UBS Investment Research
Asia Oil Explorer
M ore bullish on upstream
.. Upgrade to global oil prices
We upgraded our global oil price forecasts significantly on 15 May梤aising our
Brent crude forecasts to US$114/bbl (+30%), US$120/bbl (+52%) and US$116/bbl
(+55%) for 2008, 2009 and 2010, respectively. Based on this raise, we have
become more bullish on the upstream sector and continue to prefer upstream sector
stocks to downstream stocks in Asia. Following the upgrade, we gave a meaningful
boost to our estimates for PTT Exploration & Production (PTTEP), Cairn India and
PTT Chemical (PTTCH). Following a large drop in Oil & Natural Gas抯 (ONGC)
share price, we upgraded our rating on the stock from Neutral to Buy.
.. A mixed bag for SK Energy and PTT Public
We believe the effect of the higher oil prices on SK Energy and PTT Public will be
mixed. While PTT Public may benefit through the upside risk in PTTEP and
PTTCH, we think a significant downside risk exists for its refining associates.
Similarly, we expect SK Energy will benefit in terms of the value of its crude oil
reserves but the continued rise in oil prices could affect its simple refining and
petrochemical exposure.
.. High oil prices detrimental to Thai refiners
High global oil prices have pushed up Asia LPG and naphtha prices. We believe
any further rise would damage Thai refiners, given the risk of continued
enforcement of the LPG subsidy at US$26/bbl and given their exposure to aromatic
products. We maintain our Sell rating on PTT Aromatics (PTTAR) and our Neutral
rating on Thai Oil.

Contents

UBS forecasts 5
Product price & margin 6
— Crude oil price & spread.......................................................................................6
— CFTC traders’ report ............................................................................................8
— Olefins .................................................................................................................9
— Olefin derivates ..................................................................................................10
— Upstream aromatics ...........................................................................................12
— Midstream/downstream aromatics......................................................................13
— Vinyls chain........................................................................................................14
US refining inventory & utilisation 15
US refining margins 17
Refining margins & spreads 18
Recent oil & chemical reports 19
Stock performance & valuations 20
— China .................................................................................................................20
— Taiwan ...............................................................................................................22
— Thailand.............................................................................................................24
— Korea .................................................................................................................26
— India...................................................................................................................28
— Other Asia Pacific Countries...............................................................................31
— Solar stocks .......................................................................................................32
Valuations: Oil & Chemicals 33
Recent notes 39
— SK Energy..........................................................................................................40
— Honam Petrochemical Corp ...............................................................................41
— Yingli Green Energy Holding Company ..............................................................42
— Cairn India Limited .............................................................................................43
— Oil & Natural Gas Corporation............................................................................44
— PTT Chemical ....................................................................................................45
— PTT Exploration & Production ............................................................................46
— Asia refining sector.............................................................................................47
— PTT Public Company Ltd. ..................................................................................48
— LDK Solar Co Ltd ...............................................................................................49