Thailand prepares for $200 oil: conservation, rail, biofuels and biogas

At the recent meeting of the heads of state of OPEC member countries, Venezuelan president Hugo Chavez warned that oil prices would go stratospheric and could reach up to $200 per barrel if a conflict with Iran or tensions in the Strait of Hormuz were to break out. The left-wing leader's statements did not make much of an impression on the markets, because they remain hypothetical and are clearly ideologically burdened. Nonetheless, some countries take the warning seriously, and are preparing for the worst.

Speaking at a seminar on the promotion of biotechnology in Bangkok, Thailand's Energy Minister Piyasvasti Amranand acknowledged that rising political tensions in the Middle East present a major risk to global energy security. Citing the surge in oil prices to $100 a barrel from $20 five years ago, the minister said anything was possible and that a preparedness plan is now in order.

If the crude prices double from now, local retail prices would exceed 60 or 70 baht a litre. This would severely disrupt Thailand's economy. The country relies substantially on crude oil imports representing 6.5% of its GDP. Poorer oil-importing developing countries could enter an era of negative economic growth, mass unemployment and hyper-inflation, especially those energy intensive Least Developed Countries (LDCs) that spend more than 10% of their GDP on importing oil products (previous post).

One way of dealing with the problem is for the state to subsidise fuels. But Thailand's energy minister ruled out this approach and will instead step up its efforts to promote conservation, rail transport and alternative fuels including ethanol, biodiesel, natural gas and biogas.

Biogas
In its latest move, the Thai government has set aside a 4.78 billion baht (€102/$152 million) fund to subsidise biogas, obtained from anaerobically digesting agricultural and industrial waste as well as energy crops.

The programme targets the farm sector and food-processing plants that have plans to convert waste biomass into methane gas to replace cooking gas. The fund will subsidise 20% of the total costs of biogas consulting fees, construction and installed equipment for successful applicants.

More than 430 plants, poultry farms and 300 community organisations are expected to join the biogas project, which could substitute as much as 760 million cubic metres a year of fossil fuels, valued at 5.4 billion baht (€116/$172 million) a year:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: biogas :: fuel subsidies :: crude oil :: conservation :: public transport :: Thailand ::

Waste water from agricultural processing industries as well as municipal waste is used by agricultural mills and municipalities, respectively, to produce biogas.

Palm oil and tapioca mills build biogas systems as part of their wastewater treatment and use the biogas produced to replace fuel oil or LPG consumption or to produce electricity.

To strengthen energy security and sustainability, the Thai government has set 2011 as the target date for 8% of the nation’s total energy, representing an estimated 1,900 MW, to be generated from renewable energy sources.

Conservation, public transport and improved efficiency are obviously on the radar as well, with the government considering the option of taking money from the State Oil Fund to promote these measures:

Freezing or intervening in prices of retail petrol is only a short term solution to the problem. If we don't begin to take energy conservation seriously, the country will continue to face this oil crisis over and over again. We will speed up energy-saving campaigns and expedite the construction of public transport systems such as railway lines using money from the State Oil Fund. - Piyasvasti Amranand, Thailand's Energy Minister

Commenting on the fears for economy-wrecking oil prices, Bangchak Petroleum executive Yodpoj Wongrakmit noted that while a price of $200 a barrel for refined oil could not be ruled out, the West would likely resort to economic sanctions rather than a full-fledged war against Teheran. Bangchak will consider increasing its retail oil prices across the board before this weekend since the current gross margin of 0.65-0.70 baht a litre is below the appropriate level of at least 0.70-0.80 baht a litre.

Picture: biogas plant under construction at the Nong Bua pig farming company, located to the south of Bangkok, Thailand.

References:
MCOT Thai News Agency: Global oil may hit $200 if US attacks Iran: minister - November 20, 2007.

Bangkok Post: 'No subsidy even if oil hits $200' - November 20, 2007.

Bangkok Post: Minister warns oil prices 'could' double - November 20, 2007.