows,
used as a measure of value in use.

The estimate for the discounted future cash flows is based on many
factors as follows: estimated future production volume, future selling
price, supply and demand in the market, risks, margin rate and
discounted rate which is based on the principal of the investments.

  Income Tax

Deferred tax assets are recognized to the extent that it is probable
that future taxable profits will be available against which the
temporary differences can be utilized. The assumption for the future
taxable income contains the possibility of the uncertainty that if there
is a change, the recognition of the deferred tax asset will be impacted.

  Employee Retirement Plans

The Group’s obligation regarding the retirement benefit plans is
calculated by estimating the amount of future benefits that employees
will have earned in return for their services to the Company and its
subsidiaries in the current and in the future periods. Such benefits are
discounted to the present value using the rate of government bond
yields. The calculation is performed by an independent actuary using the
Projected Unit Credit Method and the relevant assumptions which include
financial and demographic assumptions as disclosed in Note 22.

When the benefits under the plans are changed, the portion of the
increased benefits relating to the past services of employees is
recognized in the statement of income on a straight-line basis over the
average remaining period until the benefits become vested. The expense
is recognized immediately in the income statement when the benefits are
paid.

  Provisions

The provisions are provided by the Group and presented in the balance
sheet when there is an obligation as a result of the past event and
there is the possibility that the company will have to pay its
beneficial assets for such obligation when its amount can be reliably
calculated.

The Group records provision for decommissioning costs whenever it is
probable that there is an obligation as a result of the past event and
the amount of obligation is reliable.

The Group recognizes provision for decommissioning costs, which are
provided at the onset of completion of the project, for the estimate of
the eventual costs that relate to the removal of the production
facilities. These costs were included as part of the oil and gas
properties and were amortized based on proved reserves on a unit of
production basis. The estimates of decommissioning costs have been
determined based on reviews and estimates by the Group’s engineers and
managerial judgment.

The provisions are based on the current situation such as regulations,
technologies and prices. The actual results could differ from these
estimates as future confirming events occur.

2.  Bills of Exchange

In 2008, the Company launched the "PTTEP Short-term Financing Program"
which involves the Company’s inaugural issuance of bills of exchange
(B/Es). The B/Es are to be issued monthly on a revolving basis to
institutional and high net-worth investors, with a total revolving
credit of up to Baht 20,000 million. As at December 31, 2008 the
remaining B/Es are as follows:

  ----------------- ----------- --------- ---------------- ----------------
  Issue date        Value       Period    Discount         Maturity date
                                          interest rate    

                    (million)   (day)     (per annum)      

  October 21, 2008  1,000       94        3.85%            January 23, 2009

  November 25, 2008 1,000       94        3.51%            February 27,2009

  December 23, 2008 1,000       94        2.73%            March 27, 2009

  Total             3,000                                  
  ----------------- ----------- --------- ---------------- ----------------

3.  Bonds issuing Liabilities

Unsecured and unsubordinated bonds as at December 31, 2008 and 2007
comprised:

+-------------------------+-------------+-----------+--------+--------+
|                         |             |           | Cons   |        |
|                         |             |           | olidat |        |
|                         |             |           | ed and |        |
|                         |             |           |  the C |        |
|                         |             |           | ompany |        |
+-------------------------+-------------+-----------+--------+--------+
|                         | Interest    | Maturity  | 2008   | 2007   |
|                         | rates       | dates     |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   Maturity date within  |             |           |        |        |
|   3 years               |             |           |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   - Bonds Baht 3,500    | 4.88% per   | February  | 3,500  | 3,500  |
|   million               | annum       | 12, 2010  |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   - Bonds Baht 6,000    | 6MFDR +     | June 15,  | 6,000  | 6,000  |
|   million *             | 0.99%       | 2010      |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   Maturity date between |             |           |        |        |
|   3-5 years             |             |           |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   - Bonds Baht 3,500    | 3.91% per   | June 15,  | 3,500  | 3,500  |
|   million               | annum       | 2012      |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   Maturity date over 5  |             |           |        |        |
|   years                 |             |           |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   - Bonds Baht 2,500    | 3.30% per   | March 27, | 2,500  | 2,500  |
|   million **            | annum       | 2018      |        |        |
+-------------------------+-------------+-----------+--------+--------+
|   - Bonds Baht 3,000    | 5.13% per   | June 15,  | 3,000  | 3,000  |
|   million NC5 ***       | annum       | 2022      |        |        |
+-------------------------+-------------+-----------+--------+--------+
|                         |             | Total     | 18,500 | 18,500 |
+-------------------------+-------------+-----------+--------+--------+

  * On September 4, 2007, the Company entered into Interest Rate Swap
  Contract (IRS) for bonds amounting to Baht 6,000 million with a
  financial institution to change the interest rate from fixed rate at
  3.60% per annum to the floating rate at 6-month Fixed Deposit Rate
  plus 0.99% (6MFDR + 0.99%).

  ** On September 27, 2005, the Company had a Cross Currency Swap
  transaction with a bank to swap Baht for USD 60.82 million. Under this
  agreement, interest was charged at the rate of 3.85% per annum.
  However, on May 2, 2007, the Company swapped the USD with the same
  bank for Baht 2,500 million. Under this agreement, interest is charged
  at the rate of 3.30% per annum until the expiry date.

  *** NC5 (Non Call 5 years): the Company has the right to redeem such
  debentures in the 5th year or in 2012

2.  Summary PTTEP and its subsidiaries Financial Statements

+-------------------------+--------+-----+--------+----+--------+----+
| Summary Financial       | PTT    |     |        |    |        |    |
| Position and Result of  | Explo  |     |        |    |        |    |
| Operation               | ration |     |        |    |        |    |
|                         | an     |     |        |    |        |    |
|                         | Prod   |     |        |    |        |    |
|                         | uction |     |        |    |        |    |
|                         | Public |     |        |    |        |    |
|                         | C      |     |        |    |        |    |
|                         | ompany |     |        |    |        |    |
|                         | L      |     |        |    |        |    |
|                         | imited |     |        |    |        |    |
|                         | and    |     |        |    |        |    |
|                         | Subsid |     |        |    |        |    |
|                         | iaries |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
|                         | B      |     |        |    |        |    |
|                         | alance |     |        |    |        |    |
|                         | Sheets |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
|                         | As at  |     |        |    |        |    |
|                         | De     |     |        |    |        |    |
|                         | cember |     |        |    |        |    |
|                         | 31,    |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
|                         | 2006   |     | 2007   |    | 2008   |    |
+-------------------------+--------+-----+--------+----+--------+----+
|                         | Th     | %   | Th     | %  | Th     | %  |
|                         | ousand |     | ousand |    | ousand |    |
|                         | Baht   |     | Baht   |    | Baht   |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Assets                  |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Current Assets          |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Cash and cash           | 18,5   | 1   | 24,0   | 12 | 43,9   | 18 |
| equivalents             | 20,906 | 1.7 | 12,741 | .6 | 94,690 | .5 |
+-------------------------+--------+-----+--------+----+--------+----+
| Receivable-parent       | 8,2    | 5.2 | 10,4   | 5  | 9,9    | 4  |
| company                 | 41,234 |     | 80,295 | .5 | 39,682 | .2 |
+-------------------------+--------+-----+--------+----+--------+----+
| Trade receivable        | 1,5    | 1.0 | 2,2    | 1  | 1,5    | 0  |
|                         | 45,795 |     | 06,716 | .2 | 86,943 | .7 |
+-------------------------+--------+-----+--------+----+--------+----+
| Inventories             | 3      | 0.2 | 3      | 0  | 3      | 0  |
|                         | 33,028 |     | 60,988 | .2 | 20,368 | .1 |
+-------------------------+--------+-----+--------+----+--------+----+
| Materials and           | 3,9    | 2.5 | 4,2    | 2  | 6,4    | 2  |
| supplies-net            | 97,820 |     | 22,010 | .2 | 14,793 | .7 |
+-------------------------+--------+-----+--------+----+--------+----+
| Other current assets    | 2,3    | 1.5 | 2,9    | 1  | 4,6    | 2  |
|                         | 25,771 |     | 72,082 | .6 | 95,556 | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Current Assets    | 34,9   | 2   | 44,2   | 23 | 66,9   | 28 |
|                         | 64,554 | 2.2 | 54,832 | .3 | 52,032 | .1 |
+-------------------------+--------+-----+--------+----+--------+----+
| Non-Current Assets      |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
|   Investments in        | 4      | 0.3 | 3      | 0  | 3      | 0  |
|   subsidiaries,         | 18,704 |     | 96,739 | .2 | 84,337 | .2 |
|   associates and        |        |     |        |    |        |    |
|   jointly controlled    |        |     |        |    |        |    |
|   entities              |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Long-term loans to      | -      | -   | 6      | 0  | 1,8    | 0  |
| related parties         |        |     | 00,000 | .3 | 35,000 | .8 |
+-------------------------+--------+-----+--------+----+--------+----+
| Property, plant and     | 121,5  | 7   | 143,0  | 75 | 167,3  | 70 |
| equipment-net           | 03,558 | 7.0 | 04,876 | .3 | 26,087 | .2 |
+-------------------------+--------+-----+--------+----+--------+----+
| Intangible assets       | 3      | 0.2 | 3      | 0  | 4      | 0  |
|                         | 54,368 |     | 50,592 | .2 | 18,344 | .2 |
+-------------------------+--------+-----+--------+----+--------+----+
| Deferred income tax     | -      | -   | -      | -  | 6,996  | 0  |
| assets                  |        |     |        |    |        | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Other non-current       | 5      | 0.4 | 1,4    | 0  | 1,3    | 0  |
| assets                  | 71,724 |     | 32,098 | .8 | 44,566 | .6 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Non-Current       | 122,8  | 7   | 145,7  | 76 | 171,3  | 71 |
| Assets                  | 48,354 | 7.8 | 84,305 | .7 | 15,330 | .9 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Assets            | 157,8  | 10  | 190,0  | 1  | 238,2  | 1  |
|                         | 12,908 | 0.0 | 39,137 | 00 | 67,362 | 00 |
|                         |        |     |        | .0 |        | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Liabilities and         |        |     |        |    |        |    |
| Shareholders’ Equity    |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Current Liabilities     |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Account payable         | 8      | 0.5 | 1,6    | 0  | 2,2    | 0  |
|                         | 52,762 |     | 82,890 | .9 | 45,413 | .9 |
+-------------------------+--------+-----+--------+----+--------+----+
| Current portion of      | 7,0    | 4.4 | -      | -  | -      | -  |
| long-term loan          | 02,592 |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Bill of exchange        | -      | -   | -      | -  | 2,9    | 1  |
|                         |        |     |        |    | 85,957 | .3 |
+-------------------------+--------+-----+--------+----+--------+----+
| Working capital to      | 4      | 0.3 | 1,4    | 0  | 9      | 0  |
| co-venturers            | 32,746 |     | 20,939 | .7 | 83,840 | .4 |
+-------------------------+--------+-----+--------+----+--------+----+
| Accrued expenses        | 13,1   | 8.3 | 13,3   | 7  | 15,9   | 6  |
|                         | 25,810 |     | 40,731 | .0 | 60,297 | .7 |
+-------------------------+--------+-----+--------+----+--------+----+
| Accrued interest        | 1      | 0.1 | 1      | 0  | 1      | 0  |
| payable                 | 86,218 |     | 10,722 | .1 | 09,835 | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Income tax payable      | 15,7   | 1   | 16,3   | 8  | 26,0   | 10 |
|                         | 25,428 | 0.0 | 20,076 | .6 | 48,879 | .9 |
+-------------------------+--------+-----+--------+----+--------+----+
| Other current           | 1,4    | 0.9 | 1,5    | 0  | 1,1    | 0  |
| liabilities             | 58,385 |     | 81,244 | .8 | 15,673 | .5 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Current           | 38,7   | 2   | 34,4   | 18 | 49,4   | 20 |
| Liabilities             | 83,941 | 4.6 | 56,602 | .1 | 49,894 | .8 |
+-------------------------+--------+-----+--------+----+--------+----+
| Non-Current Liabilities |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Bonds                   | 2,2    | 1.4 | 18,5   | 9  | 18,5   | 7  |
|                         | 03,820 |     | 00,000 | .7 | 00,000 | .8 |
+-------------------------+--------+-----+--------+----+--------+----+
| Deferred income tax     | 13,0   | 8.3 | 14,5   | 7  | 15,2   | 6  |
| liabilities             | 57,090 |     | 09,607 | .6 | 32,222 | .4 |
+-------------------------+--------+-----+--------+----+--------+----+
| Other non-current       |        |     |        |    |        |    |
| liabilities             |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Deferred income         | 4,0    | 2.6 | 3,0    | 1  | 2,5    | 1  |
|                         | 31,491 |     | 59,663 | .6 | 34,432 | .1 |
+-------------------------+--------+-----+--------+----+--------+----+
| Provision for           | 10,7   | 6.8 | 10,9   | 5  | 16,3   | 6  |
| decommissioning costs   | 12,388 |     | 90,905 | .8 | 09,665 | .8 |
+-------------------------+--------+-----+--------+----+--------+----+
| Other non-current       | 4      | 0.3 | 1,7    | 0  | 2,1    | 0  |
| liabilities             | 99,728 |     | 35,537 | .9 | 37,323 | .9 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Non-Current       | 30,5   | 1   | 48,7   | 25 | 54,7   | 23 |
| Liabilities             | 04,517 | 9.3 | 95,712 | .7 | 13,642 | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Liabilities       | 69,2   | 4   | 83,2   | 43 | 104,1  | 43 |
|                         | 88,458 | 3.9 | 52,314 | .8 | 63,536 | .7 |
+-------------------------+--------+-----+--------+----+--------+----+
| Shareholders’ Equity    |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Share capital           |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Share capital issued    | 3,2    | 2.1 | 3,2    | 1  | 3,3    | 1  |
| and fully paid-up       | 86,002 |     | 97,420 | .7 | 07,084 | .4 |
| capital                 |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Share premium           | 12,3   | 7.8 | 12,8   | 6  | 13,4   | 5  |
|                         | 07,589 |     | 59,031 | .8 | 23,109 | .6 |
+-------------------------+--------+-----+--------+----+--------+----+
| Currency translation    | (1,79  | (1  | (2,31  | (  | (2,28  | (  |
| differences             | 5,377) | .1) | 5,109) | 1. | 1,147) | 1. |
|                         |        |     |        | 2) |        | 0) |
+-------------------------+--------+-----+--------+----+--------+----+
| Retained earnings       |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Appropriated            |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Legal reserve           | 3      | 0.2 | 3      | 0  | 3      | 0  |
|                         | 32,200 |     | 32,200 | .2 | 32,200 | .1 |
+-------------------------+--------+-----+--------+----+--------+----+
| Reserve for expansion   | 16,9   | 1   | 16,9   | 8  | 16,9   | 7  |
|                         | 00,000 | 0.7 | 00,000 | .9 | 00,000 | .1 |
+-------------------------+--------+-----+--------+----+--------+----+
| Unappropriated          | 57,4   | 3   | 75,7   | 39 | 102,4  | 43 |
|                         | 94,036 | 6.4 | 13,281 | .8 | 22,580 | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Shareholders’     | 88,5   | 5   | 106,7  | 56 | 134,1  | 56 |
| Equity                  | 24,450 | 6.1 | 86,823 | .2 | 03,826 | .3 |
+-------------------------+--------+-----+--------+----+--------+----+
| Total Liabilities and   | 157,8  | 10  | 190,0  | 1  | 238,2  | 1  |
| Shareholders’ Equity    | 12,908 | 0.0 | 39,137 | 00 | 67,362 | 00 |
|                         |        |     |        | .0 |        | .0 |
+-------------------------+--------+-----+--------+----+--------+----+
| Book value per share    | 26.04  |     | 32.08  |    | 40.55  |    |
| (Baht)                  |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
| Issued and fully        | 3,2    |     | 3,2    |    | 3,3    |    |
| paid-up capital at the  | 86,002 |     | 97,420 |    | 07,084 |    |
| end of year (Thousand   |        |     |        |    |        |    |
| share)                  |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+
|                         |        |     |        |    |        |    |
+-------------------------+--------+-----+--------+----+--------+----+

  --------------------------- -------------- ------- ------------ ------- ------------- -------
  Summary Financial Position  PTT                                                       
  and Result of Operation     Exploration an                                            
                              Production                                                
                              Public Company                                            
                              Limited and                                               
                              Subsidiaries                                              

                              Statement of                                              
                              Income                                                    

                              For the years                                             
                              ended December                                            
                              31,                                                       

                              2006                   2007                 2008          

                              Thousand Baht  %       Thousand     %       Thousand Baht %
                                                     Baht                               

  Revenues                                                                              

  Sales                       86,339,273     94.1    90,763,840   93.8    132,620,657   94.7

  Revenue from pipeline       2,928,083      3.2     3,295,047    3.4     4,131,145     3.0
  transportation                                                                        

  Gain on foreign exchange    1,313,929      1.4     915,590      0.9     117,995       0.1

  Interest income             939,146        1.0     810,016      0.8     942,229       0.7

  Other revenues              202,588        0.2     988,531      1.0     2,195,117     1.6

  Total Revenues              91,723,019     100.0   96,773,024   100.0   140,007,143   100.0

  Expenses                                                                              

  Operating expenses          6,488,216      7.1     7,803,175    8.1     10,528,530    7.5

  Exploration expenses        3,631,646      4.0     3,542,833    3.7     8,273,389     5.9

  Selling, general and        3,017,492      3.3     3,333,183    3.4     4,617,716     3.3
  administrative expenses                                                               

  Petroleum royalties and     12,848,707     14.0    12,529,164   12.9    17,328,158    12.4
  remuneration                                                                          

  Depreciation, depletion and 14,906,652     16.3    16,365,065   16.9    23,290,106    16.6
  amortization                                                                          

  Derivative loss on hedging  -              -       857,515      0.9     904,488       0.6

  Director’s remuneration     35,229         0.0     36,313       0.0     45,336        0.0

  Loss from equity affiliates 9,159          0.01    21,965       .0      12,402        0.0

  Total Expenses              40,937,101     44.6    44,489,213   46.0    65,000,125    0.0

  Income before interest and  50,785,918     55.4    52,283,811   54.0    75,007,018    53.6
  income taxes                                                                          

  Interest expenss            1,114,368      1.2     882,728      0.9     829,953       0.6

  Income taxes                21,624,279     23.6    22,945,693   23.7    32,502,229    23.2

  Net income                  28,047,271     30.6    28,455,390   29.4    41,674,836    29.8

  Basic earning per share     8.55                   8.65                 12.62         
  (Baht)                                                                                

  Diluted earning per share   8.53                   8.63                 12.60         
  (Baht)                                                                                

  Weighted average number of  3,279,243              3,290,408            3,301,731     
  outstanding ordinary shares                                                           
  (Thousand share)                                                                      
  --------------------------- -------------- ------- ------------ ------- ------------- -------

+--------------------------------+------------+------------+----------+
| Summary Financial Position and | PTT        |            |          |
| Result of Operations           | E          |            |          |
|                                | xploration |            |          |
|                                | an         |            |          |
|                                | Production |            |          |
|                                | Public     |            |          |
|                                | Company    |            |          |
|                                | Limited    |            |          |
|                                | and        |            |          |
|                                | Su         |            |          |
|                                | bsidiaries |            |          |
+--------------------------------+------------+------------+----------+
|                                | Statement  |            |          |
|                                | of Cash    |            |          |
|                                | flows      |            |          |
+--------------------------------+------------+------------+----------+
|                                | For the    |            |          |
|                                | years      |            |          |
|                                | ended      |            |          |
|                                | December   |            |          |
|                                | 31,        |            |          |
+--------------------------------+------------+------------+----------+
|                                | 2006       | 2007       | 2008     |
+--------------------------------+------------+------------+----------+
|                                | Thousand   | Thousand   | Thousand |
|                                | Baht       | Baht       | Baht     |
+--------------------------------+------------+------------+----------+
| Cash flows from operating      |            |            |          |
| activities                     |            |            |          |
+--------------------------------+------------+------------+----------+
| Net income                     | 28,047,271 | 28,455,390 | 41       |
|                                |            |            | ,674,836 |
+--------------------------------+------------+------------+----------+
| Adjustment to reconcile net    |            |            |          |
| income to net cash             |            |            |          |
+--------------------------------+------------+------------+----------+
| Provided by (used in)          |            |            |          |
| operating activities           |            |            |          |
+--------------------------------+------------+------------+----------+
| Loss from equity affiliates    | 9,158      | 21,965     | 12,402   |
+--------------------------------+------------+------------+----------+
|   Amortization of up-front     | 145,637    | -          | -        |
|   payment under Bongkot Gas    |            |            |          |
|   Sale Agreement               |            |            |          |
+--------------------------------+------------+------------+----------+
| Depreciation, depletion and    | 14,906,652 | 16,365,065 | 23       |
| amortization                   |            |            | ,290,106 |
+--------------------------------+------------+------------+----------+
| Amortization of prepaid        | 56,922     | 241,505    | 86,723   |
| expenses                       |            |            |          |
+--------------------------------+------------+------------+----------+
| Exploration expenses           | 1,701,861  | 1,959,864  | 6        |
|                                |            |            | ,306,832 |
+--------------------------------+------------+------------+----------+
| Loss on disposal of assets     | 3,422      | 11,650     | 3,945    |
+--------------------------------+------------+------------+----------+
| Income recognized from         | (745,012)  | (951,082)  | (        |
| deferred income                |            |            | 531,164) |
+--------------------------------+------------+------------+----------+
| Provision on oil price hedging | -          | 479,855    | -        |
| loss                           |            |            |          |
+--------------------------------+------------+------------+----------+
| Provision for employee         | 110,906    | 79,729     | 383,994  |
| benefits                       |            |            |          |
+--------------------------------+------------+------------+----------+
| (Gain) loss on foreign         | (          | (          | 404,138  |
| exchange                       | 2,165,824) | 1,179,352) |          |
+--------------------------------+------------+------------+----------+
| Interest income and            | 175,222    | 72,711     | (        |
| expenses-net                   |            |            | 112,276) |
+--------------------------------+------------+------------+----------+
| Income tax                     | 21,624,279 | 22,945,694 | 32,50    |
|                                |            |            | 2,229.00 |
+--------------------------------+------------+------------+----------+
|                                | 63,870,494 | 68,502,994 | 104      |
|                                |            |            | ,021,765 |
+--------------------------------+------------+------------+----------+
| Changes in assets and          | (2         | (2         | (21,     |
| liabilities                    | 0,393,139) | 2,430,381) | 756,906) |
+--------------------------------+------------+------------+----------+
| Net cash provided by operating | 43,477,355 | 46,072,613 | 82       |
| activities                     |            |            | ,264,859 |
+--------------------------------+------------+------------+----------+
| Cash flows from investing      |            |            |          |
| activities                     |            |            |          |
+--------------------------------+------------+------------+----------+
| Net lending of loans to        | (30,000)   | (600,000)  | (1,      |
| related parties                |            |            | 235,000) |
+--------------------------------+------------+------------+----------+
| Interest received from loans   | -          | 20,322     | 82,624   |
+--------------------------------+------------+------------+----------+
| Increase in property, plant    | (3         | (3         | (48,     |
| and equipment                  | 5,052,055) | 9,051,654) | 983,885) |
+--------------------------------+------------+------------+----------+
| Increase in intangible assets  | (83,749)   | (56,888)   | (        |
|                                |            |            | 140,377) |
+--------------------------------+------------+------------+----------+
| Net cash used in investing     | (3         | (3         | (50,     |
| activities                     | 5,165,804) | 9,688,220) | 276,638) |
+--------------------------------+------------+------------+----------+
| Cash flows from financing      |            |            |          |
| activities                     |            |            |          |
+--------------------------------+------------+------------+----------+
| Proceeds from issuance of      | -          |  -         | 2        |
| bills of exchange              |            |            | ,905,842 |
+--------------------------------+------------+------------+----------+
| Redemption of bonds            | (          | (          | -        |
|                                | 8,234,920) | 6,629,078) |          |
+--------------------------------+------------+------------+----------+
| Proceeds from bond             | -          | 16,383,820 | -        |
+--------------------------------+------------+------------+----------+
| Bond issuance expense          | -          | (18,881)   | -        |
+--------------------------------+------------+------------+----------+
| Interest paid                  | (          | (951,284)  | (        |
|                                | 1,262,047) |            | 750,726) |
+--------------------------------+------------+------------+----------+
| Proceeds from common stock     | 400,601    | 562,861    | 573,743  |
+--------------------------------+------------+------------+----------+
| Dividend paid                  | (1         | (1         | (14,     |
|                                | 0,856,490) | 0,235,420) | 963,995) |
+--------------------------------+------------+------------+----------+
| Net cash used in financing     | (1         | (887,982)  | (12,     |
| activities                     | 9,952,856) |            | 235,136) |
+--------------------------------+------------+------------+----------+
| Net increase in cash and cash  | (1         | 5,496,411  | 19       |
| equivalents                    | 1,641,305) |            | ,753,085 |
+--------------------------------+------------+------------+----------+
| Cash and cash equivalents at   | 30,507,066 | 18,520,906 | 24       |
| the beginning of the year      |            |            | ,012,741 |
+--------------------------------+------------+------------+----------+
|                                | 18,865,761 | 24,017,317 | 43       |
|                                |            |            | ,765,826 |
+--------------------------------+------------+------------+----------+
| Effect of exchange rate        | (344,855)  | (4,576)    | 228,864  |
| changes on cash and cash       |            |            |          |
| equivalents                    |            |            |          |
+--------------------------------+------------+------------+----------+
| Cash and cash equivalents at   | 18,520,906 | 24,012,741 | 43       |
| the end of the year            |            |            | ,994,690 |
+--------------------------------+------------+------------+----------+

Summary information of subsidiary companies

  -------------------------------- --------------- ------------ ------------
                                   Summary                      
                                   Financial                    
                                   Position and                 
                                   Result of                    
                                   Operations                   

                                   As at December               
                                   31,                          

                                   PTTEP                        
                                   International                
                                   Company Limited              

                                   2006            2007         2008

                                   Million Baht    Million Baht Million Baht

  Total Assets                     36,488          44,082       54,963

  Total Liabilities                5,854           10,515       19,763

  Total Shareholders' Equity       30,634          33,567       35,200

  Sales                            10,792          10,937       14,059

  Total Revenues                   11,594          12,176       16,337

  Net Income                       2,441           3,063        2,625

                                                                

                                   PTTEP Offshore               
                                   Investment                   
                                   Company Limited              

                                   2006            2007         2008

                                   Million Baht    Million Baht Million Baht

  Total Assets                     36,307          43,645       52,361

  Total Liabilities                21,436          24,936       26,246

  Total Shareholders' Equity       14,871          18,709       26,115

  Total Revenues                   9,277           8,537        10,986

  Net Income                       5,765           4,358        7,372

                                                                

                                   PTTEP Kim Long               
                                   Vietnam Company              
                                   Limited                      

                                   2006            2007         2008

                                   Million Baht    Million Baht Million Baht

  Total Assets                     268             274          300

  Total Liabilities                552             581          715

  Total Shareholders' Equity       (284)           (307)        (415)

  Net Loss                         (57)            (22)         (109)

                                                                

                                   PTTEP Southwest              
                                   Vietnam Company              
                                   Limited                      

                                   2006            2007         2008

                                   Million Baht    Million Baht Million Baht

  Total Assets                     196             204          227

  Total Liabilities                366             387          465

  Total Shareholders' Equity       (170)           (183)        (238)

  Net Income (Loss)                2               (13)         (54)
  -------------------------------- --------------- ------------ ------------

  -------------------------------- ------------ ------------ ------------
                                   PTTEP                     
                                   Hong-Long                 
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     1,409        2,672        2,570

  Total Liabilities                3,327        5,945        9,313

  Total Shareholders' Equity       (1,918)      (3,273)      (6,743)

  Net Loss                         (733)        (1,355)      (3,470)

                                                             

                                   PTTEP                     
                                   Hoan-Vu                   
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     2,697        3,906        6,398

  Total Liabilities                4,455        5,788        8,377

  Total Shareholders' Equity       (1,758)      (1,882)      (1,979)

  Sales                            -            -            1,472

  Total Revenues                   -            -            1,182

  Net Income (Loss)                213          (124)        (97)

                                                             

                                   Summary                   
                                   Financial                 
                                   Position and              
                                   Result of                 
                                   Operations                

                                   As at                     
                                   December 31,              

                                   PTTEP Oman                
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     5,189        5,769        6,639

  Total Liabilities                6,056        5,972        4,950

  Total Shareholders' Equity       (867)        (203)        1,689

  Sales                             -            -           3,976

  Total Revenues                    -            -           3,782

  Net Income (Loss)                (261)        664          1,893

                                                             

                                   PTTEP                     
                                   Algeria                   
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     979          1,984        2,350

  Total Liabilities                1,665        3,203        4,571

  Total Shareholders' Equity       (686)        (1,219)      (2,221)

  Net Loss                         (247)        (533)        (1,002)

                                                             

                                   PTTEP                     
                                   Services                  
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     212          237          385

  Total Liabilities                162          136          253

  Total Shareholders' Equity       50           101          132

  Net Income                       41           51           30

                                                             

                                   PTTEP                     
                                   (Thailand)                
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     70           127          167

  Total Liabilities                116          147          188

  Total Shareholders' Equity       (46)         (20)         (21)

  Net Income (Loss)                (89)         26           (1)

                                                             

                                   PTTEP Siam                
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     10,918       16,413       19,772

  Total Liabilities                7,603        7,674        10,308

  Total Shareholders' Equity       3,315        8,739        9,464

  Sales                            13,132       15,045       19,254

  Total Revenues                   13,409       15,239       19,424

  Net Income                       5,060        5,424        7,775

                                                             

                                   PTTEP Iran                
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     12           282          955

  Total Liabilities                278          621          1,402

  Total Shareholders' Equity       (266)        (339)        (447)

  Net Loss                         (248)        (73)         (109)
  -------------------------------- ------------ ------------ ------------

  -------------------------------- ------------ ------------ ------------
                                   Summary                   
                                   Financial                 
                                   Position and              
                                   Result of                 
                                   Operations                

                                   As at                     
                                   December 31,              

                                   Diamond                   
                                   Petroleum                 
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     2            1            -

  Total Liabilities                -            -            -

  Total Shareholders' Equity       2            1            -

  Net Loss                         (0.4)        (0.2)        -

                                                             

                                   PTTEP                     
                                   Merangin                  
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     163          137          35

  Total Liabilities                218          307          499

  Total Shareholders' Equity       (55)         (170)        (464)

  Net Loss                         (57)         (115)        (293)

                                                             

                                   PTTEP                     
                                   Bahrain                   
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     2            2            17

  Total Liabilities                0.2          0.05         47

  Total Shareholders' Equity       1            1            (30)

  Net Loss                         (0.3)        (0.2)        (32)

                                                             

                                   PTTEP                     
                                   Holding                   
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     3            3            -

  Total Liabilities                1            146          442

  Total Shareholders' Equity       1            (143)        (438)

  Net Loss                         (1)          (144)        (295)

                                                             

                                   PTTEP                     
                                   Indonesia                 
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     3            -            -

  Total Liabilities                2            141          185

  Total Shareholders' Equity       1            (141)        (185)

  Net Loss                         (1)          (142)        (44)

                                                             

                                   PTTEP                     
                                   Bengara I                 
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     2            40           66

  Total Liabilities                0.3          180          247

  Total Shareholders' Equity       1            (140)        (181)

  Net Loss                         (1)          (142)        (41)

                                                             

                                   PTTEP Thai                
                                   Project                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            8            12

  Total Liabilities                -            7            17

  Total Shareholders' Equity       -            1            (5)

  Net Loss                         -            (0.1)        (6)
  -------------------------------- ------------ ------------ ------------

  -------------------------------- ------------ ------------ ------------
                                   Summary                   
                                   Financial                 
                                   Position and              
                                   Result of                 
                                   Operations                

                                   As at                     
                                   December 31,              

                                   PTTEP                     
                                   Andaman                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            0.3          0.2

  Total Liabilities                -            0.1          0.1

  Total Shareholders' Equity       -            0.2          0.1

  Net Loss                         -            (0.1)        -

                                                             

                                   PTTEP                     
                                   Australia                 
                                   Pty Limited               

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            157

  Total Liabilities                -            1            327

  Total Shareholders' Equity       -            (1)          (170)

  Net Loss                         -            (1)          (171)

                                                             

                                   PTTEP                     
                                   Australia                 
                                   Offshore Pty              
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            672

  Total Liabilities                -            0.05         840

  Total Shareholders' Equity       -            (0.05)       (168)

  Net Loss                         -            (0.05)       (170)

                                                             

                                   PTTEP Egypt               
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            5            1

  Total Liabilities                -            4            73

  Total Shareholders' Equity       -            1            (72)

  Net Loss                         -            (0.3)        (73)

                                                             

                                   PTTEP                     
                                   Rommana                   
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            2            93

  Total Liabilities                -            0            90

  Total Shareholders' Equity       -            2            3

  Net Income (Loss)                -            (0.1)        1
  -------------------------------- ------------ ------------ ------------

  -------------------------------- ------------ ------------ ------------
                                   PTTEP Sidi                
                                   Abd El                    
                                   Rahman                    
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            2            142

  Total Liabilities                -            0            139

  Total Shareholders' Equity       -            2            3

  Sales                            -            2            142

  Net Income (Loss)                -            (0.1)        1

                                                             

                                   PTTEP                     
                                   Bangladesh                
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            2            322

  Total Liabilities                -            0            326

  Total Shareholders' Equity       -            2            (4)

  Net Loss                         -            (0.04)       (5)

                                   Summary                   
                                   Financial                 
                                   Position and              
                                   Result of                 
                                   Operations                

                                   As at                     
                                   December 31,              

                                                             

                                   PTTEP                     
                                   Myanmar                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            2

  Total Liabilities                -            -            -

  Total Shareholders' Equity       -            -            2

                                                             

                                   บริษัท พีทีทีอีพี                
                                   นิวซีแลนด์ จำกัด              

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            2

  Total Liabilities                -            -            -

  Total Shareholders' Equity       -            -            2

                                                             

                                   PTTEP Semai               
                                   II Limited                

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            129

  Total Liabilities                -            -            131

  Total Shareholders' Equity       -            -            (2)

  Net Loss                         -            -            (3)

                                                             

                                   PTTEP                     
                                   Australia                 
                                   Perth Pty                 
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            2

  Total Liabilities                -            -            1

  Total Shareholders' Equity       -            -            1

                                                             

                                   PTTEP                     
                                   Australia                 
                                   Browse Basin              
                                   Pty Limited               

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     -            -            1

  Total Liabilities                -            -            -

  Total Shareholders' Equity       -            -            1

                                                             

                                                             
  -------------------------------- ------------ ------------ ------------

Summary Information of Jointly Controlled Entities

  -------------------------------- ---------------- ------------ ------------
                                   Summary                       
                                   Financial                     
                                   Position and                  
                                   Result of                     
                                   Operations                    

                                   As at December                
                                   31,                           

                                   Carigali -                    
                                   PTTEPI Operating              
                                   Company Sdn Bhd.              

                                   2006             2007         2008

                                   Million Baht     Million Baht Million Baht

  Total Assets                     104              559          1,308

  Total Liabilities                103              558          1,307

  Total Shareholders' Equity       1                1            1

                                                                 

                                   Moattama Gas                  
                                   Transportation                
                                   Company                       

                                   2006             2007         2008

                                   Million Baht     Million Baht Million Baht

  Total Assets                     4,351            3,862        4,094

  Total Liabilities                2,455            2,017        1,826

  Total Shareholders' Equity       1,896            1,845        2,268

  Sales                            3,746            4,005        4,950

  Total Revenues                   3,751            4,012        4,956

  Gross Profit                     3,536            3,763        4,673

  Net Income                       2,533            2,715        3,296

                                                                 

                                   Taninthayi                    
                                   Pipeline LLC                  

                                   2006             2007         2008

                                   Million Baht     Million Baht Million Baht

  Total Assets                     2,392            2,209        2,278

  Total Liabilities                706              623          637

  Total Shareholders' Equity       1,686            1,586        1,641

  Sales                            2,570            2,594        2,935

  Total Revenues                   2,570            2,594        2,935

  Gross Profit                     2,386            2,413        2,728

  Net Income                       1,689            1,722        1,897

                                                                 

                                   Orange Energy                 
                                   Limited                       

                                   2006             2007         2008

                                   Million Baht     Million Baht Million Baht

  Total Assets                     10,043           10,163       11,100

  Total Liabilities                6,177            5,394        5,785

  Total Shareholders' Equity       3,866            4,769        5,315

  Sales                            11,214           9,716        10,997

  Total Revenues                   11,270           9,827        11,048

  Gross Profit                     4,025            3,588        4,253

  Net Income                       1,839            1,815        2,132

                                                                 

                                   B8/32 Partners                
                                   Limited                       

                                   2006             2007         2008

                                   Million Baht     Million Baht Million Baht

  Total Assets                     3,754            3,834        3,607

  Total Liabilities                2,107            1,875        1,832

  Total Shareholders' Equity       1,647            1,959        1,775

  Sales                            4,070            3,515        3,973

  Total Revenues                   4,072            3,533        4,032

  Gross Profit                     1,447            1,422        1,528

  Net Income                       856              734          805
  -------------------------------- ---------------- ------------ ------------

Summary Information of Associated Companies

  -------------------------------- ------------ ------------ ------------
                                   Summary                   
                                   Financial                 
                                   Position and              
                                   Result of                 
                                   Operations                

                                   As at                     
                                   December 31,              

                                   Energy                    
                                   Complex                   
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     972          2,274        5,205

  Total Liabilities                194          1,544        4,530

  Total Shareholders' Equity       778          730          675

  Net Income                       (18)         (48)         (55)

                                                             

                                   PTT ICT                   
                                   Solution                  
                                   Company                   
                                   Limited                   

                                   2006         2007         2008

                                   Million Baht Million Baht Million Baht

  Total Assets                     331          691          840

  Total Liabilities                183          531          607

  Total Shareholders' Equity       148          160          233

  กำไรสุทธิ                          (2)          11           73
  -------------------------------- ------------ ------------ ------------

12.3 Summary significant financial ratio table

  ----------------------------------- --------- ----------- ---------- --------
                                                Financial              
                                                Ratio                  

                                                2006        2007       2008

  Liquidity Ratio                                                      

  Current Ratio                       (times)   0.90        1.28       1.35

  Quick Ratio / Acid Ratio            (times)   0.73        1.07       1.12

  Cash flow from Operations to        (times)   1.15        1.26       1.96
  current liabilities ratio                                            

  Account Receivable Turnover         (times)   10.64       8.37       11.30

  Collection Period                   (days)    33.82       43.01      31.87

  Profitability Ratio                                                   

  Profit Margin                       (%)       31.42       30.25      30.47

  Return on Equity ( ROE )            (%)       35.01       29.14      34.60

  Efficiency Ratio                                                      

  Return on Assets                    (%)       18.63       16.36      19.46

  Return on Fixed Assets              (%)       38.92       33.89      41.87

  Assets Turnover                     (times)   0.59        0.54       0.64

  Financial Policy Ratio                                                

  Debt - to -Equity                   (times)   0.78        0.78       0.78

  Times Interest Earned               (times)   59.42       79.19      139.28

  Times Burden Covered                (times)   0.79        0.67       0.95

  Dividend Ratio                      (%)       37.61       38.01      43.01

  Data Per Share                                                        

  Book value per share                (Baht)    26.94       32.38      40.55

  Net Profit per share                (Baht)    8.55        8.65       12.62

  Dividend per share                  (Baht)    3.21        3.28       5.42

  Growth Rate                                                           

  Total Asset                         (%)       10.11       20.42      25.38

  Total Liabilities                   (%)       (3.26)      20.15      25.12

  Sales                               (%)       30.11       5.12       46.12

  Net Profit                          (%)       18.17       1.46       46.46
  ----------------------------------- --------- ----------- ---------- --------

12.4 Management Discussion and Analysis of Operation Results in 2008

1.  PTTEP Performance

Two thousand eight was a very challenging year for PTTEP due to the
tough business environment. In 2008, the oil price was highly volatile
as it moved from above 140 USD per barrel in the middle of the year to
lower than 40 USD per barrel at the end of the year. The Thai political
situation in 2008 was also somewhat unstable. In addition, the recent
world economic crisis caused lower-than-expected energy demand. All of
these factors affected PTTEP business as a whole. However, PTTEP has
been striving to effectively deal with these challenges by reviewing
organization structure and adjusting its business plan & strategy to
correspond with the changing environment. This effort yielded impressive
results in what was considered one of the best years for PTTEP as the
total revenue for 2008 was 140,007 Million Baht and the net profit
amounted to 41,675 Million Baht or 12.60 Baht per share diluted. The
return of shareholders’ equity was 35.

2008 PTTEP business results are summarized below:

Exploration and Appraisal: PTTEP succeeded in discovering petroleum in
28 wells out of a total of 43 exploration and appraisal wells drilled in
2008 which is equivalent to the drilling success ratio 28:43 or 65%. A
key exploration success in 2008 was the Pailin Project where petroleum
was discovered in all 7 exploration and appraisal wells drilled in 2008.
However, there were a total of 15 wells written off in 2008 with a total
expenditure amounting to 6,198 Million Baht. Regarding well write offs,
PTTEP would, in general, write off wells which contain non-commercial
amounts of petroleum resources/reserves. Nevertheless, PTTEP benefits
from using data from written off wells to further study and get a
clearer picture of the field’s petroleum system which may lead to
petroleum discovery in other areas of the field.

Development: PTTEP accelerated the development of various projects to
start up as planned. For the MTJDA B-17, the project successfully
installed major facilities including 4 wellhead platforms, 1 central
processing platform jacket, 1 living quarter platform deck and jacket,
and 12 development wells. In addition, PTTEP also succeeded in reaching
agreement with PTT on key contents of the supplementary gas sales
agreement and is now in the process of concluding the supplementary gas
sales agreement. For Greater Bongkot South development, PTTEP completed
awarding contracts for all major facilities including the central
processing platform, living quarters, and wellhead platforms. The
construction work was started as planned. For M9 & M 11, in 2008, the
Myanmar government approved the development plan and also the production
area for M9 development. In addition, PTTEP and Myanmar Oil & Gas
Enterprise signed the Heads of Agreement (HOA) with PTT in June 2008.
PTTEP is now in the process of preparing the gas sales agreement for M9
with PTT. Regarding the development of other projects, Algeria 433a &
416b Project received an approval on the final discovery report (FDR)
/or the outlined development plan of Bir Seba field from the Algerian
government. The basic and front-end engineering, engineering procurement
and the construction contracts of production facilities are planned to
start in 2009. Production is expected to start in 2012.

Production: PTTEP managed its projects to meet its production targets.
In 2008, PTTEP officially started production from 3 projects including
Arthit, Vietnam 9-2, and G4/43. For Arthit, the project started gas
production on 26 March 2008 at 80 Million Standard Cubic Feet per Day
(MMSCFD) and increased production to reach the daily contractual
quantity (DCQ) at 330 MMSCFD in April 2008. So far, in 2008, the project
succeeded in maintaining its production target. For the G4/43 Project,
the production was started up in January 2008. The average crude and
natural gas production at present is around 10,000 BPD and 10 MMSCFD
respectively. Finally, the Vietnam 9-2 commenced production of crude oil
and natural gas from Ca Ngu Vang (CNV) oil field on 25 July 2008 with
the approximate flow rate of 8,000 BPD and 20 MMSCFD respectively. The
project now produces crude oil at approximately 12,000 BPD and natural
gas at 30 MMSCFD. All production start ups in 2008 have successfully
created value for PTTEP from existing assets as per Company target.

Sales: PTTEP’s sales volume averaged 219,314 barrels of oil equivalent
per day (BOED) in 2008, higher than the average sales volume of 2007 of
179,767 BOED by approximately 22%. The increase mainly resulted from 3
new producing assets and an increased sales volume from Oman 44 Project.
However, the average sales volume of 2008, 219,314 BOED, was still lower
by 2% than the sales target of 223,334 BOED which was initially set at
the beginning of 2008. The reason for the deviation from the sales
target was due to the delay in Arthit North production start up which
was shifted to 2009.

Investment: PTTEP continued to expand its investment in various regions
aligned with the investment strategy. In January 2008, PTTEP entered
into a farm-in agreement for Blocks 17 and 18, located offshore of the
People’s Republic of Bangladesh with a 30% participation interest. In
addition, in November 2008, PTTEP and the joint ventures succeeded in
bidding for the petroleum exploration block Semai II in Indonesia with a
33.33% participation interest. The Murphy Oil Cooperation is the
operator of the field. Regarding the investment in Australia which is a
high petroleum potential country, PTTEP and the joint venture were
awarded the concession block WA-423-P in Australia. The joint ventures
comprise Murphy Australia Oil Pty Ltd. (Operator) and PTTEP with the
participation interests of 70% and 30% respectively. In addition, PTTEP
signed the Share Sales Agreement to purchase 100% shareholders’ equity
in Coogee Resources Limited or CRL. The company was established under
the laws of Western Australia and is engaged in investment and
development of oil and gas exploration and production businesses in
Australia. The overall success of investments in various regions is
well-aligned with PTTEP investment strategy

To develop business opportunities to drive long term growth, PTTEP
signed the memorandum of understanding (MOU) with Golar LNG Limited to
collaboratively conduct a study on the investment in stranded gas fields
which could deploy the FLNG (Floating Liquefied Natural Gas production)
technology to commercialize stranded gas economically. Commercializing
stranded gas is considered a critical move in the natural gas industry
because it is clean energy and there are large amounts of remaining
reserves around the world. This also helps strengthen the nation’s
energy security and is well aligned with the future PTT LNG importation
plan.

Capability Development: PTTEP continuously strived to improve human
resources capabilities through various initiatives. One of the efforts
in 2008 was to adopt the activity based manpower planning concept in
preparing a long term manpower plan for key operating assets. The
objective is to improve the manpower plan to align well with Company
work plans and activities. PTTEP was also very active in personnel
recruitment to support company growth. In addition, to develop its
people to reach maximum potential, in 2008, PTTEP extensively used the
Competency Management System as a tool to assess and design
comprehensive programs to develop its people. In addition, the Technical
Career Ladder (TCL) system was also introduced in PTTEP. This system
helps improve the career development of technical personnel to be able
to progress on their professional career path to the equivalent of
Management positions. PTTEP believes these comprehensive capability
development programs will attract high potential staff to join PTTEP
both from internal and external sources.

To strengthen organization capability, PTTEP revised its organization
structure to correspond with the Company strategy. The Business
Development Group was established as a separate unit reporting to the
CEO in order to drive the Company’s aggressive growth target. In
addition, the Asset Divisions were also restructured for integrated work
planning and optimizing resource allocation. In addition, in 2008, PTTEP
executives collectively reviewed and further refined corporate
directions and strategy up to 2020. They also constantly reviewed and
adjusted the strategy and work plan to correspond with the changing
working environment. Moreover, PTTEP also strengthened its work planning
along with the KPI setting processes to be able to effectively monitor
and adjust the performance to achieve the set direction and target.
Finally, PTTEP also periodically reviewed its investment portfolio and
aligned the country strategy to set comprehensive investment strategies
in each region.

2.  Results of Operations

Detailed discussion of financial results for the two years ending 31
December 2008 is below:

  ------------------------------------------- ------------- -------------
  Earnings summary                            For the year  

  (Unit : Millions of Baht excepting Baht per 2008          2007
  share amounts)                                            

  Income from continuing operations                         

  Exploration and production                  36,631        24,491

  Pipelines                                   5,186         4,428

  Others                                      (142)         (464)

  Total net income                            41,675        28,455

  Diluted earnings per share – from           12.60         8.63
  continuing operations                                     

  Total Revenues - from continuing operations 140,007       96,773

  Sales Revenue                               132,621       90,764
  ------------------------------------------- ------------- -------------

For the results of operations of the year 2008, PTTEP and its
subsidiaries’ totaled a net profit of Baht 41,675 million or Baht 12.60
per share-diluted, an increase of Baht 13,220 million or 46% when
compared with 2007’s net profit of Baht 28,455 million or Baht 8.63 per
share-diluted. Return on shareholder’s equity for 2008 was 35%.

For 2008, total revenues of PTTEP and its subsidiaries amounted to Baht
140,007 million,
an increase of Baht 43,234 million or 45% when compared with last year
(Baht 96,773 million). This increase was mainly due to higher sales of
petroleum of Baht 41,857 million or 46%, resulting from (1) the higher
average petroleum sales price for the year 2008, which rose to USD 49.69
per BOE compared with last year at USD 39.78 per BOE; however the
average sales exchange rate for this year decreased to Baht 33.25 per
USD from last year’s Baht 34.77 per USD as a result of the strengthened
Baht, and (2) the higher sales volume for
this year to 219,314 BOED compared with the last year of 179,767 BOED.
This increased volume mainly came from (1) petroleum sales volume from
the Arthit, G4/43 and Vietnam 9-2 projects, which started production
this year (2) increased petroleum sales volumes from the Oman 44
project, while (3) the crude oil sales of
the B8/32&9A project and natural gas sales of the Yadana and Yetagun
projects decreased.

PTTEP and its subsidiaries collected higher revenue from pipeline
transportation, which was proportionally recorded from Moattama Gas
Transportation Company (MGTC) and Taninthayi Pipeline Company LLC (TPC).
Also, there was increased other income from construction service on the
Arthit gas export pipeline to customers.

PTTEP and its subsidiaries recognized a foreign exchange gain of Baht
118 million for the year 2008, a decrease of Baht 798 million or 87%
when compared with Baht 916 million for the last year.
This decrease was because of the change in the value of the Baht against
the USD.

PTTEP and its subsidiaries incurred expenses for 2008 amounting to Baht
65,000 million,
an increase of Baht 20,511 million or 46% when compared with Baht 44,489
million for the last year. This increase was the result of the
following:

(1) Higher depreciation and amortization expenses, mainly from the
    projects which started production this year (the Arthit, Vietnam 9-2
    and G4/43 projects), as well as increased depreciation of B8/32&9A
    and Bongkot projects as a result of their additional oil and gas
    properties.

(2) Higher petroleum royalties and remuneration resulting from increased
    sales revenues.

(3) Rising exploration expenses, mainly due to the write-off of dry
    wells under the projects in Myanmar, Vietnam 16-1 and Algeria
    433a&416b projects, as well as Geology and Geophysics study costs
    from the A4,5&6/48, L21, 28 & 29/48 and projects in Myanmar. Also,
    there was a write-off of B13/38 project.

(4) Increased operating expenses from (1) increased operating expenses
    of the Arthit and Oman 44 projects which increased their operation
    activities (2) construction service on the Arthit gas export
    pipeline (3) increased operating expenses and maintenance costs of
    the Yadana, Yetagun and B8/32&9A projects, while (4) operating
    expenses of the Nang Nuan project decreased due to the fact that its
    production had been suspended in the latter part of August 2007.

(5) Increased selling, general administrative expenses, mainly from
    recognition of provision for employee benefits and general
    administrative expenses from the Arthit project, which increased its
    number of operation activities.

PTTEP and its subsidiaries incurred higher income tax expenses of Baht
9,556 million based on the higher petroleum taxable profits.

1.  Financial position

  -------------------------------- -------------------- ------------------
                                   31 December          

  (Unit: Million Baht)             2008                 2007

  Total Assets                     238,267              190,039

  Total Liabilities                104,163              83,252

  Total Shareholders’ Equity       134,104              106,787
  -------------------------------- -------------------- ------------------

As of 31 December 2008, PTTEP and its subsidiaries commanded total
assets of Baht 238,267 million, an increase of Baht 48,228 million, or
25% higher than at the total at the end of 2007. This increase was
mainly due to (1) higher cash and cash equivalents of Baht 19,982
million from operating activities and B/Es issuance (2) the increase of
Baht 24,321 million in oil and gas properties for production, mainly
from MTJDA-B17, Arthit, Pailin, Bongkot and B8/32&9A projects, and (3)
the increase of a long term loan to Energy Complex Co., Ltd. amounting
to Baht 1,235 million.

Most current assets as of 31 December 2008 were in cash and cash
equivalents, parent company receivables and accounts receivables. A
large proportion of the non-current assets were (1) assets used in
joint-venture exploration and production, presented under Property,
Plant, and Equipment, and (2) investments in associated companies,
namely Energy Complex Co., Ltd., and PTT ICT Solutions Co., Ltd.
presented under Investments in Associates.

PTTEP and its subsidiaries had total liabilities of Baht 104,163 million
or Baht 20,911 million higher than the total at the end of 2007, mainly
due to income tax payable and the issued. PTTEP launched the Short-term
Financing Program (“PF”) in April 2008, which involved the company’s
inaugural issuance of Bills of Exchange (B/Es) via Public Offering to
institutional and high net-worth investors. B/Es are to be issued
monthly on a revolving basis, whereby biddings are conducted on the
third Thursday of every month to select the Arranger/Paying Agent bank
offering the best discount rate.

As of 31 December 2008 the outstanding face value of B/Es was 3,000
million Baht with interest rate 2.73 – 3.85. On 11 November, 2008 the
Company registered the change in its registered paid-up capital from
Baht 3,306.77 million to Baht 3,307.08 million, as a result of the
exercised warrants from Management and Employees to purchase the
Company’s stock under the Employee Stock Option Program (ESOP). The
total number of shares exercised for this period was 311,200 shares at
the par value of Baht 1 per share resulting in a total of 311,200 Baht.
As of 31 December 2008 the outstanding number of warrants was 2.88
million units (1 unit of warrant = 5 units of common shares)

As of 31 December 2008, PTTEP and its subsidiaries had cash and cash
equivalents of Baht 43,995 million, an increase of Baht 19,982 million.
The majority of this was cash received from sales revenue.

PTTEP and its subsidiaries commanded a net cash flow used in investment
activities of Baht 50,277 million, mainly resulting from (1) the higher
investment in oil and gas properties for production from the MTJDA-B17,
Arthit, Pailin, Bongkot, and B8/32&9A projects (2) a long term loan to
Energy Complex Co., Ltd. amounting to Baht 1,235 million.

PTTEP and its subsidiaries had a net cash flow used in financing
activities of Baht 12,235 million as follows: (1) dividend payment to
shareholders for the second half of 2007, Baht 1.67 per share and
dividend payment to shareholders for the fist half of 2008, Baht 2.86
per share, amounting to Baht 14,964 million (2) interest paid of Baht
750 million (3) net cash received from the B/Es issuance of Baht 2,906
million and (4) cash received from the issuance of ordinary shares for
the exercise of warrants of Baht 573 million.

2.  The Adoption of International Accounting Standard (IAS) No. 19
    Employee Benefits

As from 1 January 2008, PTTEP and its subsidiaries have adopted
International Accounting Standard No. 19, Employee Benefits, for the
purpose of accounting for the retirement benefits obligation. The
calculation of provision for employees’ retirement benefits is performed
by a qualified actuary. The discrepancy of provision calculated by the
actuarial valuation method and previous provision (transitional
liabilities) will be amortized as expenses on a straight-line basis over
5 years.

3.  Impacts on Operational Results

The 2008 global financial crisis has made an impact on the world economy
as a whole. It also consequently affected a decrease in oil price and
its demand all over the world. As for Thailand, this situation results
in the lower-than-expected national gas demand and petroleum products
prices. These factors, hence, affected PTTEP’s sales volume, product
prices, and overall performance, particularly in the 4th quarter, to be
lower than the projection.

In addition, the world financial crisis and the slump in petroleum
demand and product price also caused a decrease in market values of oil
companies over the world. Many companies may also slow down or hold up
the investment on petroleum exploration and production projects as
result of a sub-commercial return on the project. As result of the
aforesaid factors, the downward trend in prices of goods & services for
E&P industry can be also expected.

In 2008, PTTEP constantly reviewed and revisited its strategy to deal
with these challenges and came up with action plans on both Asset
Management and Growth aspects as follows.

-   Asset Management- PTTEP has periodically reviewed the investment
    plans of existing assets and considered rescheduling investment in
    some assets to best optimize the asset value. Besides, PTTEP would
    focus on operating cost optimization through various initiatives
    i.e. optimizing procurement spending by effectively defining product
    quantity and time to procure to fit with the market situations.
    Moreover, PTTEP also applied the “Capital Project Management”
    initiative for high investment projects to improve project
    management performance. Finally, PTTEP adopted the “Operational
    Excellence” concept to improve overall efficiency of production and
    operation activities.

-   Growth - The economic crisis and the downward trend of the oil price
    has caused the decrease in market value of many oil & gas companies.
    This is a good opportunity for PTTEP to find good M&A which can
    create value in the long term. PTTEP, hence, would focus on pursuing
    M&A opportunities which aligned with the investment strategy. In
    addition, due to lower product price, PTTEP would rather focus on
    business development in conventional E&P projects which is aligned
    with the investment strategy. PTTEP would carefully consider and may
    hold up unconventional E&P opportunities with high investment and
    unit costs e.g. heavy oil, etc.