Highlights

The Thai Cabinet revised its Alternative Energy Development Plan in 2015, aiming to promote higher use of ethanol and biodiesel up to the year 2036 on a self-reliance basis. Fuel ethanol consumption in 2016 is estimated at 1.3 billion liters and has been growing at a rate far below the pace required to meet the target of 3.3 billion liters set for 2021. Biodiesel consumption in 2016 is also estimated at 1.3 billion liters with a calculated on-road use of B5.7.

Executive Summary

In October 2015, the Thai Cabinet approved Thailand's revised national energy plan, consisting of 3 plans. The plan revision is intended to align with the 11th National Economic and Social Development Plan. The bottom line of the revised AEDP is to promote higher use of biofuels and while remaining self-reliant in feedstock and biofuels with minimum to trade for both. The plan also aims at expediting the mandatory blending the current B7 requirement to B10 in 2018. The Government plans to subsidize the use of B20 in large trucks on a voluntary basis, beginning in 2016. However, the accomplishment of higher blends under this mandatory requirement plan may be difficult to reach or sustain given the volatile weather-driven production of palm oil, which is an only domestic biodiesel feedstock if the market remains closed to foreign feedstock and biodiesel. Thailand's campaign to utilize used cooking oil for biodiesel production exists among one or two biodiesel companies as a Corporate Social Responsibility (CRS) campaign but the use is limited to 5-6 million liters of unused cooking oil per annum. Regarding ethanol policy, the government is still promoting the ethanol use through price incentives and excise tax reduction for cars compatible with E20 and E85 gasohol.

In 2017, fuel ethanol production and consumption should continue to increase to 1.4 billion liters, supported equally through price incentives to the State Oil Fund and market incentives to retailers. The price subsidies, which are paid by the State Oil Fund, make gasohol (ethanol-blended gasoline) 20 to 40 percent cheaper than regular gasoline.

Although the government's policy is to maintain its B7 mandates in 2016 and 2017, it possibly restate a step-down in biodiesel mandates at any time following weather-vulnerable palm oil supplies. Lately in 2016, the government announced to lower B7 mandates to B5, effective on July 25, 2016 because palm oil supplies appeared to be lower than earlier estimates, and if the mandates continue, soaring palm oil prices would negatively affect household cooking palm oil consumers.

The significant decline in diesel prices in 2015 not only encouraged diesel vehicle users (mainly trucks or trailers) to switch to diesel from CNG, but it also stimulates increased use of diesel among smaller vehicles (i.e., pick-up trucks). As a result, biodiesel consumption rose by 4 percent growth to 1.23 billion liters in 2015, as compared to 1.18 billion liters in 2014. Prevailing low prices for diesel are expected to drive biodiesel consumption growth 6 percent in 2016 and 8 percent in 2017.

Policy and Program

The 10-year Alternative Energy Development Plan (2012-2021) was approved by the Thai Cabinet and valid until it was replaced by Thailand's 20-year National Energy Plan (2015 – 2036) endorsed in October 2015 in order to align with the 11th National Economic and Social Development Plan. Like the 2012-2021 plan, the new plan includes Alternative Energy Development Plan (AEDP), Oil Plan, and Gas Plan. Under the AEDP, the share of renewable and alternative energy from biofuel is aimed to increase from 7 percent of total fuel energy use in 2015 to 25 percent in 2036. In order to accomplish this energy use goal, the Thai government has targeted to increase ethanol consumption from 1.17 billion liters in 2015 to 4.1 billion liters by 2036, and to increase biodiesel consumption from 1.23 billion liters in 2015 to 5.1 billion liters by 2036.

The bottom line of the revised AEDP is to promote higher use of biofuels and remain self-reliant with restrictions on trade in feedstocks and biofuels. Regarding ethanol policy, the government is still promoting the use of gasohol through price incentives and excise tax reduction for cars compatible with E20 and E85 gasohol. As for biodiesel policy, on the demand side, the government continues to impose the mandatory blending of biodiesel in diesel markets which covers on-road, agriculture, industry, and etc. To meet the demand, the government has targeted oil palm acreage at 10.20 million rai (1.63 million hectares) by 2036 with the plan that only domestic palm oil will be used as a feedstock and other feedstock like animal fats and UCO will be used insignificantly.

Ethanol

The Thai government aims to increase ethanol consumption from 1.2 billion liters in 2015 to 3.3 billion liters by 2021 and up to 4.1 billion liters by 2036.

The government continues to promote the use of gasohol through price incentives. The price subsidies, which are paid by the State Oil Fund, make gasohol 20 to 40 percent cheaper than regular gasoline. The price subsidy rises as the blend level increases with the effect of lowering retail prices at the pump of higher blend levels. In addition, the government also increased the marketing subsidies to gasoline stations, at around 5 baht/liter (54 US cent/gallon), to entice them to expand sales of E85 gasohol (a mixture of 85 percent ethanol and 15 percent gasoline).

The government also supports the manufacturing of vehicles which are compatible with E20 and E85 gasohol. The excise tax rate for Eco-cars (less than 1,300 cc engines with fuel consumption rate of no more than 5 liters per 100 km.) is at 17 percent compared to 30 percent for E10 vehicles. Moreover, the government will give an additional 3 percent reduction in the excise tax rate for the manufacturing of Eco-cars which use E85 gasohol.

Under this same plan, the government expects molasses-based ethanol, which accounts for around 70 percent of total ethanol production in 2015, to dominate Thailand's overall ethanol production through 2026 with molasses-based ethanol production reaching 1.8 billion liters. This is based on the Ministry of Agriculture and Cooperatives' estimate that Thai sugarcane production will reach the highest potential at 182 million metric tons with molasses production of 8.56 million metric tons in 2026. Meanwhile, the Ministry of Agriculture and Cooperatives foresees the increase in demand for ethanol from 2026 onward will be filled by cassava as molasses-based ethanol facilities will not be able to expand any further due to limited sugarcane acreage. The cassava-based ethanol production is expected to increase to 2.4 billion liters by 2036 as cassava production is expected to increase to 17 million metric tons in 2036, compared to 10 million metric tons in 2015. This will account for around 60 percent of total ethanol consumption of 4.1 billion liters in 2036. Meanwhile, molasses-based ethanol will account for around 40 percent of total ethanol production by 2036.

Biodiesel

The Thai Government has set a biodiesel consumption target at 5.1 billion liters by 2036. The plan focuses on both supply and demand.

On the demand side, the government continues to impose the mandatory blending of biodiesel in diesel for any purpose. The plan also aims at expediting the mandatory blend rate from currently B7 to B10 and B20. The Government plans to subsidize the use of B20 in large trucks on a voluntary basis, beginning in 2016, and to commence the B10 mandatory requirement in 2018. However, the accomplishment of mandatory biodiesel requirement plan may not be attained given the weather-driven volatility of palm oil production, the only feedstock used for biodiesel in Thailand, driven by weather conditions.

On the supply side, the government has targeted oil palm acreage at 10.20 million rai (1.63 million hectares) by 2036. Production of palm fresh fruit bunch (FFB) is expected to reach 29.46 million metric tons (MMT). Out of this FFB production, 4.24 MMT of FFB would be processed as biodiesel in 2036.

Ethanol

In 2017, fuel ethanol production is forecast to increase to 1.4 billion liters, up around 7 percent from 2016. Molasses-based ethanol still dominates Thailand's overall ethanol production, accounting for around 70 percent of fuel ethanol. The demand for molasses is expected to increase to 3.8 million metric tons, up 8 percent from 2016. Presently, there are 21 fuel ethanol plants with production capacity of 1.5 billion liters per year. Production capacity of molasses-based ethanol is currently around 0.9 billion liters per year. Other producers use cassava and sugarcane as inputs with production capacity of 0.5 and 0.1 billion liters, respectively. In 2016, fuel ethanol production is expected to increase to around 1.3 billion liters, up 11 percent from the 2015's level. The increase is driven by growing domestic consumption of gasohol. Molasses is the primary feedstock for the increased ethanol production. The demand for molasses is expected to increase to 3.6 million metric tons, up around 13 percent from 3.2 million metric tons in 2015. Demand for cassava increases to an estimated 2.4 million metric tons, up 8 percent from the previous year. The government's plan to use its own rice stocks for ethanol production to substitute for cassava is not viable as rice prices are far above cassava prices. The sole sugarcane-base ethanol plant is expected to operate at full capacity of around 76 million liters per year using around 1 million metric tons of sugarcane. The production of non-fuel ethanol is controlled by the government. The Liquor Distillery Organization, 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 20 million liters per year. Meanwhile, domestic demand for industrial grade ethanol, particularly for medical, pharmacy, paints and cosmetics uses, is around 18 million liters per year. The primary feedstock for industrial ethanol production is molasses and cassava. Presently, fuel ethanol production capacity is at 81 percent of full capacity. Production capacity is expected to reach 96 percent by 2017. Ethanol producers reportedly have received approval from the government to expand their production capacities. However, their investment has been delayed due to the concern about an economic instability.

Consumption

In 2017, ethanol consumption is forecast to increase to 1.4 billion liters, up around 8 percent from 1.3 billion liters used in 2016. This is mainly due to growing demand for E20and E85. The demand for E20 and E85 will be driven by government's price subsidies and the expansion of E20 gasohol stations. Total gasohol (gasoline with ethanol blends of all levels) consumption is forecast to increase to around 11 billion liters in 2017, up around 7 percent from an estimated 10.3 billion liters in 2016. The average ethanol blending rate is expected to increase from 12.1 percent in 2015 to 12.6 percent in 2017. During January – May 2016, ethanol consumption totaled 568 million liters, up around 8 percent from the same period last year. This is due to an increase in gasohol consumption to 4,142 million liters, up 13 percent from the same period last year.

While ethanol is harmonized under 220710 and 220720, Post's estimate of ethanol imports and exports in the Ethanol PS&D is based on HS22072011 and HS22072019.

Post's estimates of biodiesel imports and exports is based on HS271020, described as petroleum oils containing up to 30 percent biodiesel, and HS382600, described as biodiesel, both reported by Thai Customs Department.

Consumption of gasohol accounted for 95 percent of total gasoline consumption. E20 gasohol consumption also continued to increase, accounting for 17 percent of total gasohol consumption due to the government price subsidies. Presently, E10 and E20 retail prices are 25 to 30 percent cheaper than regular gasoline. E20 retail prices are also approximately 10 percent cheaper than E10 gasohol. The number gasohol stations continued to increase nationwide to 3,105 stations for E20 and 867 stations for E85, compared to 2,836 and 678 stations in May 2015, respectively.

Thailand's Gasoline And Gasohole Consumption

Type of Gasoline

2010

2011

2012

2013

2014

2015

2015

2016

%Change

2016\2015

Gasoline

3,035

3,119

3,250

763

559

583

239

239

-02

Reular ( Octane 91)

2,958

3,077

3,208

147

61

81

31

38

21.0

Premium (Octane 95)

77

42

42

616

498

502

208

201

-3.4

Gasohol

4,383

4,213

4,455

7,470

8,008

9,130

3,673

4,142

12.8

Gasohole (E10 Octane 91)

1,552

1,860

2,121

3,337

3,595

4,019

1,651

1,709

3.5

Gasohole (E10 Octane 95)

2,692

2,122

1,932

3,030

2,735

3,283

1,282

1,585

23.6

Gasohole E20

137

222

367

963

1,344

1,511

606

720

18.8

Gasohole E85

211

910

36

141

334

318

134

128

-4.8

Total

7,418

7,332

7,705

8,233

8,567

9,714

3,913

4,381

12.0

Ehanol is a controlled import/export product. Traders must have import/export permits which will be considered by the Ministry of Industry (MOI). To date, the MOI has never approved any imports of fuel ethanol into Thailand as there are sufficient domestic supplies. Also, sources report that ethanol producers normally export only ethanol for industrial uses as their facilities were originally designed to produce fuel ethanol for the domestic market and they do not have the storage facilities to cover fuel export business.

Non-fuel, industrial ethanol exports are likely to be minimal to zero in 2016 and 2017 due mainly to growing domestic demand for ethanol. In 2015 there were no exports of fuel ethanol. Also, exports of industrial-grade ethanol were marginal at around 0.1 million liters. Meanwhile, non-fuel, industrial ethanol imports were steady at around 11 million liters, mainly for use in pharmaceutical and cosmetic industries. This accounted for less than 1 percent of total ethanol production. The Thai government imposes a 2.5 baht/liters duty on ethanol imports.

Stocks

Ethanol stocks are expected to decline to around 20 million liters in 2017 in anticipation of growing demand for gasohol consumption. Most fuel ethanol producers mainly supply their ethanol to domestic refineries for gasohol production. Consequently, their total storage capacities are limited to only around one month of domestic use.

Biodiesel

Production

Biodiesel Production and Use in Thailand

Production Capacity

Number Of Biorefineries

9

13

13

13

10

10

10

12

12

12

Nameplate Capacity

920

2,170

2,170

2,170

1, 600

1, 600

1, 600

2, 060

2, 060

2, 060

Capacity use %

48,7 %

28, 1%

30,4 %

29, 0 %

56.9 %

67,5 %

73,1%

59,7%

64,6%

68,9%

Feedstock Use for Fuel (1, 000 MT)

RE DPO\CPO

300

400

445

390

630

775

825

845

885

945

Stearin

125

170

180

190

200

210

235

245

280

300

FFA of Palm Oil

0

0

0

20

20

25

55

85

95

105

Market Penetration (Million Liters)

Biodiesel, on road use

265

366

389

380

540

650

707

763

780

850

Diesel, on road use

10,580

11, 080

11, 100

11, 150

12, 340

12, 500

12, 640

13, 153

13,680

13, 950

Blend Rate %

2,5 %

3,3 %

3,5 %

3,4%

4,4%

5,2%

5,6%

5,8%

5,7%

6, 1%

Diesel, total use

17, 634

18, 465

18, 480

19, 192

20, 565

20, 892

21, 071

21, 921

22, 800

23, 250

B100 or biodiesel in Thailand is currently produced from palm oil derived feedstock such as crude palm oil (CPO), refined bleached deodorized (RBD) palm oil, palm stearin, and free fatty acids of palm oil (FFA). Thailand's campaign to utilize used cooking oil for biodiesel production exists among one or two biodiesel companies as a Corporate Social Responsibility (CRS) campaign but the use is limited to 5-6 million liters of unused cooking oil per annum. Biodiesel production is solely driven by government mandates, mainly aimed to help palm farmers. All palm oil feedstocks used for biodiesel are domestic since the Government strictly controls the imports of palm oil. Meanwhile, the blending of biodiesel among petroleum refineries is strictly controlled and monitored to comply with the mandatory requirements. The mandatory blending of biodiesel in diesel markets covers all purposes of use including on-road, agriculture, industry.

Biodiesel production is forecast to grow 7 percent to 1.42 billion liters in 2017 in line with an increase in diesel consumption and an estimated increase in the blending rates of biodiesel in diesel total use. It is estimated that about 70 percent of B100 is derived from RBDPO or CPO, 22 percent from palm stearin, and 8 percent from FFA. Given the very limited role of trade, biodiesel production in 2016 is forecast to grow by 12 percent from the previous year to 1.38 billion liters due to a sharp increase in diesel demand driven by continued prevailing low petroleum prices against compressed natural gas (CNG).

Crude palm oil supply available for domestic food, feed and industrial use plus exports is forecast to 2.3 million metric tons (MMT) in MY 2016/17. CPO production is estimated to only marginally grow to 2.1 MMT in 2015/16 from 2.07 MMT in 2014/15 due mainly to lower palm yields caused by dry weather conditions in 2014 and 2015.

The Thai Government recently turned to promote the use of lower-cost H-FAME biodiesel in preparation for B10 and above mandates. H-FAME is a process, developed by a Japanese research team, to upgrade the quality of conventional biodiesel or fatty acid methyl ester (FAME) through partial hydrogenation. Trade sources reported that Global Green Chemical, a current large biodiesel producer in Thailand, may construct an H-FAME processing plant and launch it commercially once the B10 mandate is imposed.

Thailand's Production, Supply and Demand for CPO

Oil Palm, market Begin Year Thailand

2014\2015

2015\2016

2016\2017

Jan 2015

Jan 2016

Jan 2017

USDA Official

Ne Post

USDA Official

Ne Post

USDA Official

Ne Post

Area Planted

0

0

0

0

0

0

Area Harvested

690

710

710

735

0

750

Trees

0

0

0

0

0

0

Beginning Stocks

78

78

52

228

0

228

Production

1800

2070

2200

2100

0

2300

MY Import

75

75

30

30

0

20

MY Import from US

0

0

0

0

0

0

MY Import from EU

0

0

0

0

0

0

Total Supply

1953

2223

2272

2358

0

2548

MY Export

51

95

150

120

0

160

MY Export to EU

0

0

0

0

0

0

Industrial Dom. Cons

1280

1280

1350

1350

0

1450

Food use Dom. Cons

500

550

570

580

0

600

Feed waste Dom Cons

70

70

70

80

0

100

Total Dom Cons.

1850

1900

1990

2010

0

2150

Ending Stocks

52

228

132

228

0

238

Total Distribution

1953

2223

2272

2358

0

2548

1000 HA, 1000 Trees, 1000 MT

Due to fierce competition between Thailand's biodiesel processors, newcomers have been reluctant to enter the market since 2010. Two establishments which suspended their biodiesel production during 2012-2014, revived their operations in 2015. As a result, all 12 producers as listed by Department of Energy Business, are currently operating with an estimated total production capacity of 2.06 billion liters per annum. In 2015, three of the largest B100 processors in Thailand; i.e., the Global Green Chemical Company (previously named Thai Oleochemicals), New Biodiesel Company, and the Bangchak Biofuel Company increased their production capacities by (460 million liters per annum).

Consumption

In term of the mandate administration, these mandates in the past were effective since they are applied to all types of diesel use as fuel and the blending of biodiesel among petroleum refineries is strictly controlled and monitored. In general, the main markets for diesel use in Thailand are on-road, accounting for about 60 percent of total diesel consumption, followed by agriculture at 20 percent, industry 17 percent, and others 3 percent, respectively. However, due to weather irregularities leading to inadequate palm oil feedstocks and with controls on imports, the Government is forced to reduce the mandatory blending rates from time to time. For example, the reduced CPO supplies and skyrocketing prices in early 2015 prompted decision-makers to temporarily lower the mandatory vegetable oil content requirement in biodiesel by 50 percent to B3.5 from B7 in January 2015, and then reinstated B7 mandates in April 2015. Due to this development, the actual blending rates of biodiesel in diesel total use were 5.8 percent, a level below intentional 7 percent if the B7 mandates were fully accomplished.

Although the government's policy is to maintain its B7 mandates in 2016 and 2017, in addition to its plan to subsidize the use of B20 in large trucks on a voluntary basis, beginning in 2016, the blending rates of biodiesel in diesel total use are estimated at around 5.7 percent in 2016 and 6.14 percent in 2017, given the possible reoccurrences of a step-down in biodiesel mandates at any time following weather-vulnerable palm oil supplies. Lately in 2016, the government announced to lower B7 mandates to B5, effective on July 25, 2016 because palm oil supplies appeared to be lower than earlier estimates, and if the mandates continue, soaring palm oil prices would negatively affect household cooking palm oil consumers.

A sharp reduction in global petroleum prices also generated changes in consumer demand for products such as diesel and gasoline versus the highly subsidized products like liquid petroleum gas (LPG) and compressed natural gas (CNG). Not only did low diesel prices encouraged diesel vehicle users (mainl trucks or trailers) to switch to diesel (which contains biodiesel) from CNG, but it also stimulated increased use of diesel among smaller vehicles (i.e., pick-up trucks). Lower prices for diesel (which contains biodiesel) also led diesel use for other sectors (agriculture, construction, and manufacturing industries) to increase in 2015. Total diesel sales were officially reported as increasing by 4 percent in 2015 to 21.9 billion liters. Prevailing low prices are expected to drive biodiesel consumption up 4 percent in 2016 and 2 percent in 2017.

Based on this diesel market development and the fact that the mandate of biodiesel blending in diesel is applied to all types of diesel use, biodiesel consumption rose to 1.230 billion liters in 2015, and should continue to grow to 1,3 billion liters in 2016 and 1,42 billion liters 2017, respectively.

Trade

The Thai Government restricts the import of biodiesel to protect domestic palm growers. Thailand's biodiesel imports and exports are minimal and mostly belong to petroleum oils containing up to 30 percent biodiesel. Exports of biodiesel (B100 equivalent) were 3.12 million liters in 2015, as compared to 3.86 million liters in 2014. Imports of biodiesel products (B100 equivalent) totaled 2.13 million liters, as compared to 11.57 million liters in 2014.

Ending Stocks

Biodiesel production is driven solely by contracts between palm growers and refineries. As a result, the country's B100 stocks, held by either biodiesel producers or petroleum oil refineries, are quite low somewhere around 20-50 million liters or about 10-15 days of utilization.

Advance Biofuels

There has been no progress in promoting advance biofuels, and the potential for progress is further dimmed due to sharply weaker global prices for petroleum products. A molasses-based ethanol plant using cane bagasse for cellulosic ethanol has stalled due to a lack of commercial feasibility. The production of Hydrogenated Vegetable Oil (HVO), a type of renewable drop-in diesel, is no longer commercialized due to its high production cost without the additional subsidy from the Government.