Almost 4 million tonnes of decaying rice kept in government stocks for more than two years is expected to be used as feedstock to produce ethanol, due to be in short supply soon, according to the Department of Energy Business (DOEB).
The DOEB was informed by the central government that the rice bought from farmers during the Yingluck Shinawatra administration's rice-pledging scheme that has not been sold is decaying. It has become inedible, suitable only as feedstock to produce ethanol.
The supply of ethanol, which is blended with petrol to produce gasohol, is expected to fall short of demand in December and January due to the delay of the sugar-crushing season, which also means a delay in the production of molasses, the major feedstock for ethanol.
Director-general Witoon Kulcha- roenwirat said his department is preparing to temporarily switch feedstock from molasses to decaying rice from the government's stock in order to prevent a shortage of ethanol.
He said Thailand's ethanol production capacity stands at an average of 4 million litres per day with daily consumption of 3.6-3.8 million litres.
But the shortage of molasses caused by unfavourable weather that delayed sugar crushing and molasses production, as well as mismanagement among ethanol producers that exported some ethanol during the mid-year, are likely to cause a shortage this month.
Mr Witoon said the state Oil Fund would be ready to provide subsidies if the cost of producing ethanol from rice is higher than producing ethanol from molasses. Details of the subsidies are expected to be discussed later.
The government now controls 8.4 million tonnes of rice bought from farmers since 2011, of which half is good quality and the remainder suitable for industrial use.
To prevent ethanol shortage in the long term, the DOEB has ordered ethanol producers, traders and oil retailers to report production, inventories and production capacity every day until the end of February.
The DOEB expects ethanol production in December to be around 3.7 million litres per day with demand of around 3.8 million litres.
Given the uncertain ethanol production, the DOEB might delay the phase-out of E10, or gasohol 91, from January next year to January 2018, when there would only be E20 petrol available for all vehicles in Thailand.
The delay in the mandatory use of E20 nationwide means a delay in greater ethanol demand to be blended with petrol.
Previously, energy policymakers planned to slash E10 and leave only E20 available on the market within the next 10 years.
However, Mr Witoon said major oil retailers are unlikely to bring their ethanol reserve of around 1% of total consumption to be sold, which would be sufficient for slightly over three days.
Major oil retailers recently expressed concern that ethanol production would be short for up to 5-6 days as demand for petrol in the first 10 months of this year rose by as much as 14% during the time that global oil prices remain low.
Besides, the DOEB could also amend regulations related to ethanol production in order to help maintain sustainable ethanol production for the energy sector.
The development of biofuels in Thailand started around a decade ago, when global oil prices rose above US$100 a barrel.
Demand for biofuels has grown rapidly with the production of biofuels blended with petrol helping to reduce demand for pure petrol by up to 75 million litres per day.
According to a report by the Department of Alternative Energy Development and Efficiency in September, Thailand has a total of 4 million vehicles with petrol-compatible engines, 2.5 million compatible with ethanol-blended petrol, or gasohol, and around 1 million compatible with E20.