Thai Oil sets aside $30m to buy into ethanol producer

Thai Oil Plc, Thailand's largest oil refinery, is ready to spend US$30 million to acquire at least a 25% stake in an ethanol plant to secure its ethanol feedstock, says CEO Surong Bulakul.

The ethanol plant must be in operation and located in the central part of the country, the area where the company wants to serve. However, he declined to give further details.

"We are now in talks with a number of operators on details such as share prices and conditions," he said.

The company is already operating its first ethanol plant through the joint venture Maesod Clean Energy Co, in which Thai Oil holds 30% and the zinc miner Padaeng Industry Plc and the sugar miller Mitr Phol Group each hold 35%.

The plant, located in Mae Sot in Tak province, has a daily output of 200,000 litres.

"We need to secure more ethanol feedstock as we require roughly 600,000 litres per day to produce gasohol for our parent firm, PTT," Mr Surong said.

The acquisition deal should be concluded soon, as Thai Oil intends to seek approval from the board of directors next month.

The company has already set a budget for the acquisition but the exact figure was not disclosed.

Thai Oil currently has an investment budget of $150 million for 2010-11. It includes $25 million to develop materials for tyre products, and $40 million for upgrading oil to meet the new Euro4 emissions standard. Another $50 million has been earmarked to expand its fleet to nine petroleum vessels this year from the current five vessels.

As well, the company has a plan to diversify into non-petroleum products, but it would still focus on ethanol-based products such as emulsion film and coating and solvent products, which have higher margins than gasohol.

"For the new products, we are now studying new technology that should created added value to our ethanol-based products and fit our requirements," said Mr Surong.

"PTT has a policy for [its subsidiaries] to focus on one product line. To comply with this policy, we will look mainly at ethanol and any products that are made from ethanol and provide higher margins. As you can see, our sister company PTT Chemical is keen on anything made from palm oil, such as oleochemicals," Mr Surong said.

Thai Oil's gross integrated margin in March increased to slightly higher than $5 per barrel from below $5 in January and February. Crude oil prices may stay between $84 and $85 per barrel on average for all of 2010, he forecast.

Shares of Thai Oil (TOP) closed on Friday on the Stock Exchange of Thailand at 51.50 baht, down one baht in trade worth 699.22 million baht.

source: bangkokpost