Thailand at first glance looks to be well-placed to become Southeast Asia's hub for bioethanol production and trading.
It grows two of the three main crops used to make bioethanol -- cassava and sugar cane -- with corn being the other. Thailand also has a robust state policy promoting the use of the biofuel as a gasoline blendstock, and by the end of 2012 it will have 25 plants with a total capacity of 5 million liters/day of ethanol.
In addition, it is centrally located in relation to China, India, Japan, the Philippines and Vietnam, which are biofuel advocates and prepared to import Thai bioethanol in substantial volumes.
But a series of obstacles and the lack of an integrated approach may stymie the nation's potential.
MASSIVE SURPLUS
Thailand currently has 19 bioethanol plants in operation with a combined capacity of 3.06 million liters/day, according to the Thai Ethanol Manufacturing Association. These are being run at less than 50% -- or only at about 1.3 million liters/day -- due to limited domestic demand.
Six more plants with total capacity of 2.2 million liters/day are due to start up by the end of 2012. Some of these may not come online, however, due to the mismatch with consumption.
Industry executives at refiner Bangchak Petroleum and state-owned PTT, and energy policymakers at a recent forum on ethanol were all in agreement that increasing local bioethanol use is crucial to taking the sector forward.
And central to growing the domestic market is the plan to end sales of 91 RON gasoline in favor of ethanol-blended gasoline, although the move is unpopular locally and has been delayed several times.
Even so, ending sales of 91 RON, which accounts for 40% of Thailand's total gasoline consumption of about 20 million liters/day, would only help raise demand for bioethanol for blending into gasohol by about 800,000 liters/day, to a total of 2.1 million liters/day. That is still well short of the capacity of the 19 existing bioethanol producers, said Anusorn Sangnimnuan, president of Bangchak Petroleum.
The planned phase-out of 91 RON was most recently put off by another three months from October 1 due to the shortfall of low vapor pressure gasoline -- which is blended with bioethanol to get gasohol -- resulting from the partial shutdown of the fire-hit Bangchak refinery in Bangkok on July 4.
Additionally, even though Thailand aims to become a regional exporter and trader of biofuel, the country is deficient in storage tanks dedicated to bioethanol for both export and domestic use.
NOT ENOUGH RAW MATERIAL
Thailand's bioethanol plan, as outlined by the government in 2008, calls for output of 6.2 million liters/day by 2012-2016, and 9 million liters/day by 2017-2022.
The 9 million liters/day output target could be achieved only by boosting production of cassava and sugar cane, or else Thailand would need to import raw materials from neighboring countries, said Apichart Jongskul, secretary general of the Office of Agricultural Economics.
But the Thai government has sought to meet that long-term bioethanol output goal without increasing the land for cassava and sugar cane cultivation. It is attempting to compensate for the increased demand for feedstock entirely by raising crop yields per hectare.
In 2008, the most recent year for which government statistics are available, there were 1.24 million hectares under cassava cultivation and 1.05 million hectares under sugar cane, together accounting for about 15% of the kingdom's total arable land that year.
In 2008, Thailand accounted for nearly 70% of the world's cassava exports.
The kingdom is also among the world's top sugar exporters, ranking second in 2008 after Brazil. It was the world's fourth-largest producer in 2009 with 66.81 million mt.
Improved irrigation in the country is needed if Thailand is to achieve higher yields of these fuel crops and so are sustainable price support schemes for local farmers, experts said.
A government program now pays Baht 2.80/kg (8 cents/kg) for cassava roots, but this has caused the price of bioethanol made from cassava to rise to Baht 26-27/liter, compared with Baht 20/liter from the molasses-based version. That has discouraged oil companies from using cassava-based bioethanol for blending in gasoline.
Since the introduction of ethanol production in 2008, nearly 80% of the molasses produced in Thailand have been used domestically, with bioethanol accounting for 37%, animal feed and MSG production using 11%, and the remaining 30% going into liquor production.
BIOETHANOL FUTURES
Meanwhile, state-owned PTT is planning to introduce a bioethanol contract on Thailand's commodity futures market. This is seen as key in establishing Thailand as a hub and benchmark price-setter for the biofuel.
PTT, which has the largest domestic share in the sale of oil products, including gasohol, intends to introduce bioethanol to the Agricultural Futures Exchange of Thailand by the end of this year.
Following consultation with the Agricultural Futures Trading Commission Office, PTT hopes to kick off with trading of 30,000 litres per spot contract, which critics have said is too low a volume for futures trading or to establish a benchmark.
"If we start with spot contracts, there will be highly dynamic ethanol trade volume and a benchmark price will gradually emerge," said Nattachat Charuchinda, the chief operating officer for PTT's petroleum business.
Thailand already has a monthly reference price announced by the Energy Policy and Planning Office, but oil traders say the figure does not reflect the real cost.
The introduction of a bioethanol futures contract is aimed at creating a trading system as well as setting a market reference price that would eventually develop into a benchmark for the region.
But to be a hub, Thailand may need to ensure that there is a market for about 4 million liters/day of bioethanol, according to Bangchak's Anusorn. That's going to mean promoting bioethanol-blended gasoline across ASEAN, he added.
PROMOTING REGIONAL BIOETHANOL USE
Anusorn estimated total potential ethanol demand in ASEAN plus China, South Korea and Japan at 30 million liters/day for all types of ethanol use, both transport and non-transport.
Pravit Prakitsri, managing director of Mitr Phol Biofuel, one of Thailand's major molasses-based bioethanol producers, noted that several countries in Asia such as China, Japan, India, the Philippines and Vietnam are committed to making the use of biofuel compulsory over the next few years. This will be a good opportunity for Thailand's ethanol industry, he told the Bangkok conference in July.
Meanwhile, growing demand in Asia, coupled with the Excise Tax Department's easing of regulations to facilitate bioethanol exports, has driven exports of Thai bioethanol used as industrial feedstock and automotive fuel, according to TEMA President Sirivuthi Siamphakdee.
Thai bioethanol exports in the first five months of this year were 149 million liters, outstripping 142 million liters recorded for the whole of last year.
Japan, South Korea, Taiwan, Singapore and the Philippines are the main markets.
Sirivuthi expects Thailand's bioethanol exports to reach 300 million liters for 2012. But that's still less than 1 million liters/day of bioethanol, and only a fraction of Thailand's planned capacity by year's end.
