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Tight ethanol market may ease by year-end
YUTHANA PRAIWAN
Shell will delay its launch of E20 gasohol from the third quarter to the end of the year because of an ethanol supply shortage.
"If we expand our gasohol pump network as planned earlier, it requires at least 200,000 litres of ethanol per day. But now I don't think we can make it as ethanol makers prefer to export to gain higher profits," said Tiraphot Vajrabhaya, the chairman of Shell Thailand.
"When people talk about 1.5 million litres per day of ethanol, it is misleading. The figure is in fact the full capacity in theory. Due to some production conditions, the ethanol makers can produce just 800,000 litres per day," he said.
Some producers have secured orders through delivery contracts overseas. Demand for ethanol will outpace the country's output by about 10 million litres in October and 13.6 million litres in November, he said.
Three million cars now run on gasohol 95 and 91 and 150,000 cars on E20. Only five units are using E85, and all are under fuel-quality test runs.
Shell has stocked a total of seven million litres of ethanol compared to PTT's 10 million litres.
Chanachai Chutimavoraphan, assistant vice-president of Thailand's fourth largest sugar producer and ethanol maker, KSL Group Plc, said the shortage was caused by the maintenance shutdowns of some plants, more export orders and the scarce supply of molasses, a major raw material.
Meanwhile, cassava-based ethanol is more costly to produce, at 21-22 baht a litre, compared to Thailand's benchmark ethanol price of 18.01 baht a litre, according to the Energy Planning and Policy Office.
Mr Chanachai said the shortage of molasses may ease at the end of this year after a new sugar crop hits the market in the fourth quarter.
However, Pornchai Rujiprapha, permanent secretary of the Energy Ministry, disagrees with oil company complaints about the ethanol supply shortage, saying the current output is sufficient to serve rising demand.
He said that during the sugar crop off-season, all oil firms should expect to see molasses shortages, which is why they secure supply through long-term purchasing contracts with major ethanol producers.
Ethanol demand in Thailand for the first seven months was 900,000 litres a day, on par with current output, he said. Molasses production this year is likely to top 3.3 million tonnes, with 580,000 tonnes destined for export, Mr Pornchai forecast.
"Shell chooses to have a long-term purchasing pact with only one ethanol supplier, resulting in uncertain supply."
Mr Pornchai also cast doubt on the theory that tight supply is being caused by producers intentionally delaying ethanol output in order to boost the benchmark rate that is reviewed quarterly. The last quarterly rate of the year will be announced next month, with expectations it will rise to 22 from 18 baht a litre.
Anusorn Saengnimnuan, the president of Bangchak Petroleum Plc, said ethanol supply may slightly tighten in the fourth quarter as five producers plan maintenance shutdowns, reducing output by 400,000 litres a day.
However, two new ethanol plants are expected to produce 300,000 litres a day in that quarter, easing the shortage.
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