16/01/2008 (The Bangkok Post) - The mandatory introduction of biodiesel next month has had little impact on crude palm oil supplies, insists Chaiwat Churit, a senior executive vice-president of PTT Plc. The Energy Ministry plans to make B2 biodiesel, a blend of 2% biofuel and diesel, the universal standard starting from Feb 2.

Mr Chaiwat said the introduction of biodiesel would have only a minor impact on the palm oil market.

Palm oil prices have jumped sharply in recent months, leading authorities to consider a ban on exports. Palm oil is a raw material for cooking oil, the food industry and as an alternative fuel.

A Commerce Ministry panel that monitors palm oil prices yesterday recommended that the government import 30,000 tonnes of crude olein, the liquid component of palm kernel oil, to ease supply shortages. The proposal will be considered today by the Edible Oil Policy Board, chaired by Commerce Minister Krirk-krai Jirapaet.

But the Palm Oil and Oil Palm Association and the Palm Oil Crushing Mill Association have come out against the proposal as doing little to address current problems.

Thavee Srisukon, the president of the Palm Oil and Oil Palm Association, said crude olein in Malaysia was now quoted at 35 baht per kilogramme. After transport costs, insurance and tariffs are included, import prices differed little from domestic prices, which in any case had moved upward in line with global prices.

One industry executive suggested that supply constraints were the fault of the Commerce Ministry itself, which should have anticipated the price impact of rising demand for biofuel production and exports.

Crude palm oil reserves last week fell to 86,000 tonnes, down from 98,000 in December and 150,000 last June.

Thailand produces around 1.4 million tonnes of crude palm oil each year, of which 800,000 to 850,000 tonnes go to cooking oil production and 500,000 for export.

But the introduction of B2 biodiesel is expected to require 350,000 tonnes of crude palm oil each year, or the equivalent of 1.2 million litres of B100 100% biofuel per day.

Charnchit Nawongsri, the general manager of Asian Palm Oil Co, said palm oil prices should ease over the next few weeks with the start of the new harvest season.

He cautioned that any move to import palm oil could affect local farmers if supply outstrips demand.

Mr Chaiwat of PTT said the authorities should have foreseen the impact the introduction of B2 would have on the market.

PTT, Bangchak Petroleum and the Energy Ministry had given the Commerce Ministry six months' advance notice about the introduction of B2 in the market, he said, including cautions that close monitoring of domestic supply would be needed to ensure sufficient output.

Manoon Siriwan, a local energy analyst, said that on the surface, crude palm oil supplies should be sufficient to meet demand, even with the introduction of biodiesel. B100 biofuel requires glycerol, a byproduct from the refining process to produce palm cooking oil.

Cooking oil requires highly pure crude palm oil as its raw material.

Of the nine biofuel producers in Thailand, only Thai Oleochemicals, a unit of PTT Chemical, is able to refine biofuel from crude palm oil. The company is expected to start commercial operations of B100 production within the next six months.

''All the remaining producers depend on glycerol, which requires less refinery investment than if you use pure palm oil as a feedstock,'' said a senior Energy Ministry official.

''As a result, biofuel production isn't really affecting crude palm oil stocks, since eight of the nine refineries use glycerol, not palm oil.''