July 11, 2012

 

Thailand to take integrated approach to become Asean's ethanol hub

 

 

In order for Thailand to become an ethanol hub in Asean, the government should come up with an integrated approach to promote ethanol consumption, players in the oil and ethanol businesses said Tuesday (July 10).

 

Anusorn Sangnimnuan, president of Bangchak Petroleum, said the government's dream of turning Thailand into the region's ethanol hub was quite elusive, as refineries perceive ethanol as a threat to their conventional oil business. To be a hub, Thailand's ethanol production capacity must be about four million litres a day, he told a seminar on "Ethanol: The National Wealth Strategy", hosted by National Defence College 2007.

 

This requires the end of sales of 91-octane petrol, which accounts for 40% of total petrol consumption of about 20 million litres a day. This also assumes that E85 consumption accounts for 10% of the total and gasohol products are required to contain 20% ethanol content, up from 10% now.

 

All those changes require an integrated approach - from price maintenance to help farmers, the establishment of a market with a fair pricing structure, the inclusion of ethanol on the list of commodities in the futures market, and the promotion of ethanol use in neighbouring countries.

 

Total ethanol demand in Asean plus China, South Korea and Japan is estimated at 30 million litres a day. This covers all types of ethanol, both for transport and non-transport use. "If our productivity improves and a fair reference price can be established, Thailand will have a chance to be an ethanol production hub," Anusorn said.

 

The government's support for farmers growing fuel crops is uneven. While cassava growers are suffering from falling prices, growers of sugar cane and oil palm enjoy high prices. Cassava is the source of tapioca, from which ethanol can be produced. The government's policy to have the Oil Fund maintain the price of tapioca-based ethanol at THB6 (US$0.19) per litre in the past six months is unsustainable, he said. It would help in the long run if the tapioca-based ethanol price were factored into petrol prices, say about THB0.20 (US$0.006) per litre.

 

Ethanol made from tapioca costs THB26-27 (US$0.82-0.85) per litre, against THB20 (US$0.63) from sugar. Given the ex-refinery petrol price of THB22-23 (US$0.69-0.72), retailers are discouraged from mixing their petrol products with tapioca-based ethanol.

Biodiesel costs retailers about THB35 (US$1.10) per litre, on top of the ex-refinery diesel price of THB25 (US$0.79). This translates into a subsidy of THB0.50 (US$0.02) per litre for oil-palm farmers.

 

Nattachart Charuchinda, chief operating officer of PTT for the downstream petrochemical business, said government agencies needed to remove legal obstacles for ethanol, since it is crucial in helping reduce energy imports, which are valued at THB1.3 trillion (US$41 billion) per year.

 

The Finance Ministry's Excise Department, the Industry Ministry's Industrial Works Department, the Energy Ministry and the Agriculture Ministry need to work together in boosting productivity, ensuring sufficient supply of raw materials and monitoring price risks. Price intervention should also be stopped. And all this needs to be done before the activation of the Asean Economic Community, to ensure Thailand's leading position in this field, he said.

 

Thailand has 19 ethanol plants with combined capacity of three million litres, against daily demand of 800,000 litres. About 75% of ethanol is made from sugar and the rest from tapioca. Some producers have suspended operations, while others are resorting to exporting the surplus.