4. Business Operation

1.  Products Features

4.1.1 Petroleum

Petroleum means crude oil, natural gas, condensate, related products and
other hydrocarbon products which are free in nature.

Crude oil means crude mineral oil and bitumen of all kinds which is
liquid in nature and is obtained from an oil well and may be obtained
through gas separation equipment but has not yet been refined or
purified.

Natural gas means hydrocarbon which is gas or vapor at the normal
temperature and pressure, and which normally has methane as it major
constituent.

Condensate means hydrocarbon which condenses in natural gas, and which,
when separated from natural gas, is transparent and has low specific
gravity (high API).

LPG means petroleum product which is obtained from crude oil refinery or
natural gas separation processes and which primarily consists of butane
and propane.

The characteristic of the crude oil and condensate is liquid in nature
and has a measurement in barrel while the natural gas is measured by
cubic foot. All petroleum products could be given into the heat
measurement in Barrel of Oil Equivalent (BOE). 1 cubic foot of natural
gas has approximately 1,000 BTU while 1 barrel of crude oil has
6,000,000 BTU

2.  Gas Transportation Pipeline:

PTTEPO has other major investment in other companies as well such as a
25% of the investment in Moattama Gas Transportation Company (MGTC) and
19.31784% in Taninthayi Pipeline Company (TPC) to conduct the business
of pipeline laying from Yadana and Yetagun projects from Myanmar to Thai
borders.

4.1.3 Jetty, Workshop and Warehouse

Petroleum Development Support Base (PSB) of PTTEP is established as a
hub to support the development of petroleum in the Gulf of Thailand and
the Andaman Sea. The main service is to support logistics operation for
the petroleum exploration and production platforms off the coast as well
as being a coordination centre in case of emergency for the petroleum
production platforms in the Gulf of Thailand and Andaman Sea by aircraft
and marine vessels. Moreover, PSB’s additional service is included the
warehouse storage for petroleum exploration and production’s equipments
for PTT EP projects and thereby perform total service of logistics
activities for all offshore concessions including the inspection service
for the equipments to a standard prior to the shipment to offshore
petroleum exploration and production platforms.

The onshore facilities are construction on 30 Rai (48,000 sq.m.) with an
additional of 28.12 Rai (44,900 sq.m.) on long lease, and consist of:

(1) Jetty has a total length of 380 metres and is divided into six
    berths, each approximately 65 metres. The deck of the jetty is +2.3
    metres above Mean Sea Level (MSL). The approaches and the water
    depth of the Jetty are maintained at a minimum 8 metres below Chart
    Datum. The facilities on the Jetty include bulk silos for Barite,
    Base Oil and Cement. The Jetty is fully ISPS CODE compliant
    (International Code for the Security of Ships and of Port
    Facilities) and is approved as a port facility by the Marine Safety
    and Environment Bureau, Marine Department, Thailand.

(2) Workshops. Two established workshops with an approximate total area
    of 5,400 sq.m. support all and project construction and equipment
    maintenance and inspection. An additional 4,400 sq.m. workshop now
    under construction will support well service work.

(3) Warehouse and Yard Area. There are two warehouses (1,200 and 900
    sq.m.) and an open storage yard (approximately 15,000 sq.m.) which
    is used for the safe storage of petroleum materials and equipment
    such as tubular, drilling and casing. Also free zone area has been
    provided for all international projects such as CPOC, Myanmar and
    Cambodia.

All parts have a wider security system, CCTV is installed at strategic
locations throughout the Base and is monitored 24 hours a day at the
Operations Centre.

4.1.4 Energy Complex Limited (Energy Complex)

PTT and PTTEP has jointly established energy complex to construct and
manage Energy Complex Project, the energy business center of the
country, in which the ministry of energy, the company of PTT group and
the energy private companies is situated.

4.1.5 PTT ICT Solution Company Limited (PTT ICT)

PTT ICT, a PTTEP 20% own company, has been hired to providing all PTTEP
information technology and communication services according to the PTTEP
Board of Director agreement of 10/2549/254 on September 29^(th), 2006.
This includes infrastructure design and implementation services,
consultancy services, procurement services, and outsourcing services to
support PTTEP information technology and communication needs. The 5 year
contract period has begun since July 1^(st), 2006 according to PTT Group
ICT Policy Strategy to create synergy drive in the group.

4.1.6 PTTEP Services Limited (PTTEP Services)

The concept that became PTTEP Services originated from PTTEP Board
meeting No. 12/2003/216. The stated objective that PTTEP Services was
created to achieve is to supply manpower for both local and overseas
subsidiary companies belonging to PTTEP and cater for the fact that
 PTTEP requires a large number of staff who are sufficiently capable and
of a high caliber with the primary objective of supporting PTTEP’s
extensive and rapid growth.

In order to fulfill these requirements, PTTEP Services has recruited and
hired staff for PTTEP since 1 July 2004 and has developed, improved, and
implemented compensation and benefits policies and practices to ensure
that standardized welfare benefits, including requisite training are
provided.

4.2 Factors affecting the opportunity or restriction in business

PTTEP does its petroleum exploration and production in the Kingdom and
abroad. The investment in foreign countries shall comply with conditions
and concession laws of those countries i.e. Production Sharing
Agreement/Contract or Services Agreement. Inside the Kingdom, PTTEP
shall comply with the Petroleum Act B.E. 2514 which sets out the details
and procedures for applying for and awarding petroleum concessions, the
period of production and also provides for various forms of benefits to
the government as owner of its petroleum resources. These forms of
benefits include royalty, petroleum income tax and other benefits. The
important points in the petroleum business operation are as follows:

4.2.1 Issue of Concession Areas

The Department of Mineral Fuels, Ministry of Energy as the responsible
agency delineates exploration blocks, and then invites oil companies to
submit applications for concessions.
The Petroleum Committee considers applications for concessions which are
initially screened by the sub-committee. The Energy Minister with the
approval by the Cabinet has the power to award and sign the concessions.
The government considers the qualifications of each applicant and will
take into account the proposed work program, adequacy of the investment
funds to be brought in and used in the exploration, the transfer of
technology, employment of Thai nationals, and also the utmost benefits
offered to the Kingdom.

4.2.2 Role of the Operator

A petroleum concession may be awarded to one concessionaire or to a
joint venture of two or more co-concessionaires. Since the petroleum
exploration and production business is associated with relatively high
risk, it is common for companies to join together in joint ventures in
order to diversify the risks. In a joint venture, one company will be
designated as “operator” to conduct the exploration and production
operations on behalf of the other co-venturers under the supervision of
a management committee composed of representatives of each company.
Other companies which participate in the joint venture are called
“non-operators”. The operator sets the cash call on all co-venturers to
finance the project. The non-operators through their representation in
the management committee participate in technical and financial
decisions. Generally, an oil company will become an operator of any
project, depending on the investment conditions, its readiness and
business strategies in that project.

4.2.3 Nature of Operations and Investment Decisions

Before any oil company decides to invest in petroleum exploration in the
Kingdom and abroad, it has to carefully consider its chances of
exploration success as well as other investment risk factors. A study of
information available is made to determine whether the area has high
petroleum potential and is commercial for production. The success ratio
of drilling of exploration wells in neighboring areas as well as the
risk factors of the investment countries are taken into account. In case
it found the project commercial to produce, then it will apply for a
petroleum concession or will “farm-in” to an existing petroleum
concession.

After the oil company is awarded a concession area for exploration of
petroleum, an exploration program will be conducted which is normally
taking 2-3 years. If the petroleum reserves are found, the amount of
investment funds required for the development stage and the value of
sale of the petroleum in the quantity of reserves expected to be
recovered will be evaluated. If such study indicates that the reserves
are worth investing in, that petroleum field will be considered to have
sufficient commercial viability to justify further investment in
development. The operator shall apply for an approval of petroleum
production and shall start its production at the same time. The
operation is still able to explore the rest of the existing areas if it
is within the time frame of exploration mentioned in the concession. At
this stage, the operator must have a certain degree of confidence about
the investment because the investment required for such development is
very high. The operator will normally identify buyers of petroleum in
advance, and a long-term sales agreement for petroleum to be produced
will be signed. At present the PTT is the biggest petroleum buyer in
Thailand. The principal elements of the sales agreement for petroleum
are the method of determination of the sales price and quantity of
petroleum to be delivered. In this regard, when the commencement period
in the contracted is reached, the buyer must be responsible the
petroleum produced immediately after the production commences. The sale
of natural gas from any domestic areas is presently made at the
well-head while the sale of natural gas from any foreign areas is made
at the Thai borders, in which case PTT must install gas pipe-lines
sufficient for the production amount specified in the gas sale
agreement. The sale of the crude oil is made at the buyer’s refinery
while the sale of the condensate is made at the Floating Storage Unit
(FSU) near the well-head.

4.2.4 Description of law relating to the business

At present, the operation of petroleum business in Thailand is governed
by two major enactments, namely, the Petroleum Act, B.E. 2514, and the
Petroleum Income Tax Act B.E. 2514, and its amendment. Several major
features of these laws are:

(1) an applicant for a concession must be limited company or a juristic
    person which has the same status as a limited company established
    under the law of Thailand or foreign law;

(2) the concessionaire, the co-concessionaire(s) and the co-venturer(s)
    must pay royalty which is normally paid by cash. However, the
    Minister may authorize a payment in kind of petroleum by a notice of
    at least not less than 6 months. The royalty may be used as credit
    against income tax (Thailand I) or be deducted as expenses (Thailand
    III);

(3) the rate of petroleum income tax may be prescribed not less than 50%
    but not over than 60% of the net interest from the petroleum
    business;

(4) interest paid cannot be deducted as expenses for income tax
    purposes;

(5) a concessionaire has right to obtain concessions for exploration
    blocks without limitation of number of exploration blocks.

Thailand I for the petroleum concessions issued by the Ministry of
Industry⁴ from B.E. 2514 to B.E. 2532 and the onshore petroleum
concession issued before B.E. 2525

Thailand II⁵ for all onshore petroleum concessions issued by the
Ministry of Industry⁴ from B.E. 2525 to B.E. 2532

Thailand III for the petroleum concessions issued by the Ministry of
Industry⁵ from B.E. 2533

Thailand IV for the petroleum concessions issued by the Ministry of
Energy⁶ from B.E. 2550

_______________________

⁴ Now is the Ministry of Energy

⁵ According to the Article 36 of the Petroleum Act (Issue 4) B.E. 2532,
all the holders of the petroleum in Thailand II have already moved to
Thailand III.

⁶ the Petroleum Act (Issue 6) B.E. 2550 has came into force 18 October
B.E. 2550

Details of Thailand I, II, III and IV Terms

  ------------- --------------- --------------- --------------- ---------------
  Term          Thailand I      Thailand II     Thailand III    Thailand IV

  Royalty Rates 12.5% of income 12.5% of income progressive     progressive
                from sale or    from sale or    rate at sliding rate at sliding
                disposal of     disposal of     scale 5-15%,    scale 5-15%,
                petroleum which petroleum which deemed to be    deemed to be
                may be treated  may be treated  expenses which  expenses which
                as tax credit   as tax credit   could be        could be
                                                deducted in tax deducted in tax
                                                calculation     calculation

  Petroleum     50% of net      50% of net      50% of net      50% of net
  Income Tax    profit from     profit from     profit from     profit from
                petroleum       petroleum       petroleum       petroleum
                business        business        business        business
                operation       operation       operation       operation

  Special       -               annual          special         special
  Benefits                      benefits, and   remunerator     remunerator
                                annual          benefit which   benefit which
                                production      may be taken as may be taken as
                                bonus           deduction       deduction

  Exploration   8 years with 4  8 years with 4  6 years with 3  6 years with 3
  Period        year extension  year extension  year extension  year extension

  Production    not exceeding   not exceeding   not exceeding   not exceeding
  Period        30 years from   30 years from   20 years from   20 years from
                expiry date of  expiry date of  expiry date of  expiry date of
                exploration,    exploration,    exploration,    exploration,
                with extension  with extension  with extension  with extension
                not exceeding   not exceeding   not exceeding   not exceeding
                10 years        10 years        10 years        10 years

  Concession    not exceeding   not exceeding   not exceeding   not exceeding
  areas         10,000 sq. km   10,000 sq. km   4,000 sq. km    4,000 sq. km
                per exploration per exploration per exploration per exploration
                block, up to 5  block, up to 5  block, up to 5  block without
                exploration     exploration     exploration     limitation of
                blocks          blocks          blocks          number of
                                                                exploration
                                                                blocks
  ------------- --------------- --------------- --------------- ---------------

4.3 Marketing and Competition

PTTEP has invested in 42 E&P activities, with 17 projects being domestic
and 25 projects being overseas. The Company’s policy is to supply its
products, namely natural gas, condensate, crude oil, and LPG from both
domestic and overseas sources primarily to the Thai market. Moreover,
its expansion abroad of E&P activities means an additional way of
forging energy security and generating income for Thailand.

In 2009, sales by PTTEP and its subsidiaries averaged 233,756 BOED, a 7%
rise from the previous year. The incremental sales of this year resulted
from greater output from projects that were fully on stream this year,
namely Arthit, Vietnam 9-2, and two new projects such as PTTEP
Australasia Project, the acquisition of Coogee Resources Limited earlier
this year, and Arthit North Project in the middle of the year.

For the year 2009, the total sales ratio was 70% natural gas to 30%
crude oil and condensate by volume, or 48% to 52% by sales revenue, as
illustrated in the following table.

  ----------------- -------------------------- ---------------------------
  Product           Volume                     Value

  Natural Gas       352,783.93 MMSCF           61,805.20   Million Baht

  Condensate        11.80 MMBBL                22,955.27   Million Baht

  Crude Oil         15.00  MMBBL               30,053.03   Million Baht

  LPG               72,409.92  Metric Tons     734.02   Million Baht
  ----------------- -------------------------- ---------------------------

4.3.1 Marketing Characteristics

PTTEP’s goals and policies are to source and supply petroleum to the
Thai market. PTT Plc is currently the major buyer of all products which,
after processing, are supplied to power plants, the petrochemical
industry, the transportation sector, industries, and households. A
portion of the indigenous crude oil whose composition does not match
domestic refinery configuration is sold to external markets.

The sales of the petroleum products from the international fields vary
from country to country as detailed below:

(1) Yadana and Yetagun projects in Myanmar: The gas produced from both
    projects is primarily sold to Thailand and some is sold to Myanmar
    for domestic power generation. The condensate from Yetagun is sold
    and consumed domestically, with the excess volume sold in regional
    spot markets.

(2) Oman 44 Project: The gas produced under this project is sold to the
    Sultanate of Oman; the condensate is sold to PTT Plc for consumption
    in Thailand.

(3) Vietnam 9-2 Project: The crude oil produced is sold in spot markets
    and by short-term contracts, whereas the gas produced is sold to
    Vietnam Oil and Gas Group, a state enterprise of that country, for
    domestic consumption.

(4) PTTEP Australasia Project in Australia: The oil output is sold under
    contracts; some is sold in spot markets. The Company is negotiating
    a sales agreement for partial supply to Thailand with PTT Plc.

The trading of each petroleum product varies with the timeframe of the
contract and the price structure as described below.

(1) Natural gas

Due to the capital-intensive investment in developing gas fields, gas
sales agreements (GSAs) must be effective or signed before any major
investment is made. GSAs are typically long-term, ranging from 15 to 30
years. Prices, volumes, and points of sales are specific and stipulated
for each contract. The designated transfer points for all domestically
sold gas are at the wellhead, from which the buyer will invest in the
distribution system. The gas sold from Myanmar to Thailand has its
delivery point at the border between the two countries. The seller is
responsible for the investment in the pipelines from the wellhead to the
border. The gas prices are usually indexed to fuel oil and economic
indices, so that the cost of production could reflect the investment and
also be competitive with competing fuels for the GSA period.

Sales volumes are based on the assessed reserves on the negotiation
date. The GSAs stipulate buyer and seller obligations for the committed
amount according to each year’s take-or-pay conditions. If the buyer is
unable to take the volume of gas as committed in the GSA, it must pay
for the committed volume whether the gas is taken or not. As a
consequence, the buyer is entitled to take delivery of gas free of
charge in subsequent years. Conversely, should the seller fail to
deliver the agreed volume, the buyer has the rights to discount the
price to be paid for the underdelivered volume.

(2) Condensate and crude

The Company sells the majority of its condensate crude oil to the
domestic market at market prices or regional prices. Contracts could be
either short-term or long-term, and some are sold in spot markets.

(3) LPG

LPG produced from S1 Project is sold to PTT Plc under a long-term
contract at a price referenced to the ex-refinery prices announced by
the government.

4.3.2 Competition

The competition of E&P industry of Thailand can be regarded as
non-threatening due to the nature of the market where demand usually
exceeds supply. Contracts are predominantly long-term, with conditions
stipulating take-or-pay clauses for gas to guarantee the market.

In 2009, despite the sizeable shrink in the Thai economy, which was
caused by the global economic crisis during the first half of the year,
the domestic economy rebounded during the second half by returning to
positive territory in the last quarter of the year, and is expected to
continue until 2010. The Thai economic growth is projected at 3.3% for
2010, supported mainly by the recovery in government and private
spending and by the increase in export and service sectors, which are
similarly projected to expand with the improving economy. By the same
token, the national energy demand is expected to grow.

As regards the medium-term to long-term market, the demand for petroleum
products is projected to keep growing. To meet this demand, PTTEP is
committed to its search for new petroleum resources, both domestic and
overseas. In 2009, PTTEP and its joint-venture partners (Total E&P
Thailand and BG Asia Pacific Pte Ltd.), representing the sellers, signed
a GSA for Bongkot South with PTT Plc, the buyer, for supply of 320
MMSCFD. Expected to come on stream in mid-2012 to mid-2013, this supply
would raise the entire Bongkot Project supply to 870 MMSCFD. In
addition, a new gas supply from the Myanmar M9 Project in the Gulf of
Moattama is planned to be on stream in 2013. Currently the Company is
engaged in 20 additional exploration projects around the world. All
these projects represent PTTEP’s continuing endeavor to expand its
output base for long-term national energy security.

4.4 Production

4.4.1 Exploration and Production Stages and Technology

Petroleum Exploration and production may generally be divided into 4
major stages as follows:

(1) Exploration Stage

-   Primary geological and geophysical surveys

-   Seismic acquisition, processing and interpretation

-   Exploration wells Drilling

(2) Appraisal/Delineation Stage

-   Detail Study of petroleum geology and additional seismic survey

-   Reservoir Formation Evaluation and Conceptual Development Design

(3) Development Stage

-   Field Development Plan Construction

-   Production facilities design, fabrication and installation

-   Development wells drilling and completion

(4) Production Stage

-   Facility and Production Plant commissioning

-   Petroleum production

-   Production monitoring and optimization

-   Well and facilities work-over and maintenance

-   Field Abandonment

4.4.2 Petroleum Reserves

Petroleum Reserves can be divided into 2 categories according to the
level of confidence, which are Proved Reserves and Unproved Reserves.
Unproved Reserves can be further divided into 2 categories which are
Probable Reserves and Possible Reserves.

(1) Proved Reserves are those quantities of petroleum which, by analysis
of geological and engineering data, can be estimated with reasonable
certainty to be commercially recoverable, from a given date forward,
from known reservoirs and under current economic conditions, operating
methods, and government regulations. Proved Reserves means the petroleum
in reservoirs that can be commercially produced, relying on supporting
data of production rate testing. In some cases, Proved Reserves obtain
from well testing and/or analyzing of source rocks in that area or the
neighboring area already produced or having tendency to be able to
produce. Moreover, Proved Reserves will be able to produce by using the
existing equipment or the equipment installed in the future.

  (2) Unproved Reserves

-   Probable Reserves are those quantities of petroleum obtained from an
    analysis of geological and engineering data as same as Proved
    Reserves but having less possibility to produce due to the
    technology, rules, or economic conditions.

-   Possible reserves are those quantities of petroleum obtained from an
    analysis of geological and engineering data as same as Probable
    Reserves but having less possibility to produce due to the
    technology, rules, or economic conditions.

The Proved Reserves are reviewed annually by company’s earth scientists
and reservoir engineers to ensure rigorous professional standards. The
Proved Reserves are reported on a gross basis, which includes the
company’s net working interest and related host country’s interest. As
of 31 December 2009, the total Proved Reserves of all PTTEP and
subsidiary’ projects are 219 Million Stock Tank Barrels (MMSTB) for
crude oil and condensate, and 5,650 Billion Standard Cubic Feet (BSCF)
for gas. The total Proved Reserves (Consolidated Companies) in term of
oil equivalent is 1099 Million Barrels (MMBOE).

4.4.3 PTTEP Petroleum Production

In 2009, the total production of PTTEP and its subsidiaries is 95.8
MMBOE or equivalent to the production rate of approximately 262,466
Barrels of Oil Equivalent per Day (BOED), approximately 14,766 BOED or
6% increase from last year. The production increase was mainly
attributed to the new petroleum production from Arthit North project.

4.5 Environmental Impact

For petroleum exploration and production operations, an effective
environmental management system is developed to minimize the following
potential environmental impact: -

(1) Impact on land use and marine organisms from sound vibration, which
    is the main environmental impact during seismic surveys.

(2) Water and soil contamination from discharges of drilling fluid and
    produced water, release of sludge and contaminated solid wastes, and
    accidental spills of oil and condensate during drilling and
    production activities.

(3) Air pollution from hydrocarbon releases and atmospheric emissions
    from gas flaring, gas venting and fuel combustion during drilling
    and production activities.

Currently, the above environmental impacts are regulated by the
Department of Mineral Fuels, which is under the Ministry of Energy and
which is the direct agency, the Office of Natural Resources and
Environmental Policy and Planning (ONEP), regulated by the Ministry of
Natural Resources and Environment, which issues the directive that an
environmental impact assessment must be conducted and approved prior to
any commencement of exploration and production projects

PTTEP has initiated efforts to reduce environmental impacts, and has
maintained a constant and continuous follow-up of this initiative,
including the following:

(1) Implementation of the ISO14001 Environmental Management System (EMS)
Standard for all operational sites and the PTTEP office building. In
accordance with ISO14001 requirements, an environmental management
system is followed in compliance with company policy, legislation and
other requirements in order to prevent pollution to environment, and to
ensure improvement in effective company performance. As a result, PTTEP
became the first petroleum exploration and Production Company in
Thailand and the Southeast Asian region to achieve ISO 14001
Certification.

(2) Study of environmental impact assessment prior to commencement of
new exploration and production projects, which is legally required in
order to ensure on-going monitoring and measurement programs to mitigate
any environmental impacts for operations in Thailand and overseas.

(3) Re-injection of produced water (wastewater separated from offshore
production processes) into subsurface reservoirs to ensure no overboard
discharging which might affect the environment.

(4) Monitoring of discharged wastewater quality from the production
process and the quality of seawater, sediment, benthic fauna and fish
around platform vicinity to ensure there is no exposure to health and
environmental hazards.

(5) Recovery of flare gas for electricity generation and sales.

(6) Oil Spill Equipment and response are provided to ensure
environmentally sound operations from any oil spill incident Tier 1 (<
20 tonnes), joining the Oil Industrial Environmental Safety Group (IESG)
for Tier 2 oil spill response incident (20-1000 tonnes) and EARL/OSRL
(East Asia Response Limited/ Oil Spill Response Limited) for Tier 3 Oil
Spill Response (>1000 tonnes). In case of the spill at Montara Oil field
in Australia, PTTEP also coordinated with EARL in Singapore to cooperate
on the oil spill response and clean up under the approval of the
Australian Governmental Agency.

(7) Provision of appropriate technology for waste disposal and treatment
(e.g. Mercury contaminated waste, oil contaminated waste) for
environmental impact abatement.

(8) Promotion of Safety, Security, Health and Environmental awareness
through a number of means, e.g., training, and monthly SSHE bulletins,
etc.

(9) Coordination and provision of support for other exploration and
production companies, the Petroleum Institute of Thailand, government
agencies and related associations in order to expand experience and
solve environmental problems for further improvement.

During the past 3 years, PTTEP has strictly complied with both Thai and
International legislation and other requirements concerning Safety,
Security, Health and Environment. In addition, PTTEP has been
continuously improving its positive environmental practices in
maintaining, developing and reducing environmental impacts by achieving
the ISO 14001 certification for Environmental Management System Standard
from AJA Registrars LTD. under UKAS (United Kingdom Accreditation
Service) accreditation, for all its operational sites as detailed below:

(1) Bongkot Project in the scope of “Exploration and production of
    natural gas and condensate”

(1) S1 Project in the scope of “Exploration and production of petroleum”

(2) PTTEP1 Project in the scope of “Exploration and production”

(3) Songkhla Logistics Base in the scope of “Provision of logistics
    services to offshore oil and gas operations”

(4) PTTEP Building in the scope of “Building management and maintenance
    services”

(5) Core research centre and logistics support for storage of core lab
    samples.

In 2006, PTTEP developed its Environmental management System to comply
with the requirement of ISO 14001 version 2004, and all PTTEP operating
units in Thailand were certified to that standard. Currently, PTTEP
plans to develop the environmental management system in our operating
units in international assets to comply with this requirement so that
the common standard ISO 14001 is applied to all projects in the future.

With regard to spill incidents; spills in 2007, 2008 and 2009 accounted
for 0.07, 2.56 and 1.19 tonnes/million tonnes of production respectively
by excluding the spill case from Montara Field. By including the Montara
Spill Case, the spill rate will rise to 318.75 tonnes/million tones of
production. From these figures, it can be seen that the level of
spillage in the year 2009 was obviously higher than in the previous
years. However, PTTEP has not only taken an immediate response for this
case by approval from Australia government authorized party but we also
conducted a root cause investigation to ensure proactive mitigation.

PTTEP is committed to its SSHE policy to conduct its activities without
negative impact on personnel, properties of the company and its
contractors. In addition, PTTEP’s Lost Time Injury Frequency Rate (The
number of Lost Time Injuries per 1,000,000 hours worked) the figures for
the years 2007, 2008 and 2009 were 0.32, 1.24 and 0.81 respectively. The
figure for 2008 being lower than those of the previous years but it is
still higher than our set target.

In response to the rapid growth of investment, and operations of PTTEP
during recent years, PTTEP is updating their SSHE documents and
documentation system to standardize references and guidelines relating
to SSHE management. Once these documents are updated, new and existing
assets will be able to develop or update their own documents,
referencing the new standards.

To emphasize the awareness and accountability of operations in all
levels, PTTEP Management visit has proceeded in both domestic and
international operations in the passing year. Furthermore, PTTEP also
implemented the Asset Integrity Management System in our SSHE Management
system for ensuring safe operations.

Additionally, as part of its commitment to protect the environment,
PTTEP has increased its spending on environmental improvement programs
by 98.0, 141.7 and 116.3 million Baht in the years 2007, 2008 and 2009
respectively.

With regard to sustainable development, PTTEP is one of the companies
under consideration for the potential project of Green House Gas
reduction. Although it is not mandatory for Thailand to reduce green
house gases, according to the Kyoto Protocol, under United Nations
Framework Convention on Climate Change (UNFCCC), PTTEP is voluntarily
encouraging green house gas emission reduction in its operations through
both a Clean Development Mechanism (CDM) and the search for
opportunities in other economical projects.

PTTEP S1 Asset, in cooperation with the Department of Mineral Fuels
(DMF) jointly initiated
a project to supply the community with natural gas from Nongtum A
Station, instead of using LPG.

For this project, flare gas was piped through a gas line from the
location to the newly built Nong Tum Agricultural Product Center. The
notable products of this center are fried fruit and vegetable products
such as banana, pumpkin and taro etc. The project was completed in
October 2008 utilizing approximately 0.04 MMscfd of gas from the flare.
By using natural gas from the flare, instead of LPG, the project was
able to save the villagers several million Baht per year.

The gas utilization project at “Nongtum A” is a project which
demonstrates PTTEP managing its activities in order to minimize impact
on the environment and on communities, thus maintaining Corporate Social
Responsibility (CSR).

PTTEP’s “Gas Recovery Unit” project was installed to reduce green house
gas emissions from Bongkot production facilities. It is expected that
the green house gas reduction will be approximately 250,000 tonnes of
carbon dioxide equivalent/year by this project.

In addition, an engineering design study of Soatien A in S1 Project
helped to facilitate a utilization of flare gas by Clean Development
Mechanism (CDM) approach for operations in the S1 concession area, this
was conducted to help to develop green house gas reduction projects in
the upcoming years.