ALTERNATIVE FUEL: Gasohol pumps may soon be running dry Published on January 29, 2006
Producers cannot compete with food exporters for pricey raw materials. Motorists could soon find gasohol, a cheap and increasingly popular alternative to petrol, running low or costing more at filling stations, energy experts say. The government’s ill-planned promotion of the mixture of petrol and crop-based ethanol, which is Bt1-Bt1.50 cheaper per litre than regular and premium petrol, has caused serious supply problems.
Since last May, ethanol has been touted as an ingredient that saves the foreign exchange otherwise spent to import fuel additives.
The country has been running a trade deficit, partly due to the rising cost of oil, so the government wants to wean drivers off of premium petrol this year.
However, gasohol’s sudden popularity has resulted in demand outstripping domestic production capacity, forcing oil firms to go overseas to secure ever-growing quantities of ethanol.
“The situation is tough for the government. We’re facing complicated problems with regard to the supply of sugar-cane, molasses and cassava, which are domestic materials for ethanol,” said Chumnong Sorapipatana, energy chairman at the Joint Graduate School of Energy and Environment at King Mong-kut's University of Technology Thon Buri.
The operations of three ethanol plants have been suspended and construction of 18 delayed due to the uncertain supply of materials, he said.
Global prices of sugar and molasses are on the rise, so ethanol-producers cannot compete with other buyers who export them as foodstuffs.
Sugar-cane production last year dropped to only 42.5 million tonnes, compared to 47.8 million tonnes in 2004, 64.5 million tonnes in 2003 and 70.1 million tonnes in 2002.
Output of sugar-cane molasses fell in consequence to only 1.9 million tonnes last year.
Another energy researcher, Supakij Nuntavorakarn, said that while demand for gasohol was high, its price was determined by the price of petrol and not by the price of sugar-cane, so farmers had no incentive to boost their harvests.
“Prices of all these three have to be interrelated. The government will have to solve this problem quickly,” he said.
Thai Alcohol Co (TAC), an ethanol-producer under the Thai Beverage Group, said it could not survive amid the current price structure.
“The government’s price cap on ethanol is Bt19 per litre based on the previous global ethanol price of US$95 [Bt3,700] per tonne, but the world market price is now $110-$115 per tonne, so a litre of ethanol should be Bt22-Bt23, not Bt19,” the company said in a statement.
TAC has a production capacity of 200,000 litres a day, but it plans to shut down part of its plant for six months in order to switch a production line over to using cassava.
Another producer, Thai Agro Energy Co (TAE), a subsidiary of Lanna Resources Plc, is planning to increase its output from 150,000 litres to 100,000 litres due to lack of materials.
“Lots of raw materials for ethanol are exported and also used by other industries. We can’t compete on price. It’s also the same with cassava,” Chumnong said.
Molasses is mainly used in the production of alcoholic beverages, animal feed and vinegar with a combined demand of 1.53 million tonnes per year.
Given the domestic shortage of raw materials, the only option is to import foreign-made ethanol.
However, this defeats the government’s goal of promoting local ethanol production as a way to reduce energy imports by an annual Bt3 billion while encouraging the use of agricultural crops as raw materials.
Gasohol consumption has skyrocketed from just 200,000 litres per day in 2004 to the average daily of 1.8 million litres in 2005.
Last month alone more than 3.5 million litres were sold daily,. During 2004-05, the consumption grew by 873 per cent while domestic supply increased just marginally.
Last September the country started bringing in 20 million litres of ethanol to cover the deficiency here. Now, it looks like more imports are needed.
Meanwhile, the outlook for biodiesel, liquefied petroleum gas (LPG) and natural gas for vehicles (NGV) is similar.
Chumnong said the problem with LPG was that demand was climbing rapidly due to government subsidies.
More and more private vehicles and taxis are switching to this cheaper fuel, which should be used only as cooking gas.
“I don’t know how long the government can continue subsidising it for motorists. Last year we spent tens of billions of baht subsidising diesel prices,” he said.
Biodiesel-producers also lack sufficient raw materials, especially palm oil, to keep up with high consumption growth, and the price is also scarcely competitive.
NGV is probably the best choice, but the cost of infrastructure and vehicle modification is very high, he said.
“A biofuel alternative is a good idea, but it’s hard to implement it efficiently. It needs sound planning and political will,” he said.
