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BANGCHAK COMPLAINT THE PRICE OF ETHANOL IS TOUGHLY HIGH

Bangchak: the company has stopped gasohol 95 gas station expansions due to the price of ethanol from the factory citing that price of raw material is high and setting retail price unfairly which leading to the stagnant of gasohol sale revenue in every gas station, concerning the government policy to encourage people to use gasohol instead of Benzene failed in the mean time, group of producer complaint that the present retail price still does not cover with the costs and stop production partly. As the case of ethanol production factory liberalization expected to have no positive results as there still are over 10 factories out of operation due to insufficient raw material “Pornchai” insisted the target from government has not changed.

Dr. Anusorn Saengnimnaon, Bangchak Petroluem PLC. Chief Managing Director said to Siam Business that “the expansion of gasohol 95 gas station as planned by the company might be just as it is as it is in the stagnation period due to the price of ethanol from factory is too high and there is no fixed rate of ethanol price but set ethanol price as they wish which has a negative effect to the company. We used to propose the price formula to be in line with foreign price but they don’t accept that idea or use future price setting in 6-12 months just like future agricultural product market, still they don’t accept. If they apply the proposed formula, the price of the ethanol should be at Bt. 23/liter not Bt. 25/liter as in the present. Oil Company preferred the fixed rate of ethanol price as it is high certainty and clear. During the period of having excess raw material, bidding process can be implemented to buy product from factory with the best price but now it is not that like, the power of price setting is at the factory which prevents oil company‘s willing to sell gasohol to the market as there as no reason to expanse the business citing that a huge chunk of profit are at capitalists nut farmers.

Dr. Anusorn Saengnimnaon elaborated more that the total sale revenue of gasohol in every gas station has unchanged for many months as it is supposed to changed upwardly every months due partly to no expansion of gasohol gas station resulted in unchanged in number of gasohol consumers and another point that prevent company’s willing to sell gasohol is that when the price of oil decreases, the gasohol’s cost of production increases as government sets price of gasohol to be Bt. 1.50 /liter lower than Benzene price which has lower marketing revenue than Benzene at Bt. 0.20/ liter. As for the government policy to liberalize ethanol production factory to produce biomass fuel from sugarcane and cassava mixed with Benzene to be gasohol 95 to replace Benzene octane 95 which contain the imported MTBE substance by allowing private sector who are interested in ethanol production operates the business without permission , Dr. Anusorn said that whoever would like to build ethanol factory must have a certain level of confidence that domestic demand is enough as hoping to make a profit from export, the location must be near seaport if not, the cost of transportation will be a burden and when exporting to foreign countries, the question is whether or not our price cam compete with market dominant Brazil and also has to concern of currency exchange. However, currently, there are over 20 factory gaining a permission to build ethanol production factory from the government but only 5 factories are in operation, they are Pornwilai International Co., Ltd, Thai Ngun Ethanol Co., Ltd, Thai Agro Energy Co., Ltd, Khonkaen Alcohol Co., Ltd and Thai Alcohol Co., Ltd which have a total of production of 655,000 liter/day but the decreasing of sugarcane product resulted in lacking of molasses which eventually boosts price of sugar leading higher costs of ethanol production than retail price that agreed to trade between ethanol producer and oil company which resulted in interval production pause. Hence, the real production is only 300-400k liter/day as a result government has to postpone the cancellation of Benzene Octane 95 consumption from the original dateline on January 1st 2007. Government sets a target of ethanol production at not less than 1 million liter/day and increase to 2 million liter/day in the future mixing with gasohol 91 and cancel Benzene Octane 91 consumption. If doing so successfully, it will reduce oil import bill up to Bt. 18,000 million and reduce the import of MTBE substance used for mixing Benzene approximately Bt. 21,000 million/year however the main problem of ethanol product is not the issue of whether or not to liberalize as in the reality there is 19 factories that already gained the permission but not in the operation but the true problem is at raw material as sugarcane has less production and molasses are insufficient and more expensive.

Mr. Jaroon Chinthammitr,Chief Operating Officer and Managing Director of Khonkaen Sugar Co., Ltd interviewed with Siam Turakij that the problem of ethanol production factory nowadays is lack of raw material so far government set aside 13 million Rai for sugarcane, corn and cassava plantation zoning , later on cut 5 million Rai for Biodiesel plantation such as oil palm and Jatropha Curcas and cut another 1 million Rai for rubber tree so the area for sugarcane, corn and cassava plantation is diminishing, the company has to develop to increase the output/Rai for example before 6 ton/Rai of output and after 12 ton/ Rai of output. Now, all of permission granted company has a combine production of 12 million liter/day but the problem is if the raw material is enough or not as my company only has the production of 150,000 liter/day still hard to find the raw material and if the government wants to liberalize, government needs to be clear on how long the factory can be built and when the production can be started which I believes that there is no new comer to ask a production permission as speculated” Mr. Jaroon said.

Mr. Jaroon elaborated more about the case of price of ethanol with oil company and stop expansion that when the factory buy raw material cheaply, they must sell cheaply too however he believed that the price of raw material might be lower after January, retail price might be at Bt. 22-23/ liter from the current price of Bt. 25.30/liter.

Mr. Pornsilp Patcharintranakul, the President of Agriculture & Food Committee, Thai Chamber of Commerce interviewed with Siam Turakij that the idea of liberalization from the government is to reduce the import of MTBE. If the raw material for ethanol production is not enough and have to import ethanol from foreign counties, that is contradict to the objective still, it depends on the government on how much the government supports the import, if support more, would it be any problem to ethanol factory in Thailand?, if not, the problem might occur to end user.

As for ethanol factory granted a permission but still out of operation for 19 factories are as following

International Gasohol Corporation Co., Ltd, Rerm Udon Ethanol Co., Ltd, Thai Sugar Ethanol Co., Ltd, Petrogreen Co., Ltd, Thai Rung-rueng Energy Co., Ltd ( 2 factories from Saraburi and Petchaboon), ES Power Co., Ltd, NY Ethanol Co., Ltd, Ratchaburi Ethanol Co., Ltd, Korat Industry Co., Ltd, Ang Wieng Industry Co., Ltd, Somdej (1991) Co., Ltd, Pha Kwan Thip Co., Ltd, Siam Ethanol Industry Co., Ltd, Picnic Gas & Engineering Co., Ltd, Boon Anek Co., Ltd., Buriram Ethanol Co., Ltd have a combine production of 4,230,000 liter/day. There are only 4 factories that completely built.

Mr. Pornchai Rujiprabha, Permanent Secretary, Ministry of Energy said the government policy is still the same but postpone the dateline a little bit further, as for the saying that oil company stops expansion of gas station, that might not be right as the price of raw material currently is in downward trend and believes that the negotiation between factory and oil company might turn out positively and be able to continue gas station expansion as planned.

Source: Siam Turakij