Thai Oil delays 48 Mgy cassava ethanol plant on feedstock cost rises; continues with 9 Mgy joint venture project

Thai Oil has delayed its $152 million, 48 Mgy cassava ethanol plant, citing high feedstock prices. However, the state oil company’s $44 million, 9 Mgy Mae Sot project, a joint venture with Padaeng Industry and Petro Green, is on schedule to open in late 2009. Thai Oil said that it would study the potential to use molasses as a feedstock in the larger project, and also would recommence development if cassava prices dropped sufficiently.

Thailand background

State oil company PTT said that it would launch biohydrogenated diesel (BHD), after tests showed that it could safely be blended at B10 concentrations with existing Thai diesel vehicles and machinery. Tests were conducted with Toyota, which said that BHD produced less pollution and extended engine life compared to conventional biodiesel.

The government announced that a biofuels incentive package that reduces the excise tax on E85. The government said that the incentives, combined with the launch of E85 at 50 stations controlled by state oil firms, would result in a savings of $3.3 billion in oil imports.

Earlier this spring, Thai PM Samak Sundaravej said the World Bank and the United Nations are criticizing biofuels exporting nations for driving up food prices, but not saying a word about the role of oil exporting nations in driving up both food and energy costs. “Let me ask the World Bank whether they used to ask oil exporting countries before pointing their fingers and blaming us that we have to use rice fields to grow biofuel crops. They have unreasonably continued to inflate oil prices even though the oil supply is not running out yet.” Oil prices, which are up more than 150 percent since 2005, are estimated to have three times more impact on food prices than increases in grain prices.

The Thai Agriculture and Cooperatives Ministry is promoting sugarcane production for ethanol in a the cadmium-contaminated Mae Sot district of Tak, where food crops have been banned for health safety reasons. The Mae Sot Clean Energy plant, a joint venture between Padaeng Industry, Thai Oil and Petrogreen, will be completed in 2008 to produce sugarcane ethanol in the district.

Earlier this month, Thai Energy Minister Piyasvasti Amranand said that biofuels sales would increase in 2008 to $469 million from $157 million in 2007. He said that the cost of oil imports have fallen 10% as a result of biofuel usage and a stronger currency, adding that gasoline would be replaced by E10 and E20 blends by 2012.

Thai biofuel demand has increased more than 100 percent for 2007; the spur in biofuels sales comes not only from the introduction on E20, but also the implementation of a B2 mandate. Demand is so brisk that major oil traders may be required to establish mandatory strategic reserves of ethanol and biodiesel in addition to conventional fossil fuels.

Biofuel distributor Bangchak said that it had voluntarily set up a reserve of 790,000 gallons of ethanol and 378,000 gallons of biodiesel.

To coordinate these disparate developments, the Thai government announced the establishment of a new, national biofuels organization, which will include members of the government, industry, and private citizens. The Energy Ministry began coordination talks with the Commerce and Agriculture ministries, as well as representatives of universities, farmers, car makers and oil retailers. A 21-member panel will supervise policy while a 13-member panel will supervise management of biofuels development from field to wheels. $3 million in palm oil taxes will be used to support the committees.

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