Thailand. Biofuels Annual. Jun 2013 Nov. 4, 2013
Thailand's ethanol and biodiesel production increased in 2013 and is forecast to further grow as a result of government policies that promote the use of biofuels.
Bangkok Executive Summary:
In 2013, ethanol consumption will likely double to 800 million liters or approximately 2.2 million liters per day compared to 1.1 million liters in 2012. The expected increase is attributed to an increase in E10 (a mixture of 10 percent ethanol and 90 percent gasoline) and E20 (a mixture of 20 percent ethanol and 80 percent gasoline) gasohol consumption driven by the government’s decision to phase out the use of Octane 91 regular gasoline. The elimination of Octane 91 has increased the use of E10 and E20 gasohol to 20 million liters per day compared to 12.2 million liters per day in 2012.
The increase in ethanol consumption is likely to result in tighter ethanol supplies, particularly during the last quarter of 2013 when feedstock supplies of molasses are expected to be limited. Molasses accounts for 80 percent of the total feedstock used to produce ethanol. The current upward pressure on molasses prices is likely to make cassava-based ethanol production more viable. In 2014, ethanol production is expected to increase to approximately 2.7 million liters per day (about 1 billion liters for the whole year), up 7 to 8 percent from around 2.5 million liters per day in 2013. Cassava-based ethanol production is likely to account for 20 to 30 percent of total ethanol production, up from approximately 15 to 20 percent in 2013. Tight ethanol supplies will likely limit ethanol exports to 130 million liters in 2013.
B100 production is expected to grow to 1 billion liters in 2013 as a result of government policies and growing diesel consumption. 780 million liters of B100 is expected to be derived from crude palm oil (CPO) while 220 million liters is anticipated come from palm stearin. Industry sources estimate B100 production is expected to increase to 1.03 billion liters in 2014.
Industry sources also believe that continued increase in feedstock for unblended biodiesel or CPO should be sufficient to meet the growing demand. CPO production for 2013 is estimated to increase to 2-2.1 million metric tons (MMT) in 2013 compared to 1.89 MMT in 2012 due to increased fresh fruit bunch (FFB) production and improved CPO extraction rates. CPO production in 2014 is forecast to further increase to 2.2-2.3 MMT.
There has been no change in the government’s biofuel policy from the previous annual report. Thailand currently promotes biomass energy for heat and power generation through the issuance of licenses to approved private companies that sell electricity to the Electricity Generating Authority of Thailand (EGAT). The government also supports second-generation molasses-based ethanol production using cane bagasse.
1. Policy and Programs
The 10-year Alternative Energy Development Plan (2012 – 2021), which was approved by the Thai Cabinet in 2011, remains unchanged. The objective of the plan is to increase the share of renewable and alternative energy from the existing 9.4 percent of total energy consumption to 25 percent by 2021. The objective is mainly to reduce the country’s dependency on fossil fuels. The plan also aims to strengthen domestic energy security, promote integrated green energy utilization in communities, enhance the development of alternative energy industries, and increase research and develop renewable energy technology for competitiveness in the global market.
The Thai Government continues to implement its new 10-year Alternative Energy Development Plan (2012 – 2021), which is set to increase ethanol consumption to 9 million liters per day by 2021. The plan is well on track as the government terminated the sale of Octane 91 regular gasoline in January 2013. As a result, ethanol production increased to 2.6 million liters per day between January – April 2013 compared to 1.8 million liters per day during the same period in 2012. The average ethanol consumption increased significantly to 2.2 million liters a day between January - April 2013 compared to an average of 1.1 million liters per day during the same period in 2012. In addition, the government has promoted the use of E20 gasohol consumption by setting prices 8 to 14 percent cheaper than E10 gasoline. These price subsidies are paid by the State Oil Fund. The government has also provided gasoline stations marketing subsidies totaling 0.5 bath/liter (6 US cent/gallon) and 6 baht/liter (76 US cent/gallon) to entice them to expand sales of E20 and E85 gasohol. The government also continues to support the manufacturing of Eco-cars (E20 vehicles) and flex-fuel vehicles (FFV) by reducing the excise taxes automobile manufacturers have to pay. Currently, the government provides manufacturers a tax reduction totaling 50,000 baht/vehicle (US$ 1,587/vehicle) for FFV and 30,000 baht/vehicle (US$ 952/vehicle) for Eco-cars. Moreover, the government has gradually liberalized the ethanol laws and regulations. In February 2013, the Thai Cabinet approved an excise tax exemption on industrial-grade ethanol for exports to support domestic ethanol manufacturers. The plan also supports a research budget which will look into ways older vehicles and motorcycles can use ethanol. As for feedstocks, the plan still focuses on improving existing feedstock supplies of molasses and cassava. The target is to increase average sugarcane yields to more than 15 metric tons per rai (93.8 tons/hectare) compared to the current average yield of 12 metric tons per rai (75 tons/hectare). The plan also aims to increase the average cassava yield to more than above 5 tons per rai (31.3 tons/hectare) with total production of 35 million tons per year.
The Thai Government’s Biodiesel Development Plan remains unchanged from the 2012 update. The government has maintained its B100 consumption target at 5.97 million liters per day by 2021. The plan focuses on both supply and demand. On the supply side, the government will promote the expansion of oil palm acreage to a targeted 5.5 million rai (880,000 hectares) with a total oil palm harvested area of 5.3 million rai (848,000 hectares) by 2021. Average yields are expected to reach 3.2 MT/rai (30 MT/hectare) in 2021 while crude palm oil crushing rates should be above 18 percent. On the demand side, the government anticipates balancing its compulsory production of biodiesel with domestic palm oil supplies. The plan also introduces pilot projects for B10 or B20 blend use in fleet trucks and fishery boats.
The government also intends to support the research and development plan called the “Future New Fuel for Diesel Substitution,” which encourages cultivation of new energy crops (jatropha and micro algae), diesohol (blending ethanol with diesel), and oil conversion technology (Bio Hydrofined Diesel: BHD, and Biomass to Liquid: BTL) between 2014-2017. The target for new commercial production capacity is 2 million liters per day in 2018 and up to 25 million liters per day by 2021.
In 2013, the number of operating ethanol plants increased to 21 with total production capacity of approximately 3.9 million liters per day, up from 19 plants and a production capacity of 3.2 million liters per day in 2012. The new ethanol plants are cassava-based plants with production capacity of 0.7 million liters per day.
In the first four months of 2013, ethanol plants operated at an average of 2.6 million liters per day, up 33 percent from an average of 1.9 million liters compared to the same period last year. The increase is due to higher gasohol consumption fueled by the government’s decision to phase out the use of Octane 91 gasoline. Molasses-based ethanol still dominates ethanol production accounting for around 73 percent of total ethanol production. Molasses-based ethanol plants are operating near full capacity at approximately 2.4 million liters per day. The sole sugarcane-based ethanol plant is operating at close to full capacity at about 0.2 million liters per day. Meanwhile, cassava-based ethanol plants are running at around 0.5 million liters per day, which is well below the total capacity of 1.3 million liters per day. The high cassava prices caused by the government’s Cassava Pledging Program, have slowed the use of cassava feedstock. Under the program, cassava intervention prices are set at 2.60 – 2.75 baht per kilogram ($87-92/MT) and are 23-32 percent above market prices. Cassava-based ethanol production accounted for approximately 20 percent of total ethanol production. Presently, cassava-based ethanol prices are 2-3 baht/liter (25-38 US cent/gallon) or 14 percent above molasses-based ethanol prices, which are approximately 24 baht/liters ($3/gallon) higher.
In 2013, total ethanol production will likely increase significantly to 930 million liters or approximately 2.5 to 2.6 million liters per day, up approximately 40 percent from an average of 1.8 million liters per day compared to last year. The demand for molasses feed stocks is likely to increase to around 3 million metric tons, up 32 percent from 2.2 million metric tons in the previous year. This will put upward pressure on domestic molasses prices. In 2013, molasses production is expected to increase to 4.5 million metric tons due to the bumper sugarcane crop of approximately 100 million metric tons (see TH3037, “Sugar Annual 2013”). Approximately, 1.5 million metric tons of molasses are expected to be used in the domestic food, feed, and beverage industries.
In 2014, ethanol production is expected to increase to approximately 1 billion liters or 2.7 million liters per day, up 7 to 8 percent from the previous year, in anticipation of growing demand for gasohol. The higher demand for ethanol is likely to be filled by cassava-based ethanol plants due to tighter supplies of molasses. Presently, there are three new cassava-based ethanol plants due for completion by the end of 2013 with production capacity of 1.4 million liters per day. In addition, the government is encouraging refineries to use cassava-based ethanol for their gasohol production through price subsidies and discounted sales of government-owned cassava stocks. This policy is expected to make cassava-based ethanol prices more competitive with molasses-based ethanol. By May 2013, the government sold 1.6 million tons of cassava from its intervention stocks of 10 million tons. The stocks were sold at a discount (2.65 baht per kilogram ($88/MT) to support cassava-based ethanol producers. The sales of cassava stocks are expected to increase supplies of cassava-based ethanol, particularly during the last quarter of 2013 when supplies of molasses-based ethanol will possibly be tighter. As a result, some refineries reportedly increased their purchases of cassava-based ethanol. Thus, the market share of cassava-based production is likely to increase to approximately 20 to 30 percent of total ethanol production in 2014, up from around 20 percent market share in 2013. Meanwhile, molasses-based ethanol is expected to decline to around 60 percent of total ethanol production in anticipation of tighter molasses supplies and limited sugarcane crop expansion caused by current downward pressure on world sugar prices.
Unlike fuel ethanol, production of non-fuel ethanol is controlled by the government. The Liquor Distillery Organization (LDO), which is under the authority of the Excise Department of the Ministry of Finance, has a monopoly on the production of industrial grade ethanol in Thailand with a production capacity of approximately 60,000 liters per day. The LDO plans to invest in new facilities that will triple the capacity to meet the growing domestic demand for industrial grade ethanol, particularly for medical/pharmacy paints, and cosmetics uses. Presently, domestic demand for industrial grade ethanol is approximately 50,000 liters per day.
In 2013, ethanol consumption is likely to double to 800 million liters or approximately 2.2 million liters per day compared to 1.1 million liters in 2012, due to an increase in E10 and E20 gasohol consumption. In the first four months of this year, gasohol consumption increased significantly to 2.4 billion liters or 20 million liters per day compared to 12.2 million liters per day in 2012. This accounted for nearly 90 percent of total gasoline consumption, up from 60 percent in 2012. The increase in gasohol consumption is due to the government’s decision to phase out the use of Octane 91 regular gasoline. The elimination of the Octane 91 regular gasoline has increased E10 use to 18 million liters per day, up from 11 million liters per day in 2012. In addition, E20 gasohol consumption increased to 2 million liters per day, compared to 1 million liters per day in 2012. Furthermore, gasohol consumption has been fueled by government price subsidies. Currently, the retail prices for gasohol are approximately 15-50 percent cheaper than Octane 95 gasoline. The number of E20 gasohol stations has also nearly doubled to 1,622 stations in 2013 compared to 885 stations in the same period last year.
In 2014, ethanol consumption is likely to trend upward to 830 million liters or approximately 2.3 million liters per day, up 3 to 4 percent from the previous year due to growing E20 and E85 consumption. Furthermore, large gasoline stations plan to sell more E20 gasohol in 2015.
In 2013, ethanol exports (HS2207.10.00) will likely decline significantly to 130 million liters, due to strong domestic demand for ethanol. In the first four months of 2013, ethanol exports declined significantly to 64 million liters compared to 138 million liters during the same period last year. Ethanol is primarily exported to the Philippines where domestic ethanol supplies remain insufficient due to its mandatory sales of gasohol. Most ethanol exports are industrial grade ethanol. Meanwhile, there will be no imports of ethanol for gasohol production in 2013 due to sufficient domestic supplies. The Thai Government also imposes a 2.5 baht/liter (32 US cents/gallon) on ethanol imports.
In 2014, ethanol exports are expected to increase slightly to 170 million liters in anticipation of larger exportable supplies from new ethanol plants. In addition, the export-oriented cassava-based ethanol plant, which started its operation in 2013, is expected to expand its capacity in 2014. Ethanol demand from the Philippines and China is also likely to remain strong.
Ethanol stocks declined significantly to around 22 million liters in 2012 due to strong export demand compared to around 40 to 60 million liters over the last couple of years. In 2013 and 2014, ethanol stocks are likely to remain low at approximately 22 to 23 million liters in anticipation of tighter ethanol supplies and growing domestic demand for gasohol.
B100 or unblended biodiesel in Thailand is currently produced from palm oil derived feedstock such as CPO, refined bleached deodorized (RBD) palm oil, palm stearin, and free fatty acids of palm oil (FFA). B100 production is solely driven by government mandates. Thailand does not import or export B100, however, it does export CPO.
The Thai Government’s biodiesel policy is mainly aimed to help palm farmers. Currently the government has required fuel producers to blend palm oil with diesel fuel and has recently announced new mandates that will increase blending requirements to B7 (7 percent blend by volume of biodiesel in diesel fuel) in 2014.
B100 production is expected to grow to 1 billion liters in 2013 as a result of government policies and growing diesel consumption. 780 million liters of B100 is expected to be derived from CPO while 220 million liters is anticipated come from palm stearin. Industry sources estimate B100 production is expected to increase to 1.03 billion liters in 2014.
Feedstock for unblended biodiesel or crude palm oil is estimated to increase to 2.0-2.1 million metric tons (MMT) in 2013 compared to 1.89 MMT in 2012. The higher feedstock is due to increased fresh fruit bunch (FFB) production and improved CPO extraction rates. The increase in FFB production is attributed to higher average yields caused by favorable weather conditions in 2012 and an increase in the number of mature palm trees used in palm oil production. In addition, industry sources report that the CPO extraction rates in 2013 should increase by an average of 17 percent in 2013 compared to 16.5 percent in 2012, due mainly to favorable weather conditions in 2012 and early 2013. CPO production in 2014 is forecast to further increase to 2.2-2.3 MMT reflecting an increase in both harvested area and a larger number of mature trees.
CPO supplies for B100 production in 2013 and 2014 is expected to reach 680,000 MT and 880,000 MT, respectively.
Due to its unprofitability, there have been no newcomers in Thailand’s B100 processing industry since 2010. Some establishments have already suspended their operations. As a result, only 10 producers currently have active operations with an estimated total production capacity of 4.3 million liters per day or 1,280 million liters per annum.
B100 consumption is expected to further increase in 2013 by 12 percent to 1 billion liters from 890 million liters in 2012, mainly due to the government’s B5 mandate and an estimated growth of 6 percent in total diesel consumption. B100 consumption in 2014 should grow by an estimated 20-30 percent as the government recently approved a B7 mandate which is scheduled to take effect on January 1, 2014.
According to industry sources, B100 production is unprofitable in Thailand, simply because there are too few refineries. Although B100 prices are set by the government, the limited number of palm oil refineries enables them to influence prices below the established reference prices. For example, the reference prices announced on June10-16, 2013 were 28.75 baht/liter ($3.51/gallon) for B100 derived from CPO and 25.47 baht/liter ($3.11/gallon). However, trade sources reported that the actual prices received by B100 producers were 3.0-5.0 baht/liter (37-61 US cents/gallon) below the reference prices. This is a primary reason why there are no new entrants in the B100 market.
The government implemented B5 biodiesel blending requirements in 2011. Below is historical implementation of mandatory use for specific biodiesel since 2007:
• June 2007 Implement mandatory use of B2 and voluntary use of B5
• June 2010 Implement mandatory use of B3 and voluntary use of B5
• March 2011 Implement mandatory use of B2 and voluntary use of B5
• May 2011 Implement mandatory use of B3-B5
• July 2011 Implement mandatory use of B4
• January 2012 Implement mandatory use of B5
• July 19, 2012 Implement mandatory use of B3.5
• November 1, 2012 Implement mandatory use of B5
• April 2013 The Cabinet agreed to implement mandatory use of B7, commencing on January 1, 2014
The Thai Government restricts the import of biodiesel to protect domestic palm growers. In addition, a lack of global demand for biodiesel has decreased Thailand’s B100 exports in recent years.
3.4 Ending Stocks
B100 production is driven solely by contracts between palm growers and refineries. As a result, the country’s B100 stocks, held by either B100 producers or petroleum oil refineries, are quite low somewhere around 20-30 million liters or about ten days of utilization.
4. Advance Biofuels
A molasses-based ethanol plant recently opened a second production line using cane bagasse. This second generation biofuel pilot project has been established between the Thai Roong Ruang Group, one of the largest sugar mills in Thailand, the Japanese government, and the Thai Government. The operation remains in the experimental stage with a production capacity of 10,000 liters/day.
The Thai Ministry of Energy has also started a pilot project using hydrogenated vegetable oil (HVO) for biodiesel production. The project is expected to take several years before it turns into a viable commercial production