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  11. Administration and Management

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11.1 Management Structure

  11.1.1 Committees: Board of Directors and Sub-Committes

PTTEP is governed by the PTTEP Board of Directors and 4 sub-committees:
the Audit Committee, the Remuneration Committee, the Nominating
Committee and the Cash Management Committee.

(1) The PTTEP Board of Directors has the authority and the
responsibility for: providing the Company with directions on its
Corporate Governance of PTTEP, policy, strategic plan, vision, and
annual budget for its operational plans; for appointing / replacing
PTTEP Management and for monitoring and following up on Company
performance, except for the following cases, which are to be approved by
a Shareholders’ Meeting with a total number of votes not less than
three-fourths of the total number of votes cast by the shareholders
present and entitled to vote :

(a) Sale or transfer of the whole or important parts of any PTTEP
    business to other entities

(b) Purchase or acquisition of the business of other companies or
    private companies by PTTEP

(c) Creation, amendment or termination of any contracts with respect to
    the granting of a lease of the whole or important parts of any PTTEP
    business, the assignment to any other person(s) to manage the
    Company or the merging of the Company with any other entity to share
    profit and loss

(d) Amendment of the Memorandum or Articles of Association

(e) Increase or reduction of registered capital, debentures issuance,
    company amalgamation and company dissolution

(f) In case PTTEP or its subsidiaries decide to enter into a transaction
which is a connected transaction, or a transaction concerning the
acquisition or disposition of material assets of PTTEP or its
subsidiaries, as defined in the Notification of the Securities Exchange
of Thailand which is applied to a connected transaction of a listed
company, as the case may be. In the event that such a Notification
requires PTTEP as a listed company to undertake and process the
Notification, PTTEP shall follow such rules and procedures in accordance
with such Notification.

(2) PTTEP Board of Directors composed of 15 directors as details of the
    present and ex-directors in Year 2003 on page 105.

(3) The Directors conducted the board performance assessment and rated
    themselves by the score of 4.42 or at a very good level, comparing
    to the score of year 2003 at 4.10. Score for each category are as
    follows:

+---------------------------+---------+---------+--------+-----------+
| List                      | 04 :    | 04 :    | 04 :   | 04 :      |
|                           |         |         |        |           |
|                           | Imp     | Perfo   | Impo   | Per       |
|                           | ortant* | rmance* | rtant* | formance* |
+---------------------------+---------+---------+--------+-----------+
| 1. Strategy               | 4.66    | 4.26    | 4.63   | 4.22      |
+---------------------------+---------+---------+--------+-----------+
| 2. Accountability         | 4.65    | 4.46    | 4.63   | 4.41      |
+---------------------------+---------+---------+--------+-----------+
| 3. Monitoring and         | 4.63    | 4.30    | 4.23   | 3.83      |
| Supervision               |         |         |        |           |
+---------------------------+---------+---------+--------+-----------+
| 4. Policy                 | 4.63    | 4.35    | 4.53   | 4.15      |
+---------------------------+---------+---------+--------+-----------+
| 5. Remuneration           | 4.58    | 4.58    | 4.56   | 4.49      |
+---------------------------+---------+---------+--------+-----------+
| 6. Meeting                | 4.57    | 4.45    | 3.85   | 3.73      |
+---------------------------+---------+---------+--------+-----------+
| 7. Training & Development | 4.54    | 4.46    | 4.17   | 3.56      |
+---------------------------+---------+---------+--------+-----------+
| 8. Teamwork               | 4.50    | 4.45    | 4.47   | 4.267     |
+---------------------------+---------+---------+--------+-----------+
| 9. Board Structure        | 4.47    | 4.47    | 4.46   | 4.24      |
+---------------------------+---------+---------+--------+-----------+
|                           | 4.64    | 4.42    | 4.39   | 4.10      |
+---------------------------+---------+---------+--------+-----------+

3 = Important / good, 4 = very important / very good, 5 = most important
/excellent

(4) Directors’ changes in number of shares holding and Board Meeting
    attendance of Year 2004 are as follows:

[TABLE]

$ Retainer Fee, Meeting Fee and Bonus in 2004(Paid in 2005)

* Become Directorship on April 29, 2004

# Resigned Directorship on April 28,2004

(5) The Audit Committee has the following responsibilities:

(a) To review and audit the Company’s financial report, so as to ensure
    that it is correct and sufficient, with the Company’s auditor also
    to attend the quarterly meeting

  (b) To review and audit the Company’s operations to ensure that they
  are in compliance with the Securities and Exchange Acts, Regulations
  of the Stock Exchange of Thailand, and any other relevant laws

  (c) To consider PTTEP’s information disclosure on matters related to
  connected transactions or conflict-of-interest transactions to ensure
  that they are correct and sufficient

  (d) To review the internal control and internal audit systems to
  ensure that they are appropriate and effective, and, by coordinating
  with the external auditors, ensure that the audit report, the audit
  method and the audit report evaluation are of the required standard

  (e) To consider, select and propose the appointment of PTTEP’s
  external auditors, including their fees

  (f) To assess PTTEP’s major risks and provide suggestions to minimize
  such risks

(g) To approve the appointment, rotation, performance appraisal and
    reward / punishment for the head of the department responsible for
    auditing

  (h) To consider the audit plan

(i) To consider the budget and manpower of the audit unit

  (j) To evaluate the Audit Committee’s performance on corporate
  governance and disclose this evaluation in the annual report

  (k) To ensure that the Chairman of the Audit Committee, or a Director
  to the Audit Committee, attends the Shareholders’ meetings to clarify
  any matters pertaining to the Audit Committee or the appointment of
  the external auditors

  (l) To review the Audit Committee Charter for revision (if necessary)
  annually

  (m) To assume any other responsibilities as assigned by the Board of
  Directors as well as to appoint the Chief of the Internal Audit or
  Senior Manager, Corporate Secretary Office to be Secretary of the
  Audit Committee

The Audit Committee comprises three Directors:

- Mr.Nopadon Mantajit Chairman of the Audit Committee

- Mr.Prasit Kovilaikool Member of the Audit Committee

- Mr.Charnchai Musiknisakorn Member of the Audit Committee

* The new Audit Committee members were appointed to substitute those who
were due to retire as to term completion on June 29, 2004.

The ex-Audit Committee comprises

-   Mr. Vudhibhandhu Vichairatana Chairman of the Audit Committee

-   General Lertrat Ratanavanich Member of the Audit Committee

-   Mr. Chulasingh Vasantasingh Member of the Audit Committee

  (6) The Remuneration Committee has the following responsibilities:

  (a) To evaluate the performance of the Board of Directors,
  Sub-Committee, President according to each year’s performance
  agreement.

  (b) To recommend guidelines in determining the remuneration package of
  the Board of Directors and Sub-Committee, including meeting fees,
  bonus and other fringe benefits both in monetary and non-monetary
  term. The remuneration principles are established fairly and decently
  in order to propose at Shareholders’ Meeting.

  (c) To recommend guidelines in determining the remuneration package of
  President , including salary, bonus and other fringe benefits both in
  monetary and non-monetary term and recommend the remuneration
  structure of Executives. The remuneration principles are established
  fairly and decently in order to propose at the Board of Directors’
  Meeting.

  (d) To review the remuneration package of the Directors,
  Sub-Committee, President and the remuneration structure of Executives
  according to the work performance, the company’s performance, the
  practices guidelines of the industry and leading listed companies in
  the Stock Exchange of Thailand, as well as related to the scope of
  duties and responsibilities.

  (e) To perform any other scope of duties and responsibilities assigned
  by the Board.

The Remuneration Committee comprises three Directors

-   Mr. Prasit Kovilaikool: Chairman of the Remuneration Committee

-   Mr. Prasert Bunsumpun: Director of the Remuneration Committee

-   Mr. Anucha Sihanatkathakul: Director of the Remuneration Committee

(6) The Nominating Committee has the following responsibilities:

  (a) To formulate a transparent and standard process of Directors or
  President selection.

  (b) To select appropriate candidates to be appointed as new Directors
  or President and to propose nominations to the Shareholders’ Meeting
  or the Board of Directors’ Meeting, depending on the case, for further
  consideration

  (c) To prepare list of possible nominee Directors or President in
  advance and/or when there is a Director or President vacancy

  (d) To perform other duties relevant to the selection of Directors or
  President as may be assigned by the Board

The Nominating Committee comprises three Directors

-   Mr. Chulasingh Vasantasingh: Chairman of the Nominating Committee

-   Mr. Prasert Bunsumpun: Director of the Nominating Committee

-   Mr. Anucha Sihanatkathakul: Director of the Nominating Committee

(7) The Cash Management Committee has the responsibility for manage cash
and report to the Board of Directors.

The Cash Management Committee comprises three directors

- Mr. Pichai Chunhavajira: Director

- Mr. Anucha Sihanatkathakul: Director

- Mr. Maroot Mrigadat: Director

11.1.2 Senior Manager, Corporate Secretary: Mr. Theerasak Tancharoenlarp

11.1.3 Details of management and their PTTEP shareholding in Year 2004
are on page 124.

11.2 Nomination of the Board of Directors and the Management

11.2.1 Directors Nominating

When there is a Directors or President vacancy, the Nominating Committee
will select appropriate candidates to become Directors or President by
collecting a list of recommended nominees from PTT, the major
shareholders, and to put forward nominations to the Shareholders’
Meeting or the Board of Directors’ Meeting, depending on the case, for
further consideration. If the vacancy occurs because of the completion
of the directorship term, the proposal will be submitted at the
Shareholders’ meeting for approval. Meeting approval requires that the
majority of the shareholders who have assembled at the meeting vote for
the proposal. In case the vacancy occurs because of a director
resignation or any other reason other than completing the term of
directorship, the proposal will be submitted at the PTTEP Board of
Directors’ meeting. Board approval requires a three-fourths vote by the
directors.

11.2.2 Executives’ Nominating

PTTEP’s President is authorized to select and appoint any person(s) with
knowledge, capabilities and experience in PTTEP business to management
level. This selection process is in compliance with PTTEP Personnel
Administration Regulations. In case there is a need to select a person
who is not in PTTEP, an interview of the candidate must be conducted by
the Interview Committee. Thereafter, the appointment must be reported at
the Board of Directors’ meeting. Additionally, any appointment of
internal audit department management is required to seek prior approval
from the Audit Committee.

11.3 Remuneration of the Board of Directors and Executives

  11.3.1 Directors’ Remuneration

+-----------------+---------+---------------+---------+----------------+
| Remuneration    | 2003    |               | 2004    |                |
|                 |         |               | ⁽³⁾     |                |
+-----------------+---------+---------------+---------+----------------+
|                 | No.of   | Total Amount  | No.of   | Total Amount   |
|                 | Prs,    | (Baht)        | Prs,    | (Baht)         |
+-----------------+---------+---------------+---------+----------------+
| Meeting Fee     | 16      | 7,261,774     | 16      | 9,818,750      |
+-----------------+---------+---------------+---------+----------------+
| Bonus           |         | 12,204,691⁽¹⁾ |         | 16             |
|                 |         |               |         | ,442,622.95⁽²⁾ |
+-----------------+---------+---------------+---------+----------------+
| Other           |         |               |         | -              |
| remuneration    |         |               |         |                |
+-----------------+---------+---------------+---------+----------------+
| Total           |         | 19,466,465    |         | 26,261,372.95  |
+-----------------+---------+---------------+---------+----------------+

(1) This include 2002 bonus of Baht  826,517

(2) This include 2004 bonus to be paid in year 2548

(3) See details of each director on page55-56

    2.  Executives’ Remuneration

+--------------+--------+-----------------+---------+-----------------+
|              | 2003   |                 | 2004    |                 |
+--------------+--------+-----------------+---------+-----------------+
|              | No. of | Total Amount    | No. of  | Total Amount    |
|              | Mgnt   | (Baht)          | Mgnt.   | (Baht)          |
+--------------+--------+-----------------+---------+-----------------+
| Salary       | 12     | 38,499,452.34   | 12      | 42,286,190.00   |
+--------------+--------+-----------------+---------+-----------------+
| Bonus        |        | 15,242,450.00   |         | 14,292,730.00   |
+--------------+--------+-----------------+---------+-----------------+
| Other*       |        | 5,554,297.77    |         | 6,037,736.00    |
+--------------+--------+-----------------+---------+-----------------+
| Total        |        | 59,296,200.11   |         | 62,616,656.00   |
+--------------+--------+-----------------+---------+-----------------+

  * Provident Fund

  Please refer to warrants of the ESOP program on page 61.

ESOP Program

During 2002-2004 the company offered the warrants to purchase the
Company’s common shares to the directors (only in year 2002), management
and employees with approval from the General Shareholder Meeting to
create a sense of belonging among management and employees and to
compensate and reward management and employees who dedicated their time
and effort to the success of the Company. Details are as follows:

+-----+-------------------+------------------------+-----------------+
| Y   | No. of warrant    | Exercise Ratio         | Exercise Price  |
| ear |                   |                        |                 |
|     | (Unit)            | (unit of warrant :     | (Baht)**        |
|     |                   | unit of share )        |                 |
+-----+-------------------+------------------------+-----------------+
| 20  | 2,000,000         | 1:1                    | 111             |
| 02* |                   |                        |                 |
+-----+-------------------+------------------------+-----------------+
| 2   | 2,000,000         | 1:1                    | 117             |
| 003 |                   |                        |                 |
+-----+-------------------+------------------------+-----------------+
| 2   | 2,800,000         | 1:1                    | 183             |
| 004 |                   |                        |                 |
+-----+-------------------+------------------------+-----------------+

 * PTTEP transferred the warrants to purchase the Company’s common shares, allotted in 2002 for 6 directors who are governmental officials to the Ministry of Finance.  For 2003-2004 PTTEP did not offer any extra warrants to the directors, only the management and employees were offered.

 ** Exercise Price Calculation 

 Year 2002 : Market price calculated by using the average closing price of Company’s shares 20 working days prior to the date of which the warrant’s issuance and offering date is determined.

 Year 2003 : Calculated by using the average closing price of Company’s shares from the first working day following the period which was used for calculating the exercise price of the 2002 ESOP Program up to the working day prior to the date which the Company determines that the new shareholders have no right to receive the 2002 dividend payment or Ex-dividend (XD) date and minus the 2002 dividend per share.

 Year 2004 : Calculated by using the average closing price of Company’s shares from the date which the Company determines that the new shareholders have no right to receive the 2002 dividend payment up to the working day prior to the date which the Company determines that the new shareholders have no right to receive the 2003 dividend payment or Ex-dividend (XD) date and minus the 2003 dividend per share.

. 

Management holding shares in the Company

+-------------------------+---------+--------+-----------+-----------+
| Name List               | Number  |        | Differ    | Number of |
|                         | of      |        | entiation |           |
|                         | Shares  |        | of Number | PTTEP     |
|                         | as of   |        | of shares | Warrants  |
|                         | 31      |        |           |           |
|                         | D       |        |           |           |
|                         | ecember |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
|                         | 2003    | 2004   |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 1. Mr. Maroot Mrigadat  | 5,500   | 14,000 | 8,500     | 61,600    |
+-------------------------+---------+--------+-----------+-----------+
| 2. Mr. Tevin Vongvanich | 10,900  | 12,400 | 1,500     | 55,000    |
+-------------------------+---------+--------+-----------+-----------+
| 3. Mr. Suwit Pitrchart  | 9,000   | 3,400  | (5,600)   | 79,200    |
+-------------------------+---------+--------+-----------+-----------+
| 4. Mr. Somkiet Janmaha  | 8,300   | 17,300 | 9,000     | 43,400    |
+-------------------------+---------+--------+-----------+-----------+
| 5. Mr. Asdakorn Limpiti | 18,300  | 25,300 | 7,000     | 43,400    |
+-------------------------+---------+--------+-----------+-----------+
| 6. Mr. Poawpadet        | -       | 500    | 500       | 22,900    |
| Vorabutr                |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 7. Mr. Chatchawal       | -       | -      | -         | 43,400    |
| Eimsiri                 |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 8. Mr.Somporn           | 5,600   | 14,600 | 9,000     | 43,400    |
| Vongvuthipornchai       |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 9. Mr. Nipit Isarankura | 4,700   | 2,900  | (1,800)   | 52,400    |
+-------------------------+---------+--------+-----------+-----------+
| 10. Mr. Prisdapunt      | 43,400  | 47,300 | 3,900     | 37,800    |
| Pojanapreecha           |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 11. Mr. Suppamas        | 3,400   | 2,600  | (800)     | 37,800    |
| Prachakvej              |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 12. Mr.Luechai          | -       | -      | -         | 20,500    |
| Wongsirasawad           |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 13. Mr. Anutra Bunnag   | 1,100   | -      | (1,100)   | 17,800    |
+-------------------------+---------+--------+-----------+-----------+
| 14. Mr. Sirirat         | 4,100   | 4,000  | (100)     | 15,200    |
| Sararattanakul          |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+
| 15. Mr.Chaiyaphon       | N/A     | 3,400  | -         | 11,100    |
| Chirakorn               |         |        |           |           |
+-------------------------+---------+--------+-----------+-----------+

11.4 Corporate Governance Report

 11.4.1 Corporate Governance Policy/ Business Ethics/Leadership and Vision 

The Board of Director of PTTEP issued a written principle of the
Corporate Governance of PTTEP in 2001 and review it regularly. The
principle is disclosed on the PTTEP website under the topic of Corporate
Governance. Business Ethics at PTTEP are based on the six main
principles of PTTEP’s Corporate Governance: Accountability,
Responsibility, Fairness and Integrity, Transparency, Creation of
long-term Value for all stakeholders and Promotion of Best Practices.
The philosophy of working at PTTEP, is that we commit to work as
professionals under good internal controls and a transparent system and
treat stakeholders fairly and equitably.

After commencing in June 2003, PTTEP continued to promote the practice
and understanding of Corporate Governance to PTTEP staff in 2004. The
Corporate Governance Culture Promotion Team (CGCP Team) created various
activities such as making video program to create understanding of CG
with staff participation. The video was displayed on many occasions such
as during orientations, in-house training courses and at the General
Shareholders Meeting in April 2004. Knowledge and information about
Corporate Governance had been communicated through the electronic system
and disclosed on a CG webpage. Continuous activities from 2003 were
still ongoing such as soft-talk with divisional employees being lead by
their supervisors as CG Leaders, opinions or ideas exchange on the CG
web-Board. In 2004, PTTEP applied for CG Rating with Thai Rating
Information Services Company Limited (TRIS) and was rated at the score
of 8.14 or “Very Good’ with the following component scores: right of
shareholders (20%) at 8.44 scores; Board and Management roles and
structures (40%) at 7.68 scores; Disclosures (25%) at 8.53 scores and
Corporate Governance Culture (15% ) at 8.36 scores. The TRIS Corporate
Governance Report of PTTEP can be assessed through PTTEP or TRIS
website.

The Board of Directors and Management still played an important role as
the leaders in Corporate Governance with accountability to all
stakeholders, especially to shareholders at the annual general
shareholders meeting.

In 2004 the directors took IOD Directorship Programs. Nine directors out
of 15 have now taken this course. Four directors of subsidiaries which
have PTTEP management also have taken this Program. During the year, the
directors also entered other courses and seminars to add value to their
role as directors.

The Directors of the Board and Sub-Committees monitored their role in
governing and supervising the management throughout the year and has
stated their performance as disclosed in item 11.1.1 (3) and in the 2004
Chairman’s Message and the Audit Committee Report.

11.4.2 Controlling System and Internal Audit

PTTEP employs an efficient internal control policy that aligns with
acceptable company risks and the diverse activities of individual
departments. The Internal Audit Department oversees constant internal
controls to ensure improved control measurements related to all possible
changes in environments and risk.

PTTEP personnel at all levels, including Directors, management and staff
employees, have collectively devised work procedures intended to achieve
the following:

1.  Efficient and effective operations, including prudent use of
    resources

2.  Accurate, reliable and prompt financial reporting

3.  Full compliance with the Company’s policies, laws and regulations

PTTEP has implemented its internal control system in accordance with the
regulations of The Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and that of the Committee of the Auditor General of
Thailand. The PTTEP internal control system comprises the five following
components:

1.  Control Environment: PTTEP has strategically planned its operations
    and projects, organization and human resources management as well as
    its business and financial management. The Company is determined to
    uphold the principles of Good Corporate Governance and has set up
    this policy in its statement: Corporate Governance of PTTEP.

2.  Risk Assessment: PTTEP has assessed prominent risks at two
    levels: 1) Corporate Level: to be managed by top executives and 2)
    Operational Level: to be managed either by management or the
    activity/work process owner.

3.  Control Activities: PTTEP has organized its business to function
    systematically, efficiently and competitively within the industry as
    well as with our partners. Also, to prevent and minimize operational
    risks, the Company operates under four essential Company
    Regulations: Human Resources Management Regulations, Finance and
    Accounting Regulations, Budgeting Regulations and the Procurement
    Regulations.

PTTEP has formed an Authority Table, known as the PTTEP Delegation of
Authority and Signatures (DAS), which the President can use to clearly
delegate authority to the Company’s functional management, resulting in
practical and easily-tracked courses of action.

4.  Information and Communication: PTTEP realizes the importance of
    Information Technology and Communication and thus has provided an
    effective system, including internal and external channels as
    detailed below:

  - Internal/External Communication: The Company has forged ahead with
  efficient information system for both internal and external
  communications, so that management and staff can readily achieve work
  objectives via the utilization of the intranet. Moreover, for more
  elaborate external communication, these systems guarantee that
  adequate information and required reports are available for all
  institutions as required by law. Also, it is a PTTEP policy to always
  promote efficiency and promptness as goals that will result in better
  understanding and improved networking for the business.

  - Secure Data Transmission: With a dependable information control
  system moderating the sending and receiving of data, PTTEP has
  attained clear distinction of authority and easily-understood
  responsibilities for all its staff and functional units. Furthermore,
  PTTEP has laid out levels for access to confidential information and
  applications in all its divisions which allow access to authorized
  personnel only.

5. Monitoring and Evaluation: PTTEP features control systems,
performance monitoring and evaluation systems in which employees at the
operational level are evaluated on their performance once a year. A Risk
assessment program has been monitoring and regularly reporting to the
Risk Management Committee Management. Furthermore, PTTEP’s Internal
Audit Department, which reports directly to the Audit Committee,
monitors and evaluates the efficiency and effectiveness of all PTTEP
operations.

The size and scope of the internal control system of PTTEP for year 2004
is presented in item 12 page 74.

11.4.3 Risk Management

Risk Management involves understanding the causes of business changes
which may affect the Company’s objectives, and setting up standard
practices required to manage these changes adequately and appropriately.

PTTEP’s Risk Management policy has been set up for the proper and
efficient identifying, mitigating and monitoring of risks. For any risk
that confronts Company business, PTTEP has prepared standard practices
to respond in an appropriate, systematic and efficient manner. It should
also be noted that the Company remains committed to enhancing a risk
awareness culture, improving work procedures and resource utilization to
proactively manage the risks. PTTEP will not only be able to reduce
possible loss, but also gain value-adding new business opportunities for
the Company.

PTTEP has developed its risk management system in 5 steps: setting
objectives; identification; assessment; mitigation and monitoring, so as
to be able to cope with 2 levels of risks: at the corporate level, taken
care of by management, and at the operational level, taken care of by
individual departments. In 2004 PTTEP presented a corporate risk profile
and mitigation plan to the Board of Directors in the meeting to approve
PTTEP’s Strategic Plan.

In practice, PTTEP held 2 Risk Management Committee Meetings in 2004 to
set up a policy and risk management framework; and also to follow up on
detailed assignments. This was to assure that the system functioned
efficiently and reported accurately to Board of Directors. Significant
projects approved by the Risk Management Committee were as follows:

-   prepared Corporate Risk Profile

-   followed up on corporate risk management by setting up task force
    working incorporative with the Risk Management Manager and
    functional departments with major corporate risk concerned;

-   prepared action plan for risk management

 Balance of Power, Aggregation or Segregation of Positions

The composition of the PTTEP Board of Directors can be specified as four
groups, namely, independent directors, connected directors,
private-sector directors, and the Director General of Department of
Mineral Fuels, Ministry of Energy. The present Board of 15 directors
consist of 7 independent directors with 3 from the private-sector and 4
from the government sector including the Director General of Mineral
Fuels. The other 7 directors are connected directors, i.e. are they
directors and management of the major shareholders, PTT; and one
executive director who is the President of PTTEP. The directors have
various knowledge and capabilities in the petroleum business, law,
finance and techniques which are very useful to the business. In all
Board meetings, Directors remain free of undue free influence and are
unlimited in any role they may wish to assume. It can be categorically
stated that in 2004 the PTTEP Board of Directors efficiently oversaw the
effectiveness of the Company and protected the assets of all PTTEP
stakeholders.

For a clearer picture of the Board structure, the Company set a clear
definition of the Independent Directors, which mean directors with
following qualification: A person who;

1.  Holds shares of not more than 1 percent of paid-up capital of PTTEP
    and its affiliated companies, associated companies of related
    companies, which shall be inclusive of the shares held by related
    persons spouse, children under legal age or nominee;

2.  Is a director or manage of PTT Public Company Limited (PTT) or a
    manage of PTTEP, its affiliated companies, associated companies or
    related companies, and is not an employee, staff member or advisor
    who receives a regular salary; lawyers or auditors who receives fees
    from PTTEP, its affiliated companies, associated companies, related
    companies of PTT.

3.  Has resigned from such position in item (2) for more than 2 years

4.  Is a director who has no direct or indirect benefit or interest in
    finance and management of PTTEP, affiliated companies, associated
    companies, related companies or PTT, including the benefit or
    interest of the said nature during the period of 2 years before his
    appointment as a member of the audit committee except where the
    board of directors has carefully considered that such previous
    benefit or interest does not affect the performance of duties and
    the giving of independent opinions;

5.  Is a director who is not related person or close relative of any
    management member of PTTEP or PTT;

6.  Discloses all concerned relationships which may cause lack of
    independence with compliance to the Policy on Conflict of Interest
    of the Corporate Governance of PTTEP.

PTTEP’s Chairman of the Board and the President are not the same person.
The Chairman takes the role as the leader to determine Company policy in
accordance with the strategy which has been jointly considered and set
up by the Board of Directors and the Management. The Chairman assures
that Board of Directors’ Meetings are conducted successfully. During the
meeting, all Directors are urged to participate as well as raise any
searching questions they may have; and meet occasionally to give advice
and support to management through the President. At the same time, the
Board will not intervene regarding any routine tasks or business
activities under the responsibility of their respective team(s). Only
the President or the Acting President is authorized to make such an
endorsement and assume such responsibility over Company matters.
Presidential authority and power are thus correctly and efficiently
channeled through Management. As a result of all of the above, the
authority of the Chairman and the Management are clearly defined and
separated.

11.4.5 Sub-Committees

On June 29, 2004 the Board of Directors appointed new members of the
Audit Committee to substitute those who were due to retire owing to
completion of their terms. The new Audit Committee members are
Mr.Napadol Mantanachit, Mr.Prasit Koviliakool and Mr.Charnchai
Musiknisakorn with Mr.Napadol Mantanachit as the Chairman. The Company
has assigned Mr.Veerasak Mangchuwong, the Manager of the Internal
Control Department as the secretary to the Audit Committee to substitute
the company secretary. In 2004, PTTEP held five Audit Committee
Meetings. Agendas were sent to the Committee members to study at least 7
days in advance and all members of the Committee attended the meetings,
all of which required two hours or more. The Audit Committee considered
a total of 37 issues. Conclusions regarding the performance of the Audit
Committee are in the Report of the Audit Committee as referred to in
item 12 : Internal Control. The Audit Committee placed high importance
on risk management issues and requested management report to the
Committee.

  PTTEP held 4 Remuneration Committee Meetings considering important
  issues regarding

  1. directors’ remuneration for year 2004;

  2. evaluation and remuneration of the President for year 2005;

  3. revision of the Remuneration Committee 2003;

4. executives’ salary structure for year 2005

5. issuance of protective regulations for directors & employees on duty.

The Nominating Committee held one meeting in 2004 which all members
attended. The meeting considered issues regarding the selection of
candidates to be elected as new directors for the 2004 General
Shareholders Meeting; and board structure.

In 2004 PTTEP did not call any Cash Management Committee Meeting.

11.4.6 Shareholders’ and Stakeholders’ Rights and Investor Relations

PTTEP is required to set up an annual general shareholders meeting
within 4 months after the closing of the fiscal accounting year. The
meeting must facilitate the equitable right of all shareholders by
declaring clear voting procedures to all shareholders present. These
voting procedures are also stipulated in the Articles of Association as
can be accessed through the PTTEP website. Shareholders can also grant
their proxy to independent directors.

PTTEP promotes full participation by all shareholders at this meeting by
sending sufficient information to enable shareholders’ informed to vote
on each agenda item and also to provide convenience for all shareholders
to be able to use their full rights.

The Company realizes the importance of all stakeholders both internally
and externally:- shareholders, customers, employees, government,
partner, society and the environment, suppliers and creditors as stated
in its policy on equivalent treatment toward stakeholders in its
statement Corporate Governance of PTTEP. The Company’s regulations also
deal with stakeholders’ rights in its Regulations of Human Resources
Management, which provides for a Welfare Committee to look after
employees’ benefits. Moreover, to provides further fairness between the
Company and its suppliers by way of a transparent procurement system,
Technical Sub-committees and Commercial Sub-committee were set up as
checks and balances prior to the process of the Procurement Committee
taking care of high value biddings of important projects. Other assigned
departments, such as the Health, Safety and Environment Department, and
the External Relations Department assume responsibility for social and
environmental activities.

The Investor Relations Section of the Financial Department and the
Office of the Corporate Secretary both also serve to answer inquiries
from shareholders and investors. PTTEP is highly concerned about timely
and accurate information disclosed to the Stock Exchange of Thailand
(SET) and shareholders. The Company has set up a transparent disclosure
procedure with regard to both the types of information and time
appropriateness for these reports in normal or urgent cases. To assure
the correctness and sufficiency of information, the quarterly Company’s
financial reports of year 2004 have been reviewed by the Office of the
Auditor General, the Company’s appointed auditor and also approved by
the Audit Committee before release to the public. Moreover, for
investors and shareholder to get prompt information, the Board of
Directors at the Board Meeting No.13/2547/230 on December 28,2004,
passed a resolution for PTTEP to be able to submit the unaudited
financial report to the SET by starting from the unaudited financial
report of year 2004 ending December 31, 2004 onwards. Additionally, a
report covering the Board of Directors’ responsibilities regarding
Company Financial Statements is included in the Annual Report.
Disclosure of non-financial information, especially connected
transactions, MD&A, risk factors are also revealed in the Annual
Information Disclosure Report (Form 56-1) and the Annual Report.
Information and document from Roadshow, news releases, Health, Safety
and Environment Annual Report etc. can be accessed through the Company
website. The PTTEP website has been developed to serve as an
easily-accessible resource for shareholders. Since the beginning of
2004, information has been provided in both Thai and English. PTTEP
disclosed 43 pieces of company information through the Elcid System to
the SET during 2004.

11.4.7 Shareholders’ Meetings and Board of Directors’ Meetings

The 2004 General Shareholders Meeting was held on April 28, 2004. The
invitation letter together with the agenda items and details were sent
to shareholders 14 days prior to the meeting. To provide convenience for
shareholders attending the meeting, a bar code system was used during
the registration process. The shareholders attending the meeting could
see on screen the number of shareholders and persons present at the
meeting and also the result of the voting of each agenda item on Real
Time Basic in the meeting room. Before starting the meeting, the
Chairman introduced all directors, management and auditors presented at
the meeting, and clearly stated its method for the counting of
shareholder votes and on every occasion prior to a meeting, such method
has been announced.

At the 2004 General Shareholders Meeting, there were 9 agenda items as
well as regular agenda items such as the verifying of the former
minutes, the consideration of the Company’s annual operating results and
dividend payment; the appointment of the auditor and consideration of
the auditing fee, the appointment of the new directors replacing those
who resigned because of their term completion. Also considered were the
remuneration of the Board of Directors, and the issuance and offering of
warrants for the Company’s management and employees as well as
allocation of the shares exercised. All proposed agenda items were
approved by the shareholders and complied with the laws. 14 directors
from the total of 15 directors, which included the chairman of the
board, the chairmen of the sub-committees, top management and auditors
attended the meeting to answer the shareholders’ inquiries. Sufficient
time was provided for shareholders to ask questions and for directors
and management to clarify. For each agenda item, it was allowed for
shareholders who voted against to submit their voting tickets for
counting and the result of the voting would then be announced. The 2004
General Shareholders Meeting took about 1 hour. The minutes of the
Shareholders’ Meeting were properly recorded with vote counting,
questions, and comments from shareholders within 14 days after the
meeting and were distributed to all shareholders within 20 days after
the meeting. This occurred without shareholders having to wait for
minutes’ distribution which usually comes with the invitation letter of
the following years General Shareholders Meeting.

At the Board of Directors’ Meeting, the Board agreed on future meeting
dates throughout the year; additionally, the monthly meeting agenda
items are now quite standard and include a monthly report on operating
results. During 2004, the monthly meetings were held on the last Tuesday
of each month, resulting in a total of 13 meetings, including one-day
outside meeting to discuss strategic planning and one special meeting to
discuss the topic of human resources. PTTEP’s Directors received
invitation letters, drafts of the meeting reports, and information
regarding the meeting agenda items on each occasion at least 7 days
prior to the meeting date. There were altogether 71 agenda items for
consideration which mostly were concerned with strategic planning and
annual budgeting, financial statements, petroleum sales agreements,
petroleum sales negotiation, international exploration and production
bidding, joint investment, acquisition and disposition of assets, high
value procurement for important projects, and the amendment of Company
regulations or policy etc. There were also 113 agenda items for
acknowledgement which mostly were concerned with progress project
reports, appointment and position changes of management and reports of
sub-committees etc. Each meeting normally required about two hours. The
Company Secretary attended all the meetings, recorded the minutes and
managed all documents as well as giving advice to the Board of Directors
and executives regarding compliance issues.

The PTTEP Board of Directors’ Meeting Minutes covered all important
issues, including all comments made by the Directors. Ultimately, all
the minutes were unanimously approved and were systematically filed. In
most cases, all PTTEP’s Directors attended meetings regularly unless
there was a legitimate and necessary reason to be absent. If having
known in advance, the Chairman of the Board was always informed prior to
the relevant meeting. Attendance reports for the Board of Directors for
year 2004 appears on page 55-56.

11.4.8 Directors’ and Executive Remuneration

At the 2004 General Shareholders Meeting, the shareholders approved the
new remuneration of the directors as proposed by the Remuneration
Committee. The new remuneration has been compared with the industry and
related to work load increases of the board as per the Company’s growth.
From 2004 onwards, directors will receive 25,000 Bath/person/month, as
compared to 2003 of 20,000 Bath/person/month for the meeting fee; 25,000
Baht/person/month as compared to 2003 of 20,000 Baht for the retainer
fee and a bonus for all directors within the performance year at an
amount limited to 17 million Baht/year as compared to 2003 11.5 million
Baht/year. The Board of Directors considered the distribution of the
allotment and the amount was to be adjusted according to the directors’
attendance at the meetings. Details of the remuneration policy are
displayed on page 57.

Within the Board of Directors’ approval of the salary structure, the
Remuneration Committee approved a 19.8% increase in the executives’
salary structure of January 1, 2004 to December 31, 2004 from the
structure of 2003. The new salary structure would be more competitive
compared with the exploration and production business, and support the
Company’s strategic plan for competing in the international market.

11.4.9 Conflict of Interest

PTTEP has established rules and regulations to manage any conflict of
interest which might occur as stated in the Corporate Governance of
PTTEP, and there are systematic procedures to treat any conflict of
interest that involves any PTTEP personnel, from the Director to the
employee level. At the end of the year, the directors and employees have
to conduct self’ assessment and disclose any situation of conflict of
interest encountered during the year and their action taken. If there is
any conflict of interest at PTTEP, the Company must follow the practice
of the SET regulation which is also clearly stated in the Company’s
Articles of Association. Therefore, for any connected transactions,
approval must be granted by the Board of Directors if required, and the
Audit Committee will ensure the disclosure of the transaction in the
Annual Report and Form 56-1.

When involved with connected transaction during 2004, PTTEP has complied
with SET rules and regulations regarding Connected Transactions year
2003 and 2004 (Amendment No.2) and PTTEP Articles of Association. The
resolution of the meeting would use only the votes of the independent
directors to determine the final decision. Please refer to PTTEP
connected transaction of 2004 on page 75.

11.5 Inside Information Handling

The Corporate Governance of PTTEP clearly stipulates policies on
Confidential Information and on Securities Exchange. The handling of all
inside information must be restricted to the scope of one’s
responsibility only, and measures are in place to dissuade particular
individuals from making any transaction of PTTEP shares during periods
in which PTTEP is about to disclose information to the Stock Exchange of
Thailand, such as reports on the Company’s annual and quarterly
financial statements and the acquisition of assets. Directors and
management, including secondees of high positions and staff involved in
the preparation of these reports and other inside information, are
instructed not to involve themselves in any transaction of PTTEP shares,
and personnel at all levels are encouraged to become long-term
shareholders for at least three months from the latest buying or selling
of PTTEP shares. In year 2004, PTTEP announced 4 restricted periods:
during the periods of the announcement of 2003 year end financial
statement at the beginning of 2004 and the first, second and third
quarter financial statements.

6.  Personnel

11.6.1 As of 31 December 2004 PTTEP had 767 employees.

11.6.2 PTTEP had no significant change in number of employees and had no
Labor Dispute in the past three year.

11.6.3 Total remuneration (include of salary bonus and provident fund)
of all employees as of 31 December 2004 is Baht 881,210,177.70.

11.6.4 Number of employees by divisions:

  (1) Lines under the President 54 employees

  (2) Strategy & Capability Development Division 29 employees

  (3) Thai Offshore Assets 209 employees

  (4) Regional Assets 40 employees

  (5) Business Development Division 51 employees

  (6) Geoscience Division 58 employees

  (7) Business Services Division 158 employees

  (8) Finance & Accounting Division 56 employees

  (9) Human Resources Division 45 employees

(10) Production Development Division 67 employees

  11.6.5 Human Resources Development Policy

The Company realizes that human resources are the most important factors
in creating competitiveness and becoming an international organization. 
In line with the vision and mission, the Company accelerated the
development and management of the human resources department, and has
set up employee development plans at all levels which are summarized
below:

1)     Created a  human resource development policy in accordance with
the Company’s vision.  mission and corporate values to meet its business
growth.  The main focus is on the development of technical and other
professional competencies. Other areas focus included safety and
environment, information technology, English language and managerial
skills.  Along this line, the Company is establishing a  Corporate
Culture and creating an environment that supports the development of
ethical employees who are willing to learn and develop themselves,
thereby enhancing the strength of the company’s learning organization
and supporting those employees who are devoted  to work to achieve
excellence.      

2)      Conducted Performance Development Appraisal and Competencies
Development Assessment and  used  the results as a basis for analyzing
employees’ development needs.

3)     Developed  career development plans that meet the human resource
development policy and needs, and used the plans as guidelines for the
development of management’s and employees’ skills knowledge and
capability needed for performing their current jobs, thereby  helping to
further future growth ; as well as for enhancing teamwork, decision
making and solving problems skills required for  various situations. 
The career development plans are established together with employees,
line managers and all others concerned both for specific groups of
employees and for each individual through the use of a systematic and
continuous approach. 

4)     Provided training in accordance with the established plan through
internal/external courses, on the job training, international
assignments, secondment programs, study visits, job rotations, project
assignments and coaching (which has been intended to provide
developmental advice), seminars, knowledge sharing forums and
self-development through the use of information technology and library
resources. 

5)    Established a mechanism for efficient employee development by
involving line managers, Job Family Master, the Human Resources
Department, and all concerned in the preparation of manpower plans,
individual development plans, follow-up and assessment of employee
development projects to ensure target achievements.