Responsibilities of the Board

The Board consists of 15 Directors, which is considered suitable for the business. At Extraordinary Shareholders’ Meeting No. 1/2548 on 15 December 2005, the composition of the Board was approved as follows:

• 
  Connected Directors
  
• 
  Independent Directors with no relationship to major shareholders; not serving as directors or executives of major shareholders; and not serving as executives of or representing major shareholders. At PTTEP, Independent Directors must always account for one-third of the Board or number at least five.
  
• 
  Qualified private-sector Directors who, at PTTEP, may be Connected Directors and number at least three.
  

At Meeting No. 12/2548/242 on 21 October 2005, the Board determined the qualifications of its members as follows:

• 
  Age not over 70 years
  
• 
  Diverse skill mix in industry knowledge, accounting & finance, business judgment, management skills, international markets, business strategy, crisis management, corporate governance, and legal matters.
  

At Meeting No. 8/2548/252 on 28 July 2006, the Board approved the upgrading of PTTEP GCG, issued in accordance with Good Corporate Governance Principles of Listed Companies (2006). To enable PTTEP to leverage Directors’ qualifications for the greatest suitability and benefit, Directors’ terms were limited to three consecutive periods.

Moreover, the Board also approved to include the number of other companies where a Director is serving for consideration as a critical factor for its Director selection. This information will be disclosed in attachement 1 of Form 56-1, in the annual report, and disseminated through the Company website. Currently, there is one director who serves more than 5 boards of the listed companies. However, this doesn’t cause any effect on the performance since the director commit himself to his responsibility by attending the board meetings regularly and expressing his opinion beneficial for the company. Additionally, in order to assess the board performance more effectively, the number and time of attendance will be one of the key factors for the board assessment.

(c) Definition of Independent Director Qualifications

This has been detailed under Item 9.1.4

Under the code of practice found in PTTEP’s GCG Principles, an employee may take part in external activities for good reasons or if such participation expands the vision and broadens the experience of that employee, or if it improves the employee’s performance for the benefit of the Company – given no conflict of interest. Such appointment of the President or management team members needs prior approval of the Board or the President respectively, and is not entitled to extra compensation, as this is considered part of routine work.

The Chairman of the Board and the President are two separate persons. The Chairman is elected by Directors, whereas the President comes from nomination. The Chairman is the ultimate leader, with significant input to decision-making on PTTEP matters, jointly considered and established by the Board and the Management. He or she ensures that Board meetings proceed efficiently and effectively. During each meeting all Directors are urged to actively participate and raise essential questions. Directors also occasionally meet to advise and support the Management through the President. At the same time, the Board is to stay away from routine tasks or business activities under the responsibility of the Management. Only the President or acting President is authorized by the Board to commit the Company through his or her signature. Presidential authority is therefore efficiently channeled through the Management, and therefore there is a clear distinction between the roles of the Board and the Management.

PTTEP recognizes that, in future elections of the Chairman, independence will be a key factor for deliberation. Nevertheless, PTTEP’s Chairmen have always performed their duties independently. Moreover, PTTEP has instituted the Chairman’s performance evaluation since 2005 as guidelines for improving and auditing his performance. The outcome has been disclosed in Form 56-1 and the annual report.

The Company has chosen Mr. Theerasak Tancharoenlarp, whose responsibilities consist of:

(a) Providing recommendations and support to the work of the Board on legal and regulatory matters

(b) Ensuring good CG practices and following up actions to ensure that Board policy directions and recommendations effectively implemented

(c) Supervising actions by the Board and the Management to ensure their compliance with related laws and regulations

(d) Ensuring suitable and prudent actions taken by the Board

(e) Communicating with shareholders and ensuring that they are properly taken care of

(f) Communicating with related regulatory agencies.

The Board has appointed standing subcommittees (or simply ‘committees’) to handle specific aspects for the Board. Their qualifications and responsibilities have been defined in their respective charters. A majority of their members are Independent Directors, and so is the Chairman of each subcommittee, with the exception of the Risk Management Committee. The Chairman of the Board does not belong to any subcommittee. The subcommittees are to regularly report their findings to the Board.

To date, PTTEP has appointed five subcommittees, namely the Corporate Governance Committee, Audit Committee, Remuneration Committee, Nominating Committee, and Risk Management Committee. Their member names, responsibilities, and reports are elaborated under Items 9.1.2 and 9.5 respectively.

(3) Roles and Responsibilities of the Board

(a) Corporate Governance Policy

The Board issued a written Good Corporate Governance (GCG) policy in 2001, and this policy has constantly been reviewed and publicized on the Company’s website. The current GCG policy is Revision 3, consisting of two parts: first, the GCG policy approved by the Board, second, the Company’s code of conduct and policies approved by President. These have been distributed to Directors and all employees for reference and compliance. PTTEP also disseminates them to its joint-venture partners, regulators and government agencies, those with regular contacts with PTTEP, and interested persons. Again, this material is disseminated on the PTTEP website under Corporate Governance for the reference of shareholders, investors, and interested persons.

In 2006, PTTEP still focused on constantly promoting knowledge and understanding of GCG to Directors and all employees through activities, including orientation sessions for new Directors and employees and a special talk on GCG principles for Directors and the Management. CG Champions have improved processes to achieve international standards and reported the progress made every quarter to the CG Committee. PTTEP also joined in the PTT CG Group Day to jointly determine GCG policy in accordance with international standards and apply uniform practices. This would enhance business efficiency, transparency, merit, and ethics internationally accepted, and yield sustainable organization development toward excellence. Decisions and actions are made responsibly with due consideration of all stakeholders.

PTTEP has developed communication channels of GCG information for its employees as follows:

 PCS CG Information Center, for general information concerning GCG practices

 PCS Compliance News Alert, for a reminder about relevant rules and laws, including insider trading, or for advice on relevant, upcoming rules and laws.

To clearly measure its annual GCG performance for further improvement, in 2006, PTTEP commissioned Thai Rating and Information Services Company (TRIS) to assess its GCG practices. The rating criteria used by TRIS were based on those of the Organization for Economic Cooperation and Development. To elaborate, they rely on 20% weighting for shareholders’ rights, 40% for the composition and roles of the Board and the Management, 25% for information disclosure, and 15% for CG culture. Out of the possible 10, PTTEP scored 8.31 against 8.14 in 2004, also by TRIS, and 8.21 by internal assessment in 2005. Details appear below:

PTTEP Board stipulated its business ethics in the Good Corporate Governance of PTTEP document to guide its conduct toward equitable treatment, transparency, openness to enquiry, and respect to the rights of all stakeholders – to create confidence and acceptance of its operation. The code of ethics is based on six principles:

• 
  Accountability
  
• 
  Responsibility
  
• 
  Fairness and Integrity
  
• 
  Transparency
  
• 
  Creation of Long-term Value to All Stakeholders
  
• 
  Promotion of Best Practices, using four yardsticks, namely righteousness, suitability, transparency, and fairness.
  

PTTEP’s policy, published in the GCG Policy, is for all Directors and employees to avoid any conflict between personal and corporate interest.

 Decisions about Company business by all Directors and employees must solely be in the best interest of PTTEP.

 All Directors and employees must review and report all conflicts of interest to the Company.

In addition, PTTEP has formulated the following measures:

 Strict compliance with laws, rules, and regulations, particularly those of SET concerning connected transactions.

 Adherence to a fair and suitable pricing policy for its products/services under general business terms and conditions.

 Prohibition from considering and approving cases where Directors, employees, or connected persons would benefit from connected transactions. Pricing must be set as under general business terms and conditions.

 Formulating procedures to treat conflicts of interest involving all Directors and employees, whereby he or she must report them immediately on the CG form together with all details attached.

Connected transactions must be deliberated by the Board for suitability, while the Audit Committee will approve its disclosure in the annual report and Form 56-1.

In deliberating connected transaction during 2006, PTTEP complied with SET rules and regulations of 2003 and its amendment in all details. Board resolutions concerning these transactions were strictly made among non-connected Directors. Please refer to Connected Transaction of 2006 under Item 13.

(d) Internal Control and Internal Audit

PTTEP employs an internal control policy that is proportional with acceptable Company risks and prevailing business circumstances, or the activities of individual departments. The Internal Audit Department regularly monitors internal control practices to ensure suitable control measures with current circumstances, environment, and risks.

The Board, the Management, and all employees have collectively decided business procedures to ensure achievement of the objectives with reasonable confidence:

• 
  Efficient and effective operations, including prudent use of resources
  
• 
  Accurate, reliable, and timely financial reporting
  
• 
  Compliance with Company policies, laws, and regulations.
  

• 
  Control Environment: A proper control environment fosters control awareness in personnel conducting business with competence, integrity, and a code of conduct. It covers the formulation of business directions and policies, business expansion, organization, and clear definition of responsibilities. It entails proper delegation of authorities and responsibilities. (See details under Personnel Development). Determined to uphold the principles of CG, the Company has disseminated the CG Policy in its previously mentioned documents.
  
• 
  Risk Assessment: The Company has not only assessed major types of risk facing it, together with their probability and impacts, but has also taken steps to manage them to acceptable levels. PTTEP classifies risk management at the corporate level, linking to its strategic directions and strategies, and the operating level, to be managed by departments. All risks come under the supervision of the Risk Management Committee, equipped with clear risk management procedures. (Details as under Risk Management)
  
• 
  Control Activities: PTTEP has designed its business to function systematically and efficiently. Also, to prevent and minimize operation risks, the Company operates under four essential regulations: human resources management; finance and accounting; budgeting; and procurement regulations; including the charters of the five subcommittees. These regulations frame PTTEP’s management and operation control.
  

The Company has allocated responsibilities of compliance to four main departments to verify, control, and supervise to ensure that PTTEP strictly observes laws and regulations. These consist of Legal Department; Corporate Secretary Office; Accounting Department; and Safety, Security, Health and Environment Department. These Departments are also required to alert all parties when new rules and regulations come into effect. When doubts arise, departments must seek advice from Legal Department to ensure accurate interpretation and compliance.

• 
  Information and Communication: The Company executes this aspect by instituting efficient and effective communication procedures for information both internally and externally for complete, accurate, and timely decision-making. The systems contain both financial and non-financial information. Internally, through the Intranet (via Internal Communication as the information center), PTTEP provides employees with adequate and timely information needed for doing their work, as well as communication between the Management and employees to improve job coordination and execution to fulfill goals. Externally, the Company has an effective procedure in place to provide sufficient information and deliver reports on its performance to various institutions in a timely and efficient way as required by relevant regulations, for coordination and business image.
  

• 
  Monitoring and Evaluation: PTTEP has clear control and operating performance assessment, as well as that of risk management performance. A risk assessment monitoring procedure reports its findings regularly to the Risk Management Committee. Corporate performance is assessed every quarter of the year with each department reporting its results against plans and performance indicators. In addition, the Office of the Internal Audit monitors and assesses internal control outcome, and then reports its findings to the Audit Committee. Results of internal control assessment for 2006 appear under Item 10.
  

Risk management is the appreciation of the causes of changes affecting businesses and obstructing the accomplishment of the organization’s objectives, followed by formulation of suitable management measures to handle them.

PTTEP’s Risk Management policy was set up for the proper and efficient identification, mitigation, and monitoring of risks. For any risk confronting Company business, PTTEP has prepared suitable, systematic, and efficient measures. The Company remains committed to enhancing a risk awareness culture, improving business procedures and resource utilization to proactively manage the risks. Therefore, PTTEP will not only be able to reduce possible losses, but could also gain new business opportunities.

The Company has defined five stages of risk management, namely Set Objective, Identification, Assessment, Mitigation, and Monitoring, along with a suitable warning system, to manage the two levels of risk – strategic risks linking to its strategic directions and strategies, and the operating level, to be managed by relevant departments. All risks come under the supervision of the Risk Management Committee.

Critical activities of 2006 that had the approval of the Risk Management Committee consisted of the following.

• 
  Ensuring that the risk management processes and plans produced efficient risk management and internal control practices in proportion with acceptable risk levels and suitable for changing circumstances
  
• 
  Ensuring that an effective corporate risk profile at both strategic and operating levels was in line with the Company’s strategic direction, and provided recommendations that were considered useful for monitoring performance to reduce such risks
  
• 
  Deliberating significant Company risks in detail and providing recommendations for monitoring its performance to reduce such risks, including those having to do with geopolitics, investment, portfolio, organization capability, human resource planning, exploration, project development, and currency exchange rates.
  

As a rule, for a given year the Board plans its meeting dates with regular agenda items scheduled for each month. Other agenda items are jointly decided by the Chairman and the President, as needed. Each Director may also propose matters they consider important. In 2006, the Board met every third Friday of the month for a total of 14 times, including an offsite meeting to deliberate strategic plans and another meeting to deliberate human resource administration. The Board held one meeting without the presence of the Management before the July meeting. The Independent Directors held one meeting among themselves before the November meeting. Directors consistently received an invitation to each meeting along with draft minutes and complementary information ahead of each meeting.

In 2006 a total of 97 agenda items were deliberated, including the annual strategy formulation, work plans, and budget GCG policy; financial statements; petroleum purchase agreements and negotiations; bidding for exploration and production; joint venturing; deliberation of assets obtained or disposed of; procurement under major projects; and amendments to regulations. Matters for acknowledgment consisted of 142 items, most of which were reports on operation and updates on various projects; status of Company shares; changes in PTTEP directorship during the year; appointment of executives; reports on activities in support of social and environmental development; reports on safety, security, health and environment; report on direction, principles, or best GCG practices; and reports of subcommittees. A typical Board meeting took two hours, with the Company Secretary in attendance each time to take the minutes and file complete information along with meeting documents; he also advised the Board on pertinent regulations.

The meeting minutes covered all essential issues and all the minutes were unanimously approved. Questions raised during Board meetings along with additional explanations, and Directors’ views were clearly recorded. All documents were systematically filed under tight security. As a rule, all Directors attended each Board meeting except for legitimate reasons for absence. Whenever possible, Directors sent an apology letter to the Chairman if they could not attend a meeting. Board attendance records for the year appear under Item 9.1.1.

PTTEP has stipulated in the CG of PTTEP Item 5.1.8 that for the sake of checks & balances, the Remuneration Committee is to evaluate the performance of the Board and subcommittees against the annual Performance Agreements, reviewed by the Nominating Committee and approved by the PTTEP Board. Besides, performance evaluation will be made of the Chairman of the Board, the outcome of which is reported in the annual report.

The Board and its subcommittees prepare performance agreements (PA) annually for use in their performance rating. All Directors conducted self-assessment together with that of the entire Board and all subcommittees, including the Chairmen. PTTEP will then propose the final assessment outcome to the Remuneration Committee for scoring purposes before getting an approval from the Board and disclosing the scores in the annual report. PTTEP will then gather the comments and suggestions made in the evaluation forms as guidelines for improving the performance of the Board and the Company.

As regards the grading scale, a ‘1’ stands for ‘needs improvement’, a ‘2’ for ‘fair’, a ‘3’ for ‘standard’, a ‘4’ for ‘good,’ and a ‘5’ for ‘very good’. The Remuneration Committee has compiled the findings below for the Board’s approval.

(a) Self-assessments by Directors averaged 4.65.

(b) The Board as a group averaged 4.49 or ‘good’ – against 4.53 the year before.

In 2006, topics ranked, in descending order, as shown below:

Assessed Item	2006		2005
	Performance	%	Performance	%
5. Board Structure	4.65	93.00	4.63	92.65
2. Formulation of Policies	4.53	90.60	4.58	91.61
8. Meetings	4.52	90.40	4.59	91.83
4. Accountability	4.50	90.00	4.61	92.18
7. Training and Development	4.47	89.40	4.51	90.11
6. Teamwork	4.43	88.60	4.35	86.92
3. Overseeing the Management	4.41	88.20	4.44	88.74
1. Formulation and Monitoring of Strategic Plan	4.37	87.40	4.52	90.49
Average	4.49	89.70	4.53	90.57

(c) The Audit Committee scored 4.74 or ‘good’ against 4.53 of 2005.

(d) The Risk Management Committee scored 4.76 or ‘good’ against 4.44 of 2005.

(e) The Remuneration Committee scored 4.79 or ‘good’ against 4.38 of 2005.

(f) The Nominating Committee scored 4.69 or ‘good’ against 4.35 of 2005.

(g) The Corporate Governance Committee scored 3.93 or ‘good’ against 4.55 of 2005.

(h) The Chairman earned 4.52 or ‘good’ against 4.57 of 2005.

The 2006 Annual General Shareholders Meeting approved Directors and subcommittees’ remuneration, taking into account the Company’s business, size, correlation with Company performance; conformity with the market and industry norms; as well as the duties and responsibilities of the Board and subcommittees. The Directors’ and subcommittees’ remuneration packages for 2006 and beyond were kept constant, as for 2005:

• 
  Retainer fee at Baht 25,000/person/month, paid in full each month.
  
• 
  Meeting fee at Baht 25,000/person/meeting, paid only for those in attendance.
  
• 
  Annual bonuses for all Directors amount to Baht 17-25 million/year, depending on the Company’s net income. If the net income was Baht 10,000 million, the Board would receive Baht 17 million in total bonuses. If the income was more than Baht 10,000 million, directors would receive an additional 0.08 percent of the increment over Baht 10,000 million, with a bonus ceiling of Baht 25 million. The bonuses are to be prorated to individual Directors’ periods in office and meeting attendance. If a Director was absent from more than 25 percent to 50 percent of the meetings in a given year, his or her bonus would be deducted by 25 percent. If a Director was absent from more than 50 percent to 75 percent, his or her bonus would be deducted by 50 percent. If a Director was absent from more than 75 percent, his or her bonus would be deducted by 75 percent. The bonuses are to be paid after the audited annual financial statements have been announced to SET.
  
• 
  Members of all standing subcommittees would receive meeting fees of Baht 25,000/person/meeting. This, however, excluded members who were concurrently PTTEP executives, including the president and all management, and does not apply when meetings concerned circulating resolutions.
  
• 
  The Chairman of the Board and the Chairmen of subcommittees received an extra 25 percent of the fee allocated to regular Directors or members.
  

This has to do with entities set up by PTTEP or directly and indirectly joined in joint ventures by PTTEP to serve as mechanisms for conducting the businesses for PTTEP best interest under business conditions. These are treated as Company assets in line with legal criteria or investment conditions. As a rule, the boards of these companies are kept to a bare minimum, for instance, the President and the senior management executive directly responsible for the success of the joint venture, under PTTEP’s policies and strategies. PTTEP rules and procedures therefore apply, as these are assets managed in the best interest of the Company. The President and such an executive are not entitled to extra compensation, as this is considered part of routine work. This practice is clearly stipulated in the GCG policy of the Company.

The President’s compensation package is clearly and transparently decided by the Remuneration Committee, with the endorsement of the Board. Consideration is given to standard and prevailing industry and business practices, in particular leading listed companies on SET; and to his or her job responsibilities, linked to the annual Company performance and performance appraisal outcome.

Assessment of the President’s performance is made against the performance agreement for a given year, decided by the Remuneration Committee and endorsed by the Board as checks-and-balances and to monitor the performance of the President against short-term and long-term goals. Besides allowing for GCG practices, this would make the deliberation of the President’s compensation transparent and suitable, and would also enable the findings to improve his or her performance.

(d) Executives’ Compensation

The Remuneration Committee reviews and recommends the compensation criteria or procedures for defining the compensation of executives that is fair and reasonable, while conforming to prevailing practices in this business, for the Board’s endorsement. Executives’ compensation package and salary structure are determined by market comparison with other leading oil and gas companies’ criteria, procedures, pay rates, salary surveys, and with consideration to their individual scopes of duties and responsibilities.

The President has the responsibility of deciding senior executives’ compensation packages. Annual merit increases of executives are tied to individual performance, the Company’s performance, and key performance indicators (KPIs) achievement of each division.

To maintain its competitiveness in the oil and gas market, PTTEP participates in annual compensation surveys along with other leading oil and gas companies to obtain sufficient information to report to the Board for possible adjustment in competitive compensation strategy when there is a significant compensation change in the marketplace.

In compliance with GCG and transparency, PTTEP discloses the Management’s compensation, including their PTTEP shares and ESOP warrants in the annual report.

(7) The Board of Directors’ Training

Directors regularly upgrade themselves by attending seminars, courses, and meetings organized by the Institute of Directors of Thailand (IOD), SET, SEC, and the National Corporate Governance Committee. Apart from that, PTTEP holds sessions for Directors to meet and discuss GCG matters with those recognized as having GCG expertise. When there is a new Director, PTTEP provides a Director manual and an orientation program, which in turn provides appreciation of PTTEP business and Directors’ responsibilities, as well as acknowledgment of essential information for their tasks and duties.

SEC ranked PTTEP among the top three listed companies for organizing the 2006 annual general shareholders’ meeting, with a score of 105 out of the total 110 under the 2006 AGM Checklist Project.

On July 26, PTTEP won two awards at the 2006 SET Awards event. The first was “Best Performance of the Resources Sector” for 2005 performance including disclosure of information and liquidity. The second was “Distinction in Maintaining Excellent Corporate Governance Report”, awarded for continually maintaining outstanding reports on GCG compliance for the second year in a row. Incidentally, PTTEP has won this award for the past four years since the inaugural SET Awards in 2003.

Finally, PTTEP achieved 91% in a survey of CG practices among listed companies in 2006, and was one of the nine top performers (with 90-100%) among 402 companies. The survey was conducted by the Institute of Directors (IOD) with the support of SET and SEC.

(Mr. Vudhibhandhu Vichairatana)

Chairman of the Corporate Governance Committee

29 January 2007

(2) Reviewed the Company’s internal control and internal audit procedures to ensure sufficiency and suitability.

(3) Reviewed compliance with the securities and stock exchange laws, the Stock Exchange of Thailand’s rules and regulations, and other laws governing the Company’s business.

(4) Considered and supported the disclosure of connected transactions to ensure accuracy and integrity, together with the opinion that they had been executed for good reasons for the benefit of shareholders. PTTEP also issued quarterly Management Discussion and Analysis Reports (MD&A).

(5) Approved additional items as assigned by the Board of Directors.

(6) Approved the annual internal audit plan, reviewed internal audit reports, and evaluated internal control system to ensure the Company’s internal control’s efficiency in proportion with acceptable risks and suitability with current business circumstances.

(7) Considered and proposed that the Office of the Auditor General continue to serve as the external auditor; also considered and decided upon the relevant audit fees for 2006.

(8) Reviewed and proposed that the Board of Directors revise the Audit Committee Charter B.E. 2542.

(9) Assessed its performance of 2006 through self–assessment and through solicited feedback from the Board of Directors and related parties. The assessment found that the composition, qualifications, meetings, and performance of the Committee remained effective.

(10) Supported good corporate governance implementation by undergoing the corporate governance rating by Thai Rating and Information Service, Co., Ltd.

(11) Establish its own Key Performance Indicators for 2006.
The Audit Committee regularly submitted all Minutes of the meetings to the Board of Directors.
In conclusion, the Audit Committee performed its assigned duties and responsibilities related to Corporate Governance in 2006 with care, knowledge and independence at its fullest ability, as well as providing forthright opinions to all parties for the benefit of PTTEP, shareholders and stakeholders in an appropriate manner.

Charnchai Musignisakorn
(Mr. Charnchai Musignisakorn)
Chairman

4 January 2007

Under the Company’s GCG Principles, the Nominating Committee consists of three Directors, two of whom are independent, including the Chairman.

The Chairman is Mr. Chulasingh Vasantasingh (Independent), with General Lertrat Ratanavanich (Independent) and Mr. Prasert Bunsumpun serving as members, all of whom were reappointed for the second term from 23 June 2006 to 22 June 2009.

On 15 November 2006, Mr. Bunsumpun resigned from the committee, prompting the Board to appoint Dr. Chitrapongse Kwangsukstith in his place as nominated by the committee, effective from 15 December 2006.

During the year, the Nominating Committee duly performed its duties under the rules issued in 2003. Four meetings were held with all committee members in attendance except for the last meeting, which was caused by Mr. Bunsumpun’s resignation; only Mr. Vasantasingh and General Ratanavanich attended that meeting. The essences of the four meetings appear below:

(1) Deliberating the qualifications of candidates for Board Members and preparing a Director List with the Company’s maximum benefit in mind. Views were also sought from PTT, the major shareholder.

(2) Deliberating the list of those under (1) and proposing to the Board and shareholders’ meetings for election in place of those whose terms expired.

(3) Deliberating the list of those under (1) and proposing to the Board for election in place of those who resigned.

(4) Deliberating qualified Director candidates for standing sub-committees whose members’ terms had expired or members had resigned, and proposing them to the Board for appointment. These consisted of the Audit, Remuneration, Risk Management, and Nominating Committees.

(5) Devising 2006 performance evaluation forms for the Board, standing sub-committees, the Chairman, and the President.

(6) Devising 2007 performance agreements for the Board, standing sub- committees, and the President.

(7) Revising and amending rules of 2003 governing the committee itself, so that they may be in line with the Good Corporate Governance Principles for Listed Companies (2006).

The Nominating Committee reported its meeting outcome to the Board every time.

Through the year, the Nominating Committee duly performed all its assignments with caution, prudence, competence, and independence and provided candid views for the maximum benefit of all shareholders and stakeholders.

(Mr. Chulasingh Vasantasingh)

Chairman

30 January 2007

The Risk Management Committee members performed their duties and responsibilities as assigned by the Board of Director and in accordance with the Risk Management Charter. During 2006, the Risk Management Committee held 4 meetings which can be summarized as follows:

1. 
   Considered the Risk Management plan and procedure to ensure the effectiveness of risk management and internal control that can manage risk into an acceptable level and in appropriate with the dynamic environment.
   
2. 
   Considered the PTTEP Corporate Risk Profile in strategic and operational level that linked to and supported the strategic direction and made suggestions to mitigate those risks.
   
3. 
   Focused on PTTEP critical risks in detail and made suggestions to mitigate and monitor those risks such as Geopolitical risk, Investment and Portfolio risk, Organization capability risk, Exploration risk, Project development risk, and Financial risk.
   
4. 
   Established 2006 Key Performance Indicators of the Risk Management Committee.
   

In conclusion, the Risk Management Committee performed its assigned duties and responsibility with care, knowledge, and independence at its fullest capability, as well as providing forthright opinions to parties for the benefit of PTTEP, shareholders and stakeholders in an appropriate manner.

(Mr. Pichai Chunhavajira )

Chairman of the Risk Management Committee

15 February 2007

1. 
   Limiting access to confidential information strictly to those who need to know
   
2. 
   Instituting office security procedures to protect confidential information and files
   
3. 
   Announcing that owners of confidential information not yet publicized must remind relevant people to strictly observe the security procedures
   

9.7.1 As of year-end 2006, PTTEP and its subsidiaries (namely PTTEPS and PTTEP Services) had a total employee count of 1,779 classified as follows:

(1) Division under the President 100

(2) Strategy and Capability Development Division 71

(3) Thai Offshore Assets Division 388

(4) Joint Venture and Thai Onshore Assets Division 223

(5) Business Development and International Division 111

(6) Geoscience Division 102

(7) Operations Support Division 256

(8) Finance and Accounting Division 126

(9) Human Resources and Business Services Division 202

(10) Production Development Division 200

Total 1,779

9.6.2 PTTEP payroll in 2006 featured no significant changes. No significant labor disputes have arisen over the past three years.

9.6.3 The total compensation (salaries, bonuses, and provident fund contributions) of employees under the payrolls of PTTEP and its subsidiaries in 2006 under 9.6.1 amounted to 1,889,942,623.47 Baht.

9.6.4 Human Resources Development Policy

In order to improve staff competency and strengthen organizational capability for the continuing expansion of company’s business, both in Thailand and overseas, PTTEP has made much of the effort in improving its HR development systems and processes. In this endeavor, the company has reinforced implementation of its competency-based training and development approach with an aim to accelerate the development of its human resources. Based on this competency concept, the company has provided training throughout the past year via the following channels:

1. 
   In-house and External Training
   

2. 
   Long-term Training and Development Programs
   

3. 
   Master’s Degree Scholarship Programs