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Prime Minister Samak Sundaravej's claim to have found a source of cheap Russian diesel has raised eyebrows at local oil companies, who wonder whether it could be possible. They say high transport costs and low quality could even make Russian diesel more expensive than what's on the market now.
Mr Samak announced in his Sunday television programme that he had successfully negotiated to buy diesel at eight baht a litre cheaper than local prices from Russia, at a rate of 300,000 tonnes per month. The first shipment would arrive in 60 days.
Energy Minister Poonpirom Liptapanlop said more details would be announced together with the new economic stimulus package today.
The package includes a 55-satang cut in the gasohol E85 excise tax from 2.50 baht a litre planned earlier, together with reductions for all other fuel types, with a low 20% excise tax rate for flexible fuel vehicles (FFVs). Electricity bills will also be reduced.
However, local oil executives cast doubt on the Russia deal, pointing out that Thailand rarely imported crude from Russia in the past because the long distance resulted in steep freight costs.
PTT Plc discussed a possible supply deal with the Russian gas giant Gazprom two years ago. Prasert Bunsumpun, PTT's chief executive and president, said Russian firms should establish Thai refining because their prices would never be competitive in this region otherwise.
Manoon Siriwan, an energy expert and former deputy managing director of Bangchak Petroleum, agreed that eight baht a litre cheaper seemed too good to be true. Given taxes and transport costs, the price of imported diesel may be no different from domestic diesel, which now sells for 44.24 baht a litre.
Diesel imported from Russia has a high sulphur content of up to 0.05% while Thailand requires domestic diesel to have maximum sulphur of 0.035%.
As well, the Euro 4 standard, which the government is adopting, will require all fuel sold in Thailand to have sulphur content of no more than 0.005% by 2012.
Local refineries are spending up to 50 billion baht to improve their technology to meet the new standard.
An executive of an oil refinery pointed out that Russian diesel did not meet the government's Euro 4 goal. ''If the government accepts high-sulphur diesel from Russia, we have to export our locally made high-quality diesel abroad.''
All six of Thailand's refineries have a combined excess capacity of 20% for diesel exports. Petrol averages 35-40% of their capacity.
Anusorn Sangnimnuan, the president of Bangchak Petroleum, also doubted the possibility of the Russian deal.
''Buying oil from Russia is not new but what we discussed is a rate three or four baht cheaper than our prices,'' he said. ''How can we get diesel at eight baht cheaper?''
He also said distribution would be difficult because of the limited capacity of oil traders and refineries, adding that local sulphur-cracking units were also limited to existing operations.
''If the government wants to use it for the fishery sector, it could possibly do so by offloading the petrol offshore. But [onshore], capacities of local refineries might not be enough,'' he said.
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