The Oil Fund will step in to push down biodiesel prices 50 satang to Bt1 a litre below conventional diesel, tentatively next month, as part of the Energy Ministry's plan to promote the alternative fuel.

After a meeting with high-ranking officials and Energy Minister Piyasvasti Amranand on this year's biodiesel and ethanol promotion plan, Energy permanent secretary Pornchai Rujiprapha said the Energy Policy and Planning Office had been assigned to work on the biodiesel pricing formula, with the Oil Fund subsidising the price.

"Due to the subsidies, more oil retailers should be encouraged to sell biodiesel. At present, it is available at 400 PTT and Bangchak Petroleum stations. Both companies are now using their own money to keep the biodiesel price 50 satang cheaper than conventional diesel," he said.

The ministry plans to boost biodiesel consumption to 3.5 million to 4 million litres a day by 2011-12, when conventional diesel consumption is expected to be 60 million to 65 million litres a day. Under this target, Thailand would need 1.5 million to 2 million rai of oil-palm plantation area.

The target was revised downwards from the original plan, which targeted 8.5 million litres a day by 2012. To meet that target, 4 million to 5 million rai of oil-palm plantation area would have been required.

In the Thaksin era, the government pushed the Agriculture Ministry to broaden the plantation area to 5 million rai by 2012. The current government, however, viewed that the plan as too aggressive, which led it to revise the biodiesel consumption target downwards.

"We're selling diesel and biodiesel at the same time until we're confident that raw material supplies can meet demand and be up to standard. Then we'll decide to offer a single type of diesel," said Pornchai.

After the meeting, the Energy Business Department was assigned to formulate measures to prevent community-produced biodiesel from finding its way to petrol stations, in order to assure consumers they will be provided with only high-standard biodiesel. At present, biodiesel from only three biodiesel plants meet the standards set by oil retailers.

Pornchai noted that once the promotion gets into full speed, more than 10 biodiesel plants should be encouraged to improve their production techniques to raise standards, so that their output could be distributed to oil retailers.

Preliminarily, the biodiesel price will be based on the world price, particularly the palm-oil price quoted in Malaysia. Taken into account will be the cost of methanol and an operating fee of Bt3.60 a litre. Roughly, the retail price would be Bt21 or Bt22 a litre.

Energy Reporters

 The Nation