Good morning, everyone. My name is Chutathip Pachiyanukul, Assistant IR Manager. I would like to welcome you to SPRC Analysis Presentation for the fourth quarter and for the full year 2023 performance. Before we begin, I would like to introduce SPRC management team who are in the meeting with me today. Let's start with Robert Dobrik, Khun Rob kha, our CEO.
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Next is Khun Nutsara Somkiatweera kha, Vice President, Finance and Accounting kha.
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Then Khun Sakchai Thamsuruk kha, our Vice President, Value Chain Optimization kha.
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Also today, I am pleased to welcome Mr. Shashank Nanavati, our Executive Vice President, Commercial, who join this meeting for the first time. Khun Shashank kha, please introduce yourself kha .
[Non-English content] Good morning, everyone. My name is Shashank. Happy to be here. I am new Executive Vice President of Commercial for SPRC. As you will see on the slide, some of my background. I come with over 15 years of experience in various commercial functions, primarily in value chain optimization, supply planning, sales, and marketing. I look forward to using all that experience to continue reinforcing and growing the SPRC value here. Thank you.
Thank you, Khun Shashank. Today presentation will begin with a performance review by Khun Rob, followed by a financial information by Khun Nutsara, and then market update by Khun Sakchai. Before going back to Khun Rob again for the wrap-up session on our recent investment in fuel business. Khun Rob will also cover the future opportunities and looking ahead before the Q&A session kha. So if you have any questions, please just click on the right-hand button or send a question through the chatting channel. Khun , please turn off your microphone. Thank you. At this time, I would now turn over the session to Khun Rob kha. Please go ahead, kha. Thank you.
Thank you, Khun Thip. Well, first off, thanks for joining us today. As Khun Thip said, we will provide a bit of a background overview, but really want to get to more of your questions. So let me start by just opening up with just a very high-level overview of our operational performance in 2023, and fourth quarter specifically. As our slides would suggest, this wasn't our strongest moment. We have already shared our ultimate financial results into the market. We were challenged with a number of power incidents initiated by external factors, whether it be a lightning strike or whether it be a third-party power line strike outside the refineries, that yielded into a variety of situations which ultimately caused a total power loss in both instances.
Those had a knock-on effect in terms of tripping things like our FCC, which then just through the continued cycling, caused us to have to go in and do a variety of maintenance activities within the unit. So that whole activity had an impact previously on somewhat on the third quarter, but more importantly on the fourth quarter, both in terms of the loss of opportunity as well as the need to continue to bring in some slight volume of cargos to support our customers' demands. So a challenging quarter, not our history of SPRC. We have prided ourselves long term in terms of our reliability. We have exhaustively investigated these particular suite of incidents and are aggressively working through the root causes to minimize the likelihood of repeat occurrences. So I just wanted to open up with that parameter, and then really we will talk to specific issues here.
But we recognize reliability has been our historic calling card, and we see ourselves continuing to be that reliable provider. But we're going to have to address some of the shortcomings, which we've already done. But we have some further work to do. So with that, I'll maybe turn it over maybe to Khun Nutsara just to provide a high level of finance background.
Thank you, Khun Rob. On the financial performance, as Khun Rob mentioned that we have the issue in term of the plant reliability during September until early of November because of the power supply shortage and also the FCC maintenance. So this impact to our refining margin for the fourth quarter of 2023, and our market margin is $1.8 per barrel . And together with the stock loss that caused by the declining in the oil price. So our accounting margin is negative at $6.8 per barrel . However, looking at total year number, our margin in term of the market margin is still in the range of $4-$ 5 per barrel . But after including the stock loss, our accounting margin is at $3.5 per barrel.
Because of this low margin during the fourth quarter, that caused the net income of the fourth quarter to be a net loss of $129 million, and total year net loss is $34 million. That's mainly because of the incident that we had during the fourth quarter, and also together with the stock loss. In term of the oil price declining. Looking at the OpEx per barrel, in fourth quarter, you will see that the number is quite high comparing to the other quarter. That's because of the timing of the maintenance that we have, and the other part is also relating to the reliability maintenance and also the maintenance relating to the SPM. However, looking at the total year OpEx, if excluding those one-time item relating to the FCC maintenance or excluding the SPM maintenance regarding the replacement of the equipment.
Our OpEx is still in the range of below, actually below $2.5 per barrel . And this is also impact from the reduction of the unit of the crude intake during the year. So if we normalize everything back to normal operation, the OpEx is still in the range of like $2.3- $2.4 per barrel . And looking at the net debt-to- equity ratio, our financial performance is still in a healthy condition with the low net debt-to-equity ratio at 35%. And this is the high level of the financial performance for the fourth quarter and for 2023. Then I pass to Khun Sakchai.
Yeah. Thank you, Khun Nut. I am going to get to some of the key highlights on the market outlook, I think, which will actually cover the crude, a bit on margin, and then the product side. If you recall, I think when we talked about this issue probably in Q4, we kind of anticipate that the crude oil market is start to get toward more balanced throughout the end of the year because of the recovery of the supply for COVID. We start to see, actually, the supply start to get higher than the demand toward the end of the year. That actually happened throughout the end of this year. The increasing demand for last year is actually confirmed to be about 2.3 million- 2.4 million barrel per day growth.
If you flip into this year, in 2024, I think the forecast demand is actually expect to be about 1.2 million- 1.5 million, depend on what sort of information you grab it from. If you look at the delta of the demand, actually it is mainly because of the base. Last year actually is because of the base, it still have some impact from the COVID. That why we start to see a big recovery from last year. But coming into this year, I think because at the end of last year, the demand is come back very close to the pre-COVID level. We would expect the demand growth will be back to the, a kind of normal level that we used to see, which is about 1 million- 1.5 million barrel per day.
Majority of the demand is still in the East of Suez, in Asia Pacific. With that, I think in term of the crude oil current situation is just because of the outlets. Fundamentally, the physical barrel actually has been seen as long market. But because of the outlet situation will make the market jump up and down from time to time. That because of the security of supply come into play and spike up the price. One key factor to be note is probably the OPEC. OPEC, because of the supply from non-OPEC is really good towards second half of last year and will continue for this year. OPEC will need to really control. If they want to control the price to stay high, they actually need to maintain the cut and try to really control the barrel in the market.
OPEC will need to play a big role to really to keep the market in balance for this year as well. The next meeting will be in beginning of April to decide whether they want to unwind some of the cut that they have decide or they want to maintain. I think the margin we already talked, I think we still in line with the market. I think to be note that typically, I think SPRC still maintain a kind of competitive over Singapore margin, around $1.5- $2 But during this time, I think because of the ship-to-ship cost, I think we are probably about parity to Singapore margin. Next slide, Kha Thip.
In terms of the product, in terms of the global product, I think in general, the inventory still looks really on the low side in majority of the key product, which is light distillate and middle distillate and also fuel oil. I think I like to talk to the two key products, which is the light distillate and middle distillate. I think light distillate, if you look at, I think actually both of them still got very strong crack. I think since late of last year and also beginning of this year, the crack of the market is really strong, mainly because of, I think, driven by the inventory that is still not back to normal.
When we zoom into the light distillate, I think the light distillate typically, if we look at the drive, I think it is actually still a lot of things that have been on both U.S. demand, that typically in the second half of the year, you will start to see the inventory on U.S. side, on the west side, start to build up. This year actually, the inventory on the light distillate on U.S. is actually built up pretty slow because of some supply interruption, some refinery problem, caused the inventory build-up in second half of this year is lower than typical year. Also, if we look at on this side of the world, the strong demand on Southeast Asia country, like Indonesia, in Vietnam, and also in India. The demand is really strong.
Also, I think beginning of this year, as we know, Chinese New Year actually reduced the number of the export from China. All of things just reduce the supply into the market and be able to keep the crack of the light distillate stay really healthy toward the end of last year and beginning of this year, as expect to be continued. When we come into this time, I think, it is actually easy to say that this kind of fundamental will bridge into Q2, and that will be half heavy maintenance will happen because actually the refineries typically have a lot of maintenance happen in Q2 after they come out from winter demand. So, I would say that in Q1, Q2, I think fundamentally should drive to bridging the gap and keep the strong crack of the gasoline.
I think middle distillate is the same picture and even see really lower stock in global and in this region. The thing that actually happened during this time is, as we know, the unrest situation happened in Suez Canal and happened to drive the cargo that actually back and forward that need to come between the Mediterranean Sea and even to come into Middle East. So need to really do the long haul. When we do the long haul, actually start to eat up some of the inventory. Actually, what happened is we put the inventory on the water. Actually, then reduce the amount of supply to go into Europe and into when the Mediterranean want to supply out from that area.
So, with that, I think that why it still keep the crack of the middle distillate is still stay strong, even though fundamentally, I think, it still see more supply coming out from the market as well because of the new capacity coming out. People talk about the weather with this. Even though we know that cold weather happens from time to time, but the period of the cold weather also expect to be short. So fundamentally, I think the crack should come off, but because of the unrest situation actually push some of the cargo on the water and also increase the time of transportation of the cargo to the destination and also the freight come into play as well.
To make the arbitrage happen, to move the cargo also need to really drive the, what do you call, a higher crack spread to incentivize the, what do you call, the arbitrage to happen because of the high freight cost that happen from longer haul, longer distance. So in overall, I would say, I think the market still look really healthy. One thing that I noticed is, I think after COVID, we talk a lot about the capacity that actually come off and the new capacity that add in. Actually, I think we start to observe that any time that we start to get anything that got a problem in any part of the world, the market get high very, very fast. That actually happened many times when we start to hear the refinery problem. I think the crack between product to crude oil spike straightaway.
That's why I think it is actually give us the, what do you call, the expectation or the fundamental that the market is really tight in term of the supply and the demand. Next slide, Thip. Yeah, I think it's already covered. I think more or less it is beat by the thing that I just described. I think the crude oil market, actually, if you look at the premium, the premium in Q1 is still low. So that actually give us the fundamental of the crude that is physically, I think we got enough supply, but from time to time, we can see crude oil, the outright price, it gets spiked because of the unrest situation. The rest of the product, I think I already covered, that we still see a strong product crack spread, both middle distillate and the light distillate [inaudible]. I think that's it, kha.
Back to you, Rob.
All right. Well, hey, thank you. Just to recap a little bit on the investment transaction. I think we spoke to you obviously early last year and through the year about our efforts to acquire the Chevron fuels and marketing assets in Thailand, and just to close the loop on that. That was obviously completed as of the beginning of this year. I think actually January 3rd, we completed the transaction, made the payments per the transaction agreement, and are actually successfully running an integrated business as we speak. The transaction, we'll work through. There's still some working capital adjustments to come towards the end of the first quarter, but essentially the actual purchase price was completed. We've essentially achieved what we expected. I think there was some element of risks associated with this transaction.
Early going, we feel like we've been able to mitigate many of those risks and actually have seen a slightly increased opportunity space as we've acquired these assets. That both in terms of number of stations and the throughput through the stations, both of those are probably improved over probably some of our prior modeled expectations. Generally a positive trend in the right direction. I don't want to dwell on the retail dimension. That's just a small portion of the opportunity space, and it's really around creating this, what characterizes the crude to customer value chain. It's exciting to see how the teams are working together, leveraging their different insights, planning for the future, planning for the moment in terms of really making some adjustments, making some market placements into the highest value channels. Early days, but we're already seeing some really great opportunities.
Khun Sakchai's new organization is really expanding, including supply chain and value chain optimization organizations, and really getting a commercial team, really looking for ways to grow and optimize that value. There are some opportunities with what I call back office optimization. As we integrate teams and functions, there are some opportunities to streamline some of the volume of people we need to do some of those activities. Most of that is actually just the nature of that's a lot of work that was done at Chevron, was actually done offshore and in some other environments. Really the opportunity for us is to optimize the workflows, the work processes, and not necessarily have to replicate what we were doing in other environments is kind of the key opportunity for us.
Really we're seeing some great opportunities to anchor more volumes in perhaps different ways than we've done in the past. Just really early days, but already seeing some good opportunities to place some of those volumes. We're looking for opportunities to grow each of these different sales channels, and I don't want to dwell on any one's particular run, whether it be retail, whether it be aviation, whether it be B2B or commercial or arguably asphalt. Each one of these is representing an opportunity for us to really explore differently in the better manner with the integrated teams that are looking at this right now. That's really going to be Khun Shashank and Khun Sakchai's opportunity space moving forward. Really early days, but pretty excited about the opportunities that they're describing and really just provide some diversification and balance to our portfolio.
Just another step to really balance our earnings over a broader pool of opportunities and really step back and see opportunities from an enterprise perspective. Sometimes if you are looking at it for retail by itself, you might not jump on that opportunity. When you step back and look at an enterprise, some of these opportunities make a lot more sense. This just gives us the opportunity to really consider all opportunities from an enterprise value perspective. Next slide. As we continue to look to grow the business, we have been having a variety of strategic discussions with our board of directors and kind of breaking down the various dimensions of our business now and into the future.
Obviously, there is the marketing dimension of our business that we are looking at how do we position ourselves over the next 5 to 10 to 15 years to compete and win in this environment. At the same time, there are multiple dimensions to that opportunity space, but there are other evolving and new businesses that we need to give some serious consideration to. We are not seeing any that we are jumping into in the moment, but there are a lot of different opportunities that we need to position ourselves with understanding and ability to have the capacity and the capability to jump in as when the market is ready to reward the effort. There are a lot of energy transition opportunities out there, but generally, the returns are not that substantive, and our near-term focus is primarily on what I call short cycle, high return opportunities.
As we come closer to the turnaround, which is targeted for end of 2025, perhaps pivoting into 2026, those are kind of the focus areas around what are some very targeted, what I would characterize, low capital, high return. So not talking hundreds of millions, we are talking tens of millions, and really kind of expect to see returns in months and years, not decades, and very low exposure periods in terms of capital. From the point of investment to the point of return, a very narrow cycle in terms of payouts. That kind of dictates a lot of our immediate, and it kind of ties back to Khun Sakchai's commentary around the tightness in the market. We are kind of seeing the market likely to be tighter than not tight in the coming years.
That is not forever, but in the coming years, we see some of the things we have always done still to be in demand. Energy is still in demand. How do we provide reliable supply of that energy and really look to make some marginal but measured changes in terms of our slate to where we can both bring in different groups and likewise make some slightly different projects and place them in the market given our full crude to customer perspectives as we speak. Really looking ahead, if I could just close a bit. Our objectives are to maximize utilization and really monitor the different markets so that we are generating the right products at the right time and to the right places. Really looking for that value chain optimization. We will make some investments, and there will be some opportunities perhaps in the retail space as well.
But really be thoughtful around the returns we're likely to yield. Continue to be focused on the SPM operation, where we've made a lot of progress. Been a bit challenging at times getting regulator support. But we're in a position right now where all the equipment is actually into position. What I mean by that is we've completed all inspection, all maintenance activities are completed, and actually the hoses to enable us to bring in cargoes are in position. As when we receive final approval, we're in a position within days, weeks to be bringing in crude ships into the market. We anticipate probably another month or possibly two to work through some of the final approvals. But so far we're getting good regulator support on advancing and being receptive to our operations resumption proposals. As we talked about, our reliability this past quarter was not acceptable.
Really predicated primarily within the outcome was the FCC being shut down. But that's the constant cycling of that unit. The way we shut it down was through significant power. Really spending a lot of time to understand those, and bringing in the right expertise, making the changes we need to make to strengthen that part of the business. Once again, we're constantly looking for ways to optimize. Once again, the total value chain bottom line improvement is really identifying those value chain opportunities and then being perhaps a bit more aggressive and agile in going after those opportunities. I'm excited about what I've already seen. From a financial perspective, we're going to continue to be very thoughtful in terms of how we manage our debt. Be careful about our capital. We're not spending to spend.
But make sure that we see a valued return on the types of monies that we are putting into play so that we can get a quick return and continue to provide shareholder value throughout. Future opportunities, like I said, we're going to be thoughtful. We've explored the full gamut from, once again, just more conventional approaches to the variety of energy transition opportunities, whether it be hydrogen, biofuels. There's a whole cadre of things that we can do. Unfortunately, the market in this region doesn't necessarily support the economics at the moment. How do we continue to advocate for the right conditions, continue to monitor the technology, continue to leverage our major shareholders' capabilities, in terms of what they're doing in other markets to position us to be successful in this market? I really think I'll just close with that.
Once again, we're being thoughtful, careful on how we spend our money, and really focusing on that reliable operation to maximize the earnings and returns that we provide to shareholders. With that, Khun Thip, I think we'll turn it over to questions and respond to whatever people want to know.
Okay, kha. Thank you, kha, Khun Rob and all presenters. We are now ready to take your questions. If you have any questions at this time, please click on the Raise Hand button or send the question through the chat channel. Okay, I have one guy raising hand already. Let's start with Khun Komsun kha. Khun Komsun kha, please turn on your mic.
Can you hear me?
Yes, kha. I can hear you well.
Thank you. First off, thank you, Khun Rob and the team for the thorough presentation. I got three questions. The first one is for Khun Nutsara. What was the EBITDA contributions of the Caltex in 2023, and what was the net profit? Relating to that, what was the Caltex throughput per station? The second question was for Khun Sakchai. What is your take on the crude premium outlook? Do you think that it will stay depressed throughout this year? The third one is for Khun Rob about the SPM. Am I hearing correctly that you were expecting the restart to be within one to two months? Is the hose has already been installed, the new hose had been installed or it hasn't yet, or it's just waiting for the final approval on this regard? Thank you.
Well, I'll start with the SPM. Sorry, our [inaudible] wasn't clear. All equipment is installed, so the hoses are in position, both subsea and surface hoses. Full regulator support to go ahead and install those hoses. As I said, we're in position that if a ship showed up tomorrow, we could start unloading. There are some additional signatures we need on various resumption documents and licenses. We've generally been seeing what I call an improving support from various regulatory agencies. Hopefully that continues as we continue just on the final few steps of this resumption effort. Just maybe on the EBITDA question with regards to, I'll just preempt Shashank a little bit. There was no returns in 2023 contributions from the fuels business because it wasn't part of SPRC until beginning of 2024.
Last year's activities were really just around preparing ourselves to acquire the assets. This is day one. This is month one. January is month one of actually running a combined integrated business. Maybe I'll just turn it over to Khun Sakchai to speak to the crude premium.
Thank you, Khun Rob. Khun Komsun, in term of the crude oil premium, I think, as we know, I think we know that the crude oil premium is tied up with the supply-demand balance. As we know, I think majority of the crude that we use as a proxy is from Middle East. Look at the supply-demand balance for 2024. I think the thing that we got is the demand is probably back to the normal range, 1.2 million- 1.5 million barrels in terms of the growth. The supply, actually, mainly from non-OPEC, we start to see across to 2 million- 2.2 million barrels per day in terms of the demand increasing. Fundamentally, in terms of the physical barrel, I think it's still a bit on the surplus side.
The supply is actually expected to be more than demand. I think one thing to be noticed as we talk, I think it's just about OPEC, whether how they play into this one. How they want to control. Do they want to do it more aggressive than what they did today? Which is already quite aggressive and also, as you know, it's not the whole OPEC that actually putting the effort on this one. Majority is just leading by a few countries. The level of compliance is in question, whether is it going to last long, and people don't want to just leave the oil in the ground. Provided the future value of the crude oil is going to be shrink in the future. So that level of compliance will be something that we need to look at, whether they will stay fully compliant. Yep.
If you ask me, I think my own opinion with the fundamental of the barrel that is still happy now in the market, I don't see any big threat in terms of the crude oil premium to just buy up.
Okay. Follow-up questions on this one, Khun Sakchai. Do you think that in the second half of this year when the OPEC+ unwind their production cap, will it be putting a lot more pressure on the crude premium down the road? Thank you.
Yeah. If they do, I think that probably just send more barrel into the market. That will actually depress more of the crude oil premium in the market. Yeah, to me, I think the thing that OPEC need to do is need to really maintain their level of compliance and even need to be more heightening on the level of compliance to keep the production cut. But if they come back and unwind the position, I think that will just send a signal and the physical barrel to the market more. That will relax the crude oil premium in the market.
Yes. Thank you. I didn't want to preempt Shashank [inaudible] answering. Shashank, maybe you can just briefly touch on more or less the momentum that SPRC is seeing as far as station year-on-year improvements and how we are hitting the ground running in January towards even growing that a little bit further. Maybe I will leave it to you to c omment briefly.
Yeah. Thanks, Rob. Given the history of the last two, three years, with the Caltex brand, we've been focused on adding to our network and increasing the coverage of the network across Thailand. We've been able to add successfully over 100 stations in the last three to four years, including through the COVID period. Our plans will be to continue investing to grow and strengthen the network, not just in terms of new locations, but also in terms of the throughput through the stations. I think that was one of the questions that was asked. Our throughputs have increased about 8%- 9% on the last year and a half. We've been focusing on improving the throughputs through the Caltex stations. We currently have about 450 stations across the country.
Looking forward to continuing to invest and bring in more customers to increase that throughput even further.
Thanks, Shashank.
Okay, kha. Thank you, kha. Next, Khun Amornrat kha, please go ahead, kha.
Thank you, kha. My question is regarding the unplanned FCC shutdowns. Could you provide the actual cost of the shutdown because it lasts pretty long, like more than a month. What are the specific activities that the company has done to prevent this happened? The follow-up question to that is the total impact on the GRM because in the fourth quarter, despite the fact that the other refiners also have a lower GRM, our level of $1.8 per barrel is quite low, even compared to the simple refineries. I would just want to know the impact in terms of the barrel. Thank you.
I will let you walk through some of the financial implications, but just to be clear. The outcome of the exercise was prolonged shutdown of the FCC, while there was a pretty substantive effort to remove plugging and catalyst deposition within the unit. Unfortunately, that catalyst deposition was accelerated by these abrupt events from the grid. The FCC itself was not the root cause. It was actually the symptom or the aftermath of the power outages that were just total blackout without particular warning. When a refinery shuts down in that aggressive manner, it has potential to cause these types of situations. Unfortunately, that is the outcome of those two power outages. Subsequent to that, we have obviously looked at the entire grid, the whole power system, and made some fine-tune adjustments to a variety of interrelays between ourselves and the power provider.
We generally generate our own power, but we are connected to the power grid as a backup supply. Unfortunately, in one of the instance, the power grid itself was impacted and it actually draw power out of SPRC. Our systems are supposed to be designed to not allow that to happen, but our settings were not obviously at the right set points to prevent that from happening and cascading to a total power outage. The other one was a lightning strike that once again, we have lots of provisions to protect ourselves from grounding systems, et cetera, but we found some shortcomings in our grounding systems that enabled a key control system that controls our power relays or our power system itself to have failed in that instance, thus causing a domino effect and complete loss of power.
Two unrelated but semi impacted incidents that caused the FCC shutdown. The actual costs to do the decoking effort are not terribly material, but it is more the loss of opportunity that is reflected in the financials as opposed to the actual cost of the actual remediation. I will maybe leave it to Nutsara to add some color.
Yes. Actually, if we comparing for the FCC maintenance, that in terms of dollar per barrel is not material than Khun Rob's [explanation] . We can say that if we divided by total year, the impact is just less than $ 0.10 a barrel. It's just only $0.05 or $ 0.06 a barrel, which is immaterial in terms of the total operating cost for the refinery.
I actually have follow-up questions because there's noises on the background. May I confirm that the root cause of the FCC shutdown is because of the power system and another reason is from the catalyst or I mistaken?
Yeah. Once again, the power outage causes the complete shutdown loss of the FCC. When we go through a shutdown, let's say, for a turnaround for a planned event, you take days to actually park the unit in a very careful manner, controlling temperatures throughout. When you have a hard shutdown, it causes a slightly different effect. Likewise, there's always a general amount of coke being built up in these units. When you have a hard shutdown, unfortunately, some of that coke becomes free and loose, and it actually will sometimes plug internals to the unit. We saw a bit of both in these hard shutdowns where we saw both coke that had been displaced and then plugging specific dip leg, so to speak, which then prevent the catalyst circulation from performing as is intended.
Separately, once you observe that you've already had spalling or coke coming off the walls, you're pretty much challenged to have to go ahead and remove the remaining coke to prevent that from happening again as you attempt to restart. We completed all that activity through this period. Subsequently, we've been able to operate without any catalyst losses and the FCC, as it's operated for the remaining of the year, was fine. Unfortunately for this moment, this period, we had to deal with those conditions.
Thank you. That is pretty clear. I have one more question on the Euro 5 standard and the diesel sales. I want to ask about the production. Would there be any change in the diesel yield because some of the high sulfur kerosene might not be uploaded into Euro 5 diesel? Thank you.
Khun Sakchai, can you take that?
Yeah, I can take that. In terms of the Euro 5, I think we actually do for both gasoline and diesel. If you ask about the production that we produce for Euro 5, I would say it is no impact for both gasoline and diesel. We make pretty close to what we make under Euro 4. For your comment on the jet, I think jet is still probably a kind of 3,000 ppm spec. So it is not impact. It has some impact in terms of when we need to use some common logistic with other products. So we have the way to manage that kind of high sulfur jet into our terminal. So no impact.
Thank you, kha.
Thank you, kha. Next question will be from Khun Wattana, kha. Khun Wattana, please go ahead, kha.
Thank you very much, and do apologies in advance for me going back to the SPM questions. I just want to reconfirm with Khun Rob that we are now targeting the SPM to restart around March and April, am I understand that correctly? Can you share further on which specific signatures approval that you are waiting for, and are there any risk that this could be delayed from March or April if you are targeting for March and April? Thank you, khap.
Yeah. Thank you for your question. Are there any risks? There's always risks. However, we've tried to work through with some of the key regulatory bodies, whether they be the Department of Land Transport, the Marine Department, the local governments, to try and align on the value of bringing this SPM back in service. As you'd appreciate, our partner, we have a partner in this SPM, PTT, who's equally impacted. We're trying to jointly communicate this impact to these key stakeholders so that they recognize this is having detriment impact to not only SPRC and other companies, but also to the revenue in Thailand, whether it be tax revenue or other types of revenues. We've continued to make that argument. I think we're seeing increasing support to try and move this forward.
The key signatories, this is primarily within the Marine Department, different layers, perhaps, of the Marine Department, which we've tried to align with some of the key regulator officials. Likewise, I believe the Ministry of Transport has a license that there has to be signatory. The actual exercise is always relatively short-lived. How long it takes for somebody to actually sign a document is relatively short. The complexity of the document, it's not an overly complex document. The challenge is how do you minimize the duration between step to step, and then how do you make sure there's a sense of urgency. We're trying to continue to work with the regulators and the ministries to create that somewhat alignment on the importance and create a sense of urgency for all the various folks that will be signatories to this final resolution.
At the stage right now, we're just going through the final stages of a technical review, and I believe we'll be back in front of the Operations Resumption Committee within the next week or so to look at the final and come back with a final acceptance of our operations. There's always a wild card that could come forward, but generally, we're seeing positive signals from the various parties at this time. Could be as early as April. March may be a stretch. Sometime in March could be possible. April is perhaps more likely, but both of them are very feasible, and we're working with, once again, to shorten those durations, not only of ourselves, with our partner to try and get that back in service as quickly as we can.
Okay. There's one question from chat channel. Let me read that question. What's your expected average crude run in 2024? It's from Khun Suppata kha.
Khun Sakchai, do you want to take that?
Yep. I think given the market situation that we have in, and I think the projected market balance is still quite tight. From what we see, because of the low inventory and some other thing, I think from my point of view, we still see a margin for us to capture from the market. With that, we actually keep evaluating the crude purchasing two months in advance by gathering some of the marketing information, the market information, and then decide. But in general, I would say, at least in the near term, we still see quite a market supporting us to really running at max, khap.
Yeah. When we say max, we maximize value, not necessarily throughput. It could be any particular unit. It may not be at "max," but our objective is to dial the right recipe to maximize the value, which may be one unit is slightly underutilized, while the other unit, specific unit, is maybe at full capacity. It is just finding the right balance, right recipe. But generally, we will be running towards the upper end of pretty much most of our units.
Okay. Thank you, kha. There are two more questions from the chat channel from Khun Wisuwat, kha. The first question is about the gasoline crack, kha. Do you expect gasoline crack spread to remain high during the third quarter this year during the U.S. driving season? The second question is about to elaborate more on the low capital quick return project, kha. Khun Sakchai, will you take the first question? Thank you. Please unmute your microphone, kha, Khun Sakchai.
Okay. Sorry, khap . Gasoline is one of the seasonal product in terms of the demand. As you know, I think demand of gasoline mainly drive from the local demand in Southeast Asia. We may get some impact from the Southeast Asia, but the demand actually will pop up more on the U.S. side. So in general, I think the crack typically strong up to probably end of Q3, and then start to coming off after the end of Q3. So I think still support your comment. We should see a strong crack of the gasoline probably toward Q1, Q2, Q3, and then we will see. Typically, it come off in Q4 because of the demand in the U.S. side start coming off and on the European side starting coming off. But at the same time, right now, gasoline is not just rely just on the U.S. side.
The market in this region, I think as we talked before, the only country that we see that have the production to really cover the short or send the long into the market is just only China. It must depend on China as well, how they want to really come out on their quota. Typically, they do not really want to really just run for the sake of to export the product into this region. They typically try to cover their in-country demand. But from time to time they did drive to release some of the quota out and then send some of the product into the market because of to support their economy as well.
But at the same time, I think, need to look at their policy, whether they want to really landing high in their country and then get the product out of their country as an export. In general, I think I would say it's still strong, the forecast, up to at least Q2, Q3, khap.
Yeah. Maybe I'll start on the project. I feel like maybe Khun Sakchai puts them in perspective to the types of projects we're looking at are, once again, are really targeting some product refinements. Moving from arguably lower margin products to higher margin products. Looking for ways to perhaps to minimize our fuel oil production, looking for ways to perhaps allow us to bring in a bit more flexibility on the types of crudes we bring in to increase value. So it's a combination of targeted investments, but they're all done with the terminology we say is a minimum functional objectives mindset. Let's just not spend money for the sake of spending money, but really targeted to where we see value, and then it's okay sometimes to leave some money on the table if we're not getting the returns on those incremental investments. So we want to be real careful.
So it's very targeted, more or less de bottlenecking type capital and spread across a variety of units within the operation. But generally, relatively smaller scope projects that are trying to reposition from lower to higher value product, margin products. So maybe, Khun Sakchai, I'm not sure if there's anything you'd add.
Yes, Khun Rob. I think that actually some of the project that we look at is actually allow us to really get more flexibility around feedstock. At the same time, I think after we really have the flexibility on feedstock, we actually can upgrade some of the low-value product. Which could be LPG, could be naphtha, could be fuel oil. Yeah. So I think package that together, we will just- yeah. It's a kind of low CapEx project and high return. Yep.
Yeah. Just maybe to clarify, the orders of magnitudes of some of these projects are $30 million- $40 million- $50 million combined. We are not talking $500 million. We have looked at larger scale projects in the past, around fuel oil projects with big upgrading, and those were arguably another zero attached to it, or two. We just did not see the economics. We did not see the ability, once again, if you commit for a long duration project, you have a lot of CapEx exposed for a long period of time. Then you have to believe that the market is going to reward you at the end of that tunnel with sustained margins.
When once again, if your capital exposure is lower, your payback period is strong, you have less exposure in terms of how that capital is going to be out there versus till it is able to get a return on our investment. So that is the nature of our projects are more that short cycle, fairly targeted. We are looking for bigger bets, but we want to be careful when we take those bigger bets and be confident that the market will be there over the long term to support those investments.
Thank you. So there is one more question from Khun Panuwat from Chat channel. What is your view on China? Do you expect them to export more petroleum product this year? The second question is, what is your planned CapEx for this year and next year?
Yeah, I can take the first one.
Thank you.
I think as you talk, I think China is probably a wild card that nobody can expect a lot from them. I think they actually not really have a lot of information that we can forecast or expect from them. But what we learned from them so far is, I think last year, if you look at their experience or the thing that come out from China, actually, the drive that we see is the cheap feedstock that they get. When they get that one, probably try to help out. At that time, I think we heard that when Russia, Ukraine start to happen, they are actually trying to find a home for the crude. At that time, we hear about the kind of cheap feedstock that come into China, India.
That caused them to really release a high of quota in term of the both crude and product. Yep. But in general, I think when we look back in their normal year, I think their quota does not change significantly. I think that they actually have. You can look at the number anytime they release a quota. I think it is always in the range of 200,000-300,000 barrel per day around that one for the gasoline and then probably 300- maybe around 300,000 per day for the diesel and middle distillate. So it is always just the quota is still on that kind of number. Yeah, from what I got so far, I did not have any much of information from China, but I think looking at their historical, I think it is always in that kind of magnitude.
Maybe we will ask Khun Nut just to comment briefly on the range of the capital outlook that we are looking for the next few years.
Yes. In terms of the capital expenditure for this year and next year, initially we plan to have turnaround for next year, but we still need to finalize the scope. The range that we could say for this year and next year, it could be in the range of $100 million- $200 million in terms of the capital expenditure. But as we are still working to finalize the scope, we do not have the exact number to inform right now. But it is in the range of $100 million- 200 million.
Yeah, let me maybe qualify that a bit. That is actually our total spend plan for probably through this period for shutdowns and capital projects. Our capital project portfolio is actually not that aggressive in this particular period. Compared to prior turnarounds, this is a relatively light touch, and the turnaround team is still trying to optimize both the basic maintenance inspection work as well as the capital project work that will be done during the same time period. But I think it is in the range that Khun Nutsara was describing earlier. So thanks.
Okay. We cover all the questions already. I think we are in the closing remark. I would like to thank everyone for your time today. We appreciate your interest in SPRC. Please contact IR if you have any other questions or need any support. Thank you very much.
Khun Thip, just a few comments as we close. Look, I think--
Okay.
--SPRC has a proud history of being a safe, reliable operator. We continue to focus on making sure that safety is paramount and generally that has not been tempered. I think we've gone over 10 years without a day away from work case. Everyone going home safely continues to be a mantra. We're very focused on process safety. These power outages, though not initiated within the planted site, our systems arguably should have been able to do better. Our team has really taken that to heart, is really digging into the root causes and the safeguards that have to be in place so that we can appropriately prevent further incidents. The margin environment's improving. As Khun Sakchai kind of opened up, as we open up the first quarter, we're now looking at a much stronger margin than we closed the year. We're optimistic about that.
Likewise, I think the synergy opportunities and the value chain opportunities that we're already surfacing, we'll be excited to share those in further details in the coming quarter. Early days, but we do see the value of this acquisition, not so much in terms of running a retail business. Certainly, that anchors a portion of our production, but it's really around that understanding of how we can even create value beyond just the pure retail chains and into the other parts and products that we have in our business. We're looking forward to when we get together in the end of the first quarter to be able to share the updated information and actually share some positive progress on us extracting value from this acquisition and going beyond. Thank you for your time.
Thank you very much, kha.