The Energy Ministry, ethanol plant operators and fuel retailers have agreed on a pricing formula for ethanol, based mainly on the price in Brazil and other costs involved.

Panich Pongpirodom, director-general of the Alternative Energy Development and Efficiency Department, said yesterday that the three parties had agreed upon a pricing formula after three rounds of discussion.

"All agreed to base the domestic ethanol price on the quotation in Brazil, plus transportation costs and other expenses, including insurance. This will be the reference price for buyers and sellers," he said.

The three parties now need to decide whether the reference price should be adjustable every month or every quarter. Panich said it was likely that the three-month option will be adopted, in which case the average price of ethanol in a quarter plus expenses could be used as the reference price for the following quarter.

"Once all the details are concluded, we will forward the issue to the ethanol subcommittee chaired by Energy Ministry permanent secretary Pornchai Rujiprapha," he said.

Panich added that it was not compulsory for buyers and sellers to quote ethanol at the reference price, as the actual price could be higher or lower depending on the prevailing demand and supply situation.

A source at the Energy Ministry said that ethanol was currently quoted at about Bt15-Bt16 per litre in Brazil. Shipping the ethanol to Thailand would cost about Bt3-Bt4 per litre.

As such, according to the formula agreed upon by the three parties, the ethanol price here should not exceed Bt20 per litre, which is much lower than the current domestic price. The latest lot of ethanol was sold at Bt25.30 per litre.

"If our reference price is based on the Brazil quotation, that should help Thailand prepare to be an ethanol exporter in future, when supply exceeds demand," the source said.

Pornchai said the ethanol price had been declining sharply due to the postponement of the January 1 deadline to stop sales of octane-95 petrol in the country. Since motorists still have the option of using octane-95 instead of gasohol 95, demand for ethanol is low.

The ministry will come up with a concrete plan by the middle of the year to further promote gasohol 91 and gasohol 95, which both contain 10-per-cent ethanol instead of the chemical additive MTBE, to boost ethanol demand. This will coincide with the completion of new ethanol plants that will take the total output to more than one million litres per day.

"We're keeping the gasohol 91 and octane-91 petrol price differential at Bt1.50 per litre, like we do with gasohol 95," Pornchai said.

There are six ethanol plants operating currently with a combined capacity of 685,000 litres per day: Pornvilai International (25,000 litres), Thai Alcohol (200,000), Thai Agro Energy (130,000), Thai Nguan Ethanol (50,000), Khon Kaen Alcohol (150,000) and Petro Green in Chaiyaphum (130,000).

Four new plants are due to commence operations by May: International Gasohol (150,000 litres per day), Fa Kwanthip (60,000), Ekarat Patana (100,000) and Thai Sugar Ethanol (100,000).

Another four new plants will come on stream in May: KI Ethanol, with a capacity of 100,000 litres per day; Ratchaburi Ethanol (150,000), Thai Rung Ruang Energy (120,000) and Petro Green in Kalasin (200,000).

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