Reserves required for ethanol, biofuels

General news - Thursday December 13, 2007

Reserves required for ethanol, biofuels

Sudden demand shift threatens stability

YUTHANA PRAIWAN

The government may impose a requirement that major oil traders set aside reserves for ethanol and biofuels as part of the country's strategic oil reserve, says Metta Buntherngsuk, the head of the Energy Business Department.

A substantial increase in the demand for alternative fuels in the face of high retail oil prices has prompted the move.

''It is good to see more people turning to alternative fuels, which helps cushion the impact of volatile crude prices. However, the shift is rather abrupt, giving rise to a new worry about the possibility of temporary shortages,'' he said.

A total of 36 oil traders defined under Article 7 of the Oil Trade Act are required to allocate some of their ethanol output and biofuels in addition to their strategic oil reserves.

Mr Metta said that although the details of reserve volumes had yet to be finalised, the reserve requirement would take effect by the end of this year.

He said that molasses and cassava, the two main raw materials of ethanol, were subject to the risk of supply shortages from natural disasters.

Reserves for oil products are required by law as a key strategy to help ensure adequate energy supply to meet local consumption at any given time.

Oil traders in Thailand are required to reserve several products including crude, gasoline, high-speed diesel, jet fuel and fuel oil, in amounts equal to 18.25 days of average daily usage, or 5% of annual consumption.

Ethanol demand has soared rapidly in line with a significant increase in gasohol demand among motorists since last year, resulting in doubled sales volume of ethanol, at 700,000 litres a day.

Ethanol demand is expected to grow even more significantly next year since the majority state-owned oil and refinery companies _ PTT Plc and Bangchak Petroleum Plc _ are teaming up to create a market for E20 gasohol, a blend of 20% ethanol and 80% premium petrol, starting early next year.

Reserves of B100, a 100% biofuel, are also required as the government will phase out 100% high-speed diesel on April 1, to be replaced by B2, a mixture of 2% B100 and 98% regular diesel.

Bangchak, the biofuel market leader, has already set its own ethanol reserve at three million litres, the equivalent to 20 days of average daily sales volume, and a B100 reserve at one million litres, said president Anusorn Sangnimnuan.

PTT has also allocated its reserves for both products as for much of 30 days of the average daily sales volume.

Mr Anusorn said Bangchak would raise its ethanol and B100 reserves as soon as possible to prevent future constraints.

Bangkok Post