Energy Ministry seeks talks on Euro IV delay

The Energy Ministry is seeking discussions with the Natural Resources and Environment Ministry's Pollution Control Department before making the final decision on a proposed delay in the implementation of the Euro IV emissions standard.

Energy permanent secretary Pornchai Rujiprapha said yesterday that refineries had approached the ministry seeking a delay, due to the poor economic conditions that have led to a drop in oil consumption.

He said that at first it seemed unnecessary for there to be a delay, as those oil refineries which have not yet invested in the systems and equipment to meet the standards used in the euro zone could exchange their products with Bangchak Petroleum and Thai Oil, which have both proceeded with the necessary investment.

However, he acknowledged that all refineries had been hit by two key negative factors - the global economic downturn and the government's promotion of alternative fuels - which have led to lower oil demand. In 2012, it is targeted that natural gas for vehicles, ethanol and biodiesel consumption will account for 30 per cent of overall fuel consumption.

The Euro IV standard is set be enforced in Thailand on January 1, 2012, to ensure better quality of oil products in terms of creating less pollution.

Chainoi Puankosoom, president and CEO of PTT Aromatics and Refining and president of the Federation of Thai Industries' refinery club, said the FTI had proposed a delay of one to two years as refineries may need to reduce their investment budgets amid the economic slump.

Thai refineries in Thailand were originally expected to invest more than US$2 billion (Bt70 billion) in order to meet the standard.

Of the six refiners, PTT Aromatics, IRPC, Esso (Thailand) and Star Petroleum Refining are yet to invest in systems and equipment.

"Refineries have been hard hit by the economic slump as well as the sharp decline in oil prices. In 2008, they suffered a huge loss from oil inventories. Now, they have managed to cope with slowing demand by exporting more of their products," he said.

About 15 to 20 per cent of the combined output of about 900,000 litres a day was exported last year. The ratio is expected to rise to 20-25 per cent in 2009. Most of the exports are petrol, due to the higher demand for gasohol. Diesel products will also be exported when domestic consumption is low, such as in the rainy season.

Chainoi expects the 2009 refining margin to be close to last year's level, or about $5 per barrel. Still, the rate will vary in line with domestic and global economic conditions.

"The economy should pick up in the latter half [of 2009], if the US economy recovers. This could raise the refining margin," he said.

Due mainly to inventory losses, the country's largest refinery Thai Oil saw its nine-month net profit drop by more than 50 per cent year on year to Bt8.6 billion, though net revenue increased by 27 per cent.

Kim Eng Securities (Thailand) does not expect refineries to post as huge an inventory loss as in 2008, as Dubai crude ended the year as low as $37 per barrel.

  As the oil price is expected to rise to $50-$60 later this year, refineries could even gain from their stocks, it said.

Watcharapong Thongrung,The Nation