17 January 2007

1. Good Corporate & Social Governance in promoting ASEAN’s Regional Integration Session 1 : What is Good Corporate and Social Governance?How do I define my company strategies to meet the expectations? Songkiert Tansamrit Executive Vice President, Corporate Strategy and Plannng 17 January 2007

2. Agenda • Corporate Risk Landscape • Credibility in the Public’s Perception • CSR Framework • PTT CSR Strategic Positioning • Orchestration & Audit • National Champion • Sustainable Development • Commitment to Delivery • Create Networking • PTT CSR Drivers

3. Corporate Risk Landscape 1990’s 1950’s FN Risk Technical Risk Public Risk Source : Right of Way Communication Strategies by Dr.Ten L. Vierima, Resource Strategies, Inc.

4. Responsibility Shifts Obesity caused by individuals1 54 58 78 86 46 42 22 Obesity caused by environment1 14 1990 1996 2000 2003 1 Individual causes are biological or behavioral factors (eg. Overeating, lack of exercise); environmental causes are systemic factors (eg. Corporate marketing, lack of government guidelines on healthy eating). Source : Regina G. Lawrence, “Framing obesity : The evolution of news discourse on a public health issue, “ Harvard University working paper number 2004 – 5, 2004 (www.ksg.harvard.edu); Mckinsey analysis

5. Rising Expectations • An emerging set of sociopolitical mega trends • Power has shifted in favor of individuals and small single – issue groups increasingly armed with tools and tactics that can be deployed through the Internet • Trust in NGOs, citizens’ groups, and online information serves has risen as faith in business has declined

6. Management’s Slow Reaction • Businesses are taken by surprise when faced with negative press and stakeholder pressure • Company is often on the defensive because CEOs and othersin the top team find it difficult to wield with “soft forms of power”,that trade in emotional arguments • The arguments of pressure groups are frequently low on evidence • Most sociopolitical trends on corporate value requires executivesto make assumptions and test sensitivities that MBA textbooksgenerally don’t discuss

7. No Hideaway Places • Businesses have never been insulated from social or political expectations • Increasing the intensifying pressure and the growing complexity of the forces, the speed with which they change • Theability of activists to mobilize public opinion

8. Sociopolitical Impacts • Damage to reputations of business. • Threats to the creation of value : • The immediate financial and longer – term reputational impact of social issues that backfire can be enormous • But potential opportunity present : • New product or market strategies can emerge from changing socialand political forces

9. Rationale • Sociopolitical trends will increasingly affect the strategic freedom • of company • Company proactively understand and engage with social issues • will benefit most • Company will be better able to shape the social contract and to • identify ways of creating value from the opportunities and risks • arising from sociopolitical issues

10. Agenda • Corporate Risk Landscape • Credibility in the Public’s Perception • CSR Framework • PTT CSR Strategic Positioning • Orchestration & Audit • National Champion • Sustainable Development • Commitment to Delivery • Create Networking • PTT CSR Drivers

11. 54 33 31 9 - 6 - 7 - 11 - 31 - 48 - 48 - 49 Credibility in public debate compared with other industries and organizations negative Credibility balance * positive B.U.N.D. Greenpeace Automotive industry CHEMICAL Industry Federation of German Industries (BDI) Average Electricity Industry German confederation of trade unions (DGB) Federal government Opposition Oil Industry Source : Emnid survey commissioned by the “Chemle im Dialog” (“The Chemical Industry in Dialog”) Initiative November 2004, n = 374 decision-makers in business and administration * Credibility balance = % very / quite credible - % not very credible / not credible at all

12. Long – term image development and influencing factors Source : Emnid survey commissioned by the “Chemle im Dialog” (“The Chemical Industry in Dialog”) Initiative General assessment of the chemical industry - % predominantly positive from February 1986 to November 2004

13. Agenda • Corporate Risk Landscape • Credibility in the Public’s Perception • CSR Framework • PTT CSR Strategic Positioning • Orchestration & Audit • National Champion • Sustainable Development • Commitment to Delivery • Create Networking • PTT CSR Drivers

14. CSR Framework Core Leader CSR Framework • Values & Governance • Regulations and Controls • Business Operations • Accountability in Disclosure • Impact on Environment • Safety and Health • Employee Rights • Human Rights • Community and Society Involvement • Product and Service Responsibility Board, CG Working Group, Management Committees Law Department, Operation Units Management Committee, FN, Planning, and Operation Units IR, PR QSHE, Operation Units QSHE, Operation Units HR Committee HR Committee PR, Operation Units, Projects Operation Units, CRM, QC Units • Global & Region • Country & Society • Community & Environment • Core Business

15. CSR Stakeholders Mapping

16. PTT Corporate Image • National Champion • KM Organization • Community Development : Sufficiency Economy Reforestration Project Unleaded Gasoline Fully Integrated Business Value Chain Glowing Prosperity on Natural Gas Oil Crisis 1979 1984 1989 1994 1999 2004 2009 2014

17. Agenda • Corporate Risk Landscape • Credibility in the Public’s Perception • CSR Framework • PTT CSR Strategic Positioning • Orchestration & Audit • National Champion • Sustainable Development • Commitment to Delivery • Create Networking • PTT CSR Drivers

18. Kingdom of Thailand Public / Community National Champion • NGV • Gasohol • Bio Diesel • Energy Conservation • National Disaster Sustainable Development • Environment : Green Globe Awards • Community : Sufficiency Economy • Education • Social: - Sports - Arts - Culture Orchestration & Audit • Content Rationalization • Communication Strategy • Icing (PR) Commitment to Delivery • CSR Frame Work - QSHE Create Networking • Community • Opinion Leaders Business Operation Relationship PTT Group Policy : Credibility before Visibility PTT CSR : Strategic Positioning

19. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT CSR : Orchestration & Audit Core Business Strategy External Communications,Outreach Government and Regulatory Strategy Coordination through CEO Leadership Internal Policies, Processes Organization; Culture • Place agenda in CEO Forum • Set up PTT Group CSR Committee • Establish CSR PTT Group Framework • Structure CSR organization with audit function • Content Rationalization & communication strategy • PR

20. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT CSR : Management Structure Board of Director (CG) PTTMC President CPC • Policy & Standard • Strategy & Budgeting & KPI • Report & Audit PTT’sCSR Committee Corporate Relations • Business Unit (Nat. Champion) • Strategic Planning & Budgeting Social Responsibilities Management • QSHE HO & QSHE BGs Corporate Communications • PR HO & PR BGs Public Relations Planning Education & Leadership External Communications Community Relations & Environment Management Group of Internal Communications Social Affairs & Special Projects Audio Visual Services

21. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT CSR : Project Category • National Champion • KM Organization • Community Development : Sufficiency Economy • Support PTT Business Operation and Social network Education Community Environment Social Country • Teacher • Student • National Champion • National Disaster • Culture • Arts • Sports • Sufficient Economy • Green Globe Awards

22. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility Semiformal As expectations change, issues may shift Formal Business Frontier Expectations Social Contract Society PTT CSR : Develop Reliable Radar - Sociopolitical issues and regulatory shifts may appear to come out of the blue. Company can indeed spot new trends and that early warning signs of imminent change are plentiful - To join and shape that debate before it turns againstthem; much better to engage in a minor strategic foray than to be forced into a full – scale war - To evaluate what’s at stake, Company must scan the whole value chain - Company should develop potential future scenarios Source : Sheila M.J.Bonini, Lenny T.Mendonca, and Jeremy M.Oppenheim, “When social issues become strategic”, The Mckinsey Quarterly Report

23. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility Hydro Coal Gas Oil PTT CSR : National Champion Past Way Forward • Petroleum & Petrochemical KM Institutionalization • International Growth • KM Excellence • International Revenue • Energy Research, and R&T • Country’s HR Capital • Country’s Environment, andPeople Health • Value Added to country wealth • Energy Security + Energy Research & Innovation Technology + Intelligence Services + Continuing with Higher Performance & more Efficiency + Continuing with sustainable approach • Product Research • Operation Capability • Green Products : MTBE, FO s, Gasohol, Biodiesel, NG • Reforestration 1 million rai & Community Development + Phase III + Oleochemical + Neighboring Countries & Global + LNG + Introducing Alternative Fuel, and new Application • - NGV - DCAP • - Gasohol - Co-gen • - Biodiesel - City Gas + B100 Plant + Ethanol Plant • Petrochemical Phase I & Phase II • Secure Domestic : NG & Oil Resource • Reduce : 90% 55%Oil-dependent

24. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT CSR : Sustainable Development Regional / World Forest Community City Community Neighboring Country Sustainable Development KM + Network expansion KM Good Person Sufficiency Economy : 84 Districts dedicated for His Majesty the King’s Birthday 84th anniversary Exemplar Community Awards Ceremony Vetiver Grass Awards PTT’s Village Development 118 villages Praising Good Person Reforestation Project : 1,000,000 Rai (40,000 acres)

25. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility • The Network • Countrywide • International vetiver • Knowledge and Sufficiency Economy • Strengthened community • The Royal Project Foundation • Kanchanaburi Province together with Highway Department, Land Development of Agricultural Extension • 1.28 million stalks Public • The Chaipattana Foundation /Ministry of Agricultural • Cultivates countrywide • Mark of the Diamond Jubilee / Public relation / knowledge publicized • 5 million stalks • Yadana Gas Pipeline Project • Office of the Royal Development Projects Board as a consultant • 2.02 million stalk Communities • The Royal Project Foundation • Kanchanaburi Province • 1.41 million stalks • Network • Chiang Mai - Nan PTT • PTT Reforestration Project • Petchaboon Province • Royal Forest Department 2006 2008 2010 1994 1996 2003 2005 PTT CSR : Sustainable Development – Vetiver Grass Project

26. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT CSR : Sustainable Development – Vetiver Grass Project In 1998 In 1999 In 2001 1996: PTT actuated vetiver cultivation utilizing engineering methodology and technology to reduce soil erosion and rehabilitate forest area along the gas transmission pipeline. The implementation was successful, thereby being awarded the King of Thailand Vetiver Award in 2001 and Vetiver Network Award in 2003

27. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT CSR : Sustainable Development – Vetiver Grass Project Introduction of development patterns and utilization of vetiver leaves • PTT fosters vetiver cultivation among willing villagers in their own fields. • Officers are delegated to villages. • Villagers offered first directives in self- sufficiency through a multitude of incentives. • Study tours are organized to thriving vetiver areas with observed guidance and consultation. • Vetiver Grass Awards for the winners under the Project of Planting Vetiver Grass Home delivery Observed guidance and consultation

28. Kingdom of Thailand Public / Community Relationship Business Operation PTT Group Policy : Credibility before Visibility PTT Group CSR : Commitment to Delivery Past Way Forward CSR Framework • Business Operation • Construction Management • Community Relations • QSHE • EIA Framework • Free-style • CSR Framework • Public consultation Guideline • Introduce Best Practice Guideline • Values & Governance • Regulations and Controls • Business Operations • Accountability in Disclosure • Impact on Environment • Safety and Health • Employee Rights • Human Rights • Community and Society Involvement • Product and Service Responsibility

29. Agenda • Corporate Risk Landscape • Credibility in the Public’s Perception • CSR Framework • PTT CSR Strategic Positioning • Orchestration & Audit • National Champion • Sustainable Development • Commitment to Delivery • Create Networking • PTT CSR Drivers

30. PTT CSR : KPI Level 1 - 5 Key Performance Indicators 1. Financial Perspective(20%) 2. Stakeholder Perspective(5%) 2.1 Social Contribution 3. Internal Perspective(30%) 3.1 BEP Effectiveness (GG,SCM,MI,TRM,PCD,ICTSS) 3.2 Result Based Management Effectiveness (P/L#3,JDA-Arthit P/L, Sainoi-N/S,Wangnoi-KK, Acrylonitrile (AN) ,PDH/PP) 3.3 R&D Effectiveness Oil : Bio-Diesel B5,Gasohol 91,Lube Product Line Gas : Fuel Cell/Hydrogen(NG),Gas District Cooling,Ziegler Natta Catalyst 4. Learning & Growth Perspective(45%) 4.1 KM (Buildup & Leverage PTT Group KM Capability , Strengthen PTT KM Capability) 4.2 Success on Execution of Competency & Career Development 4.3 Employee Satisfaction Score 4.4 Good Corporate Governance(30%) 4.4.1 CG Rating : Evaluate by IOD 4.4.2 Success on Implementation of Best Practice on CG Model Through PTT Group Flagship

31. Successful transformations personalize change in order to change mindsets and behaviors Understanding And commitment Role-modeling “…I see my leaders Behaving differently” “…I know what I need to Change and I want to do it” “…I have the skills and Confidence to behave in the new way” “…the systems reinforce the desired change” Skills and competences Understanding And commitment

32. Competency Skill Knowledge Social Role Self – Image Trait Motive Competency & Behavior

33. Thank you