13/06/2009 (Bangkok Post) - SET-listed Rayong Purifier Plc (RPC) expects its new biodiesel operation to lift its sales this year by 5.4% to 23.2 billion baht, up from 22 billion last year.

RPC's wholly owned Pure Biodiesel Co has operated since January, with a daily output of 150,000 million litres of biodiesel, said Supapong Krishnakan, the chairman of RPC's executive board.

"We estimate sales contributed by the new product, based on the Energy Ministry's benchmark price, at an average of 25 baht per litre," he said.

RPC's revenue from its main business - oil refining and service stations - is projected to stay flat this year at 22 billion baht with the decline in demand for fuel amid the recession.

"Fortunately, the biodiesel plant operation is online this year so we can have more sales to help revive the company's performance," Mr Supapong said.

RPC's oil-refining unit will produce about 12,000 barrels per day this year, about 70% of its capacity of 17,000 barrels.

The company initially plans to produce biodiesel at 50% of total capacity, which would generate sales of 1.25 billion baht.

RPC aims to push utilisation past 75% by year-end and to reach full capacity by 2011 when the government will enforce mandatory use of B5, a mix of 5% biofuel and high-speed diesel, to replace B2 with 2% biofuel in diesel.

"Once the B2 diesel is replaced by B5, demand for B100 - which is 100% biofuel - will increase to 2.5 million litres a day from 1.8 million litres currently," said Mr Supapong.

But he is concerned by Thailand's slow development in palm fruit cultivation. Thailand has a yield of only 2.65 tonnes per rai. Malaysia and Indonesia, the two largest palm oil exporters, have yields of 4-6 tonnes per rai.

"We will be a loser in the Asian region for palm oil since our production cost is highest among global exporters. The government should have started to allocate a budget for research and development to lift yields and breed new high-yield species a long time ago," he said.

RPC is considering investing both upstream in plantations and downstream in oleochemical production.

"We want to increase added value from our biodiesel production. We will see if upstream or downstream can bring more added value to our existing assets," said Mr Supapong.

RPC shares yesterday gained the most in five years on expectations that higher oil prices will raise revenue. RPC rose 13% yesterday on the SET to 2.44 baht in trade worth 24.48 million baht.

"The company is a cheap bet for oil-exposure companies. It stands to gain more than lose when oil prices rise," said Mongkol Puangpetra, an analyst at Country Group Securities.