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Thailand to Stop Selling 91-Octane Gasoline



Thailand wants Asean to take the lead in creating and controlling the market for alternative fuels, but political and environmental challenges are daunting


Thailand will halt sales of 91-octane gasoline from October 2012 in a bid to reduce its imports of crude and support the domestic renewable biofuel industry, the country’s energy minister said on Wednesday.

“This plan will not only create greater opportunity for our farmers who grow biofuel crops, but also help restore the environment as well,” Pichai Naripthaphan told reporters.

He said the cancellation of the 91-octane gasoline would boost demand for ethanol by 19 million to 21 million litres per month, or around 800,000 litres a day.

Thailand’s domestic ethanol consumption stood at 1.5 million litres per day, while total production capacity was at 3.0 million litres per day.

Ethanol producers had to switch to export more ethanol in the past few months to survive in the face of a sharp fall in domestic demand after the government policy of removing levies on gasoline prices encouraged motorists to switch back to pure 91-octane gasoline.

The country has exported 60 million litres of ethanol so far this year, up from 45 million litres shipped for the whole of 2010, to major buyers such as South Korea, Japan, Singapore, the Philippines and China, the Thai Ethanol Manufacturing Association said.

Pichai also said the government was still on track to promote the use of renewable green energy, aiming at boosting the proportion of renewable energy to 25 percent within a decade, up from 6 percent now.

Now that global supplies of oil are dwindling, Thailand believes Asean’s agriculture sector has the potential to become a leader in biofuels.

Biofuels can come from many sources. Dr Prayad Pokethitiyook, chairman of the Environmental Biology Programme at Mahidol University, is part of a research team that is working with PTT Plc on the possibility of using algae.

Following the Middle East’s Organisation for Petroleum Exporting Countries (Opec), Thailand’s Energy Ministry has pitched an “Opec for Biofuels” to its Asean friends.

Biofuels are defined as liquid or gas fuels derived from biomass including crops, and they produce far lower carbon emissions than fossil fuels such as coal and petroleum.

Sarawut Kaewthip, senior planning and policy analyst from the Energy Ministry, said some countries in the region clearly had vast potential to become major exporters of biofuels, but there was still a long way to go before the region could create the equivalent of an Opec for the commodity.

“The collaboration must be very close between leading producers Indonesia, Malaysia and Thailand. It could take many years of price increases and drops for them to learn how to control the market,” said Dr Sarawut.

World trade conditions have also changed dramatically since the formation of Opec, making a biofuel cartel tougher to arrange for policymakers and private operators, said Dr Sarawut.

“The Thai government sees the readiness and plentifulness of biofuel resources not used for food production. From now on the three big players have to co-develop their resources to set up an Opec of biofuels and also prevent deforestation,” he said.

“But we have to accept that biofuel cannot completely replace fossil oil; biofuels are only another choice for countries that want to reduce dependency on oil imports or cut greenhouse gases.”

The Energy Ministry and the International Energy Agency both expect that biofuels could replace up to 25% of fossil oils in the transport sector by 2030, a significant leap from 1.5% this year.

Biofuels could supply 30 million barrels per day 20 years from now compared to total fossil oil demand today of 85-86 million bpd.

“If Asean could limit biofuel production in Asia-Pacific to only 500,000 to 600,000 barrels of supply, we could dominate the regional price,” Dr Sarawut said.

“But how many years or decades from now that happens depend on the attention devoted by each government and the private sector.

“Thailand is the world’s largest exporter of cassava and second largest for sugar, but there is no value added to these commodities. If you develop them to be ethanol and biofuels we can sell them at a higher price and a higher margin.”

He said Brazil controlled ethanol prices as the world’s largest exporter and it could be a major partner to Asean as Brazil emphasises the Atlantic Ocean market while Asean would focus on the Pacific.

Biofuel development is tough but needs to be done quickly, said Capt Dr Samai Jai-Indr, an energy expert with the Royal Thai Navy and a member of the House of Representatives Energy Committee.

He warned that industrialised countries would keep their eyes on the biofuels industry.

Europe, the United States and East Asia will never welcome biofuels unless they can secure their own resources in some way, he said.

“The companies that benefit from exploration and production in the Middle East – the US’s Chevron, Royal Dutch Shell from the Netherlands and Britain, Total of France, BP of Britain and Mitsubishi of Japan – are all from developed countries that dominate the natural resources of other countries,” said Dr Samai.

“They may move fast to control world fuel plantation areas including those here in Asean. If [developed countries] can’t control the industry, they would seek ways such as human rights, the environment or increased food prices to slow demand in the industry because otherwise they would have to depend on imported biofuels.

“Look at Brazil for an example. Its private and public sectors withstood complaints by developed countries that Brazil’s sugarcane plantations demolished parts of the Amazon forest.”

Now some developed countries buy biofuel resources in Africa and Latin America.

Dr Samai suggested biofuel producers explore opportunities in Burma and Indochina, as they possess the proper climate for fuel crops and have low labour costs.

Meanwhile, Srihasak Arirachakaran, executive director of Thai Agro Ethanol, one of the first ethanol producers in Thailand, hopes to see an organisation materialise.

“Yet these are very much rhetorical, academic questions as there are many hurdles to overcome, not just the wills of leaders,” said Dr Srihasak.

Thailand is in an early stage of biofuel development as the cost of production is still too high and the whole industry needs to develop from upstream to downstream, said Dr Srihasak.

“It is important to consider crop yields, proximity, sourcing and distribution. In the meantime, each government needs to monitor closely what it needs and what it can export to assure sufficient supply for the region. This is not difficult if ministers co-operate.”

Biofuels are appropriate for mature economies such as Europe, Japan and North America, where governments are tackling emission problems by replacing fossil fuels with biofuels and subsidising green fuel prices, said Dr Srihasak.

While the Thai government believes in the fast development of the technology, Dr Sarawut points out that the new generation of biofuel technology should focus on making it commercially viable.

Malaysia and Indonesia, the world’s largest and second-largest exporters of palm oil, have shown interest in an Asean biofuel Opec.

Dadan Kusdiana, Indonesia’s Ministry of Energy and Mineral Resources representative, said Indonesia was ready to collaborate with other countries, particularly the Asean region.

Biofuels development is on the national agenda as Indonesia hopes to not only curb fossil fuel imports but also improve local employment and standards of living.

Indonesia set a target for renewable energy of 17% of total energy use in 2025 by providing incentives for investment and subsidising costs for some types of renewables.

“There is no deforestation here and we are researching ways to find efficient land uses and increase productivity,” he said.

Malaysia’s Ministry of Plantation Industries and Commodities says its development of biodiesel is aimed at reducing dependence on fossil fuels and protecting the environment, even though using palm oil for biodiesel is not economically viable.

Since 2006, Malaysia has encouraged innovative local biodiesel production technology for normal and winter-area grade biodiesel; namely, Malaysia Palm Oil Biofuel. Now the technology has been exported to Thailand and South Korea.

“The move to develop biofuels does not come from the cost of fossil fuels, but to generate a return for local agriculture and industries involved with this sector,” said a Malaysian report.

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