PTTAR shelves jet biofuel project

Carbon credits cheaper alternative for carriers

PTT Aromatics and Refining (PTTAR) has put on hold its US$150-million (Bt4.5 billion) jet-biofuel project, given the exorbitant production cost and the likelihood that the price of the fuel would deter potential buyers.

Prajya Phinyawat, chief operating officer for the downstream petroleum business group at parent company PTT, said the cost of producing "green" jet fuel at this time was too high.

After discussion with Thai Airways International (THAI), a potential major client, it was found that bio-based jet fuel would be much costlier to the airline than carbon credits.

The high cost is also now the major problem for an energy firm in Singapore that is already producing green jet fuel, he said.

"If we cannot produce green jet fuel with more advanced technology that can lower operating costs and reduce carbon-dioxide emissions, airlines will choose to buy carbon credits instead when they fly to European destinations," Prajya said.

Placing it at the forefront in attempts to combat global warming, the European Union is putting a carbon-dioxide-emission cap on airlines flying in the area.

From next year, airlines operating in Europe will have to buy carbon credits from the Emission Trading Scheme to cover each tonne of carbon dioxide they emit in excess of the cap.

THAI, with a relatively old fleet, said earlier that it might need to buy carbon credits to offset the requirement, given that green jet fuel is not yet available.

Airbus, a major aircraft maker based in Europe, recently kicked off flight tests using biofuel with some airlines.

Prajya said that aside from the high production costs, the available technology now required hydrogen in the process to turn palm oil into compatible green jet fuel. The process in return sends high carbon emissions into the atmosphere. PTTAR began a feasibility study into the production of jet biofuel a few years ago, at the time that the Singapore-based producer embarked on such a project.

Without the availability of such fuel in Thailand, all aircraft flying to Europe would need to operate from Singapore, where they could refill their tanks with the green fuel. Such a scenario would mean reduced opportunities for Thailand, which led to PTTAR earmarking $150 million for its green jet-fuel project, with plans to commence production in 2014.

Prajya said cost and technology were now the major obstacles, while years ago the company was more concerned about the supply of palm oil.

"The supply of palm oil is not the problem, but the technology. If we have the appropriate technology that makes production possible, we will review the investment."

In a separate matter, Prasert Bunsumpun, president and chief executive officer of PTT, said that while the merger between PTTAR and PTT Chemical would go ahead, the complex process meant that the merged entity would not be able to list on the Stock Exchange of Thailand next month as planned.

Tevin Vongvanich, PTT's chief financial officer, added that the merging entities had not yet arranged a joint shareholders' meeting. It is, therefore, impossible for the merged company to list on the bourse next month.