The Risk Management Committee
Risk Management Committee Charter (Revision No.8)
Table of Contents
5. Duties and Responsibilities
6. Terms and Remuneration
9. Risk Management Function
10. Effective Date
With the purpose of enhancing the risk management of PTT Exploration and Production Public Company Limited (PTTEP) and to remain in compliance with the corporate governance practice of listed companies, PTTEP has appointed a Risk Management Committee to oversee and support the enterprise risk management program, which is a significant component to support the company to achieve its objectives.
In this Charter
“The Company” means PTT Exploration & Production Public Company Limited and PTTEP’ s subsidiaries
“Board” means Board of Directors of PTTEP
“Risk Management Function” means the function that is appointed by the Chief Executive Officer to be responsible for Enterprise Risk Management in accordance with the Company’s Enterprise Risk Management Policy and Framework defined by Risk Management Committee.
The Board appoints the Risk Management Committee which is composed of at least three PTTEP directors, with at least one of the committee member being an independent director.
One of the committee members is to be nominated to be the Chairmen and the Head of Risk Management Function is appointed as the Secretary of the Risk Management Committee.
A Committee Member must possess qualifications according to the criteria as follows:
|(1)||Is to be a member of the Board of Directors of PTTEP but neither the Chairman of the Board nor the Chief Executive Officer.|
|(2)||Is to dedicate sufficient time to perform the Risk Management Committee’s duties and responsibilities.|
|(3)||Independent Committee Members must have qualifications according to the definition of independent director as prescribed in Good Corporate Governance of PTTEP.|
5. Duties and Responsibilities
The duties and responsibilities of Risk Management Committee are as follows;
|(1)||Define Enterprise Risk Management Policy and Framework including providing guidance and recommendations to the Board and Managements on key risks and mitigations.|
|(2)||Review Risk Appetite Statement prior to the Board approval as well as approve corporate level Risk Metrics & Limits and monitor the results regularly.|
|(3)||Ensure effective establishment and implementation of enterprise-wide risk management by enhancing the level of risk awareness within PTTEP through the development of procedures and commitment of resources appropriately.|
|(4)||Maintain an enterprise-wide view of risks which are related to the Corporate Direction in the businesses i.e. E&P, related businesses and other businesses in which PTTEP invests, as well as to recommend mitigation strategies to manage the risks to keep them within the acceptable level according to clause (2) and to continuously monitor, assess and improve the mitigation strategy in responding to any changes of the business environment.|
|(5)||Support Risk Management Function in assessing key risks and advise on other potential risks which may impact the Company on continuous and efficient risk management in comparable to leading companies as well as assign tasks related to PTTEP risk management for the Risk Management Function to perform.|
|(6)||Report key risks and results of risk management to the Board regularly and promptly alert all concerned any significant events related to risk management to the Board.|
|(7)||Disclose the committee’s performance in the company’s annual report.|
|(8)||Regularly review and update its own charter to ensure its appropriateness.|
|(9)||Perform other duties relating to PTTEP risk management as may be assigned by the Board.|
In order to perform these duties, the Risk Management Committee may seek independent opinions from any other professional counselors when it is deemed necessary and appropriate, including providing the training and development courses to the committee members for knowledge related to the company activities enhancement. PTTEP is to be responsible for the expenses.
The Risk Management Committee is responsible directly to the Board according to the duties and responsibilities, while the responsibilities for all activities of PTTEP towards third person are still vested in the entire Board
6. Term and Remuneration
The term of service of a Committee Member is equivalent to the director’s Board term.
In case of any Committee Member’s vacates the Office or is unavailable before the expiration of his term of service, the Board must appoint another Risk Management Committee Member who is fully qualified to replace the resigning member not later than 3 months as of the date of incomplete composition of the Risk Management Committee.
Upon the expiration of a term of service, if there is no appointment of a new Risk Management Committee Member, the resigning member has to standby to perform the duty until the arrival of a new Risk Management Committee Member.
The resigning Committee Members may be re-appointed for another term.
Besides vacating from office by expiration of term of service, the Risk Management Committee member has to resign once he/she cannot possess the qualifications according to Article 4.
The Risk Management Committee will receive appropriate remuneration approved by the Shareholders Meetings for their duties and responsibilities and PTTEP also has to disclose that remuneration in its annual report.
The frequency of meeting is to be at least four times a year.
The Risk Management Committee fixes the number of members required to attend a valid at not less than a half of the Committee Members. If the Chairman is absent, the attending committee members must select one Committee member to serve as Chairman for the meeting.
Each decision of the Meeting is exercised by majority vote. Each Risk Management Committee Member has one vote. If the votes are equal, the Chairman will have an additional casting vote. The Secretary of the Risk Management Committee has no right to vote.
Any Risk Management Committee Member who has any personal interest or any conflict of interest in a matter being considered must inform the Meeting and abstain from expressing an opinion and voting on the issue and leave the Meeting room. An exception can be made if the other Committee members vote unanimously to allow such Committee member to stay in the Meeting room to provide information on the issue so that the Committee can deliberate on the issue thoroughly. However, such Committee member is not allowed to vote or make decision on the issue.
The Risk Management Committee has the authority to invite the management, or any other concerned parties or other appropriate persons to participate or to explain the concerned subjects in the meeting.
The Risk Management Committee must regularly report to the Board the results of the Meeting or other necessary reports.
9. Risk Management Function
The Risk Management Function has to support Risk Management Committee as follows;
|(1)||Support the Risk Management Committee by performing duties regarding the Risk Management Committee Meetings; prepare complete and accurate minutes of meeting and report including informing all concerned parties of the meeting resolution for their acknowledgment and implementation.|
|(2)||Report Corporate Risks and significant operational risks together with mitigation strategies and progress of mitigation plans to reduce risks regularly and promptly.|
|(3)||Report key risks for investment decisions to the Risk Management Committee enabling them to consider the investment proposal.|
|(4)||Perform any other duties relevant to PTTEP risk management as may be assigned by the Risk Management Committee.|
10. Effective Date
This Charter came into force in 20 August 2021.
PTTEP realizes the importance of risk management and commits to its efficiency and effectiveness to enable PTTEP in achieving the vision, mission, objectives, and strategies for energy security as well as value creation for stakeholders. In 2022, it was still very challenging for PTTEP to manage risks due to the oil price volatility stemming from the Russia-Ukraine war, the unrest situations in the countries where PTTEP has invested in, i.e. The Republic of the Union of Myanmar (Myanmar) and The Republic of Mozambique (Mozambique), Operatorship transition of large projects comprising G1/61 and G2/61 project in Thailand and Yadana project in Myanmar, global warming and climate change becoming more critical issues which drive the world transition towards “Low Carbon Future” and “Net Zero Greenhouse Gas Emissions”, the COVID-19 pandemic that continually impacts the global economy, Cyber security risks, and Disruptive technologies. Therefore, PTTEP’s Board of Directors appointed the Risk Management Committee. As of December 31, 2022, the Committee comprised 4 members, 4 of whom are independent directors. The Committee played a vital role in overseeing PTTEP’s risk management so that it remained in line with the PTTEP’s Board of Directors’ directions.
In 2022, the Committee convened 12 times, which included a meeting with the Audit Committee. The duties and responsibilities of the Committee can be summarized as follows:
|1)||Governed strategic risk management in response to the dynamic changing of internal and external environment to ensure that PTTEP is able to execute under its main strategies which are Drive Value – strengthening the petroleum exploration and production business, Decarbonize – reducing Greenhouse Gas emissions, and Diversify – expanding into beyond E&P businesses. The Committee considered PTTEP’s execution in maintaining the strengths of its E&P businesses for energy security while expanding investments in environmentally friendly energy businesses. Moreover, the Committee considered the 2023 Work Program and Budget, 5-year (2023-2027) investment plan and ensured its alignment with the corporate directions and policies.|
|2)||Closely monitored for the smooth and efficient risk management of the existing projects such as (1) transition of G1/61 Project and G2/61 project in Thailand and becoming an operator of the Yadana project in Myanmar. This enables the projects to produce natural gas continuously and safely. (2) unrest situations in Myanmar and Mozambique by providing recommendations to mitigate the potential impacts. In addition, the Committee considered the Production Sharing ontracts (PSCs) extension in the MTJDA Project, the exploration and production period extension such as Sarawak SK309 project in Malaysia and Sharjah Onshore Area C project in the United Arab Emirates etc. by assessing risks and economic returns. In this regard, the projects have shown to be able to carry out the production and exploration as planned.|
|3)||Considered the petroleum exploration and production business expansion and portfolio management by considering acquisitions to serve the Net Zero GHG Emissions target and focusing on natural gas projects such as the Thailand Bid Round and the acquisition of stakes in the Sharjah Onshore Area A Project in the United Arab Emirates etc. In addition, the Committee considered the divestment projects according to the strategic plan such as the withdrawal from Yetagun project and gas transportation company, Taninthayi Pipeline Company LLC (TPC) in Myanmar, the divestment in Barreirinhas AP1 project and Brazil BM-ES-23 project in Brazil. The Committee provided recommendations on risks and potential opportunities, option analysis and mitigation as well as monitored risk proactively. As a result, PTTEP’s investments in E&P businesses are continually based on the given strategic direction.|
|4)||Considered and provided recommendations on investment expansion for new businesses to support the energy transition and respond to future challenges. The Committee considered the opportunity to invest in the power business from natural gas and renewable energy, investment strategy in carbon capture, utilization and storage and hydrogen fuel by providing opinions on risks and opportunities such as conducting option analysis for best selection, formulating partnership with experts, and defining exit strategy, etc.|
|5)||Considered the oil price hedging guideline, closely monitored oil price trends, and provided advice on tools to help data analysis to be more systematic, scenario analysis and dynamic oil price hedging in order to respond to the rapid changes in situation and reduce the impact on net profit from oil price volatility. The Committee also emphasized on the knowledge management from lessons learned from oil price hedging. As a result, PTTEP’s oil price hedging has achieved its objectives.|
|6)||Utilized risk management information to support the risk-based audit approach. There was a meeting with the Audit Committee to exchange views on corporate risks and audit plans and to follow up significant risks to ensure effective risk management in place such as cyber security, etc. Moreover, the Committees placed importance of conducting Post Project Reviews from investment projects such as Oman Block 61. This is to enhance decision making of future investments to be more consciously thorough.|
Furthermore, the Risk Management Committee consistently oversaw enterprise risk management to ensure the businesses were operated within PTTEP’s risk appetite, particularly risks related to the COVID-19 pandemic, exploration and production operations, financial, cyber security, legal, environment including emerging risks. The outcomes of Risk Management Committee meetings were reported to the Board of Directors on a monthly basis.
In summary, the Committee independently performed its duties relating to PTTEP risk management prudently, and competently according to its scopes, authorities and duties defined in PTTEP’s Risk Management Committee Charter. These lead PTTEP to efficiently managing risks in order to achieve our objectives and goals for fair and maximum benefit to PTTEP, shareholders, and other stakeholders for long-term sustainability.
(Mr. Pitipan Tepartimargorn)
Chairman of the Risk Management Committee