Thailand’s Refining Industry: Transitioning Towards Clean Energy Goals – Thailand Business News

Thailand’s refining industry is undergoing a significant transformation as part of the country’s broader clean energy transition, driven by ambitious climate goals and global market demands. The nation has set targets for carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065, with the energy sector, including refining, playing a critical role due to its substantial contribution to emissions.

Key View

• Thailand’s refining industry is adapting to evolving market dynamics influenced by clean fuel policies.
• Thailand’s shift to Euro-5 fuel standards is compelling refineries to invest in upgrading projects to enhance fuel quality.

Major Advancements in the Refining Industry

Thailand’s refining industry is experiencing significant transformations as the government intensifies efforts to cut greenhouse gas emissions and boost energy efficiency. Local refineries are increasingly adopting sustainable practices, aligning with the nation’s broader objectives to diversify energy sources and reduce dependency on fossil fuels.

1. Thai Oil’s Clean Fuel Project (CFP):
   • Thai Oil PLC, a subsidiary of the state-owned PTT, is leading the charge with its Clean Fuel Project at the Sriracha refinery in Chonburi province. This $4.8 billion initiative, set to be completed in 2023, increases the refinery’s capacity from 275,000 barrels per day (bpd) to 400,000 bpd while eliminating fuel oil production in favor of cleaner fuels like Euro 5-quality gasoline and diesel.
   • The project includes a new crude distillation unit (CDU) with a 220,000 bpd capacity, replacing older units, and incorporates advanced units like hydrocracking and hydrodesulphurization to reduce emissions of particulate matter and nitrogen oxides.
   • The CFP also enhances flexibility to process heavier, less expensive crudes, improving competitiveness and aligning with global regulations, such as the International Maritime Organization’s low-sulfur fuel requirements.
   • Recent updates indicate Thai Oil has appointed Wood PLC as the Procurement & Construction Management firm, with Bechtel and JGC as candidates for the Engineering, Procurement, and Construction (EPC) contractor role, signaling ongoing progress.
2. Shift to Low-Sulfur and Sustainable Fuels:
   • The refining industry is moving away from heavy, high-sulfur fuel oil due to stricter environmental regulations and declining demand from sectors like maritime shipping. Thai Oil’s upgrade will boost diesel and jet fuel output to 70-75% of total production, up from 56%, to meet regional demand for cleaner fuels.
   • The focus on Euro 5 standards, effective in Thailand from January 1, 2024, underscores the industry’s commitment to reducing environmental impact.
3. Integration of Renewable and Alternative Energy:
   • Refineries are exploring integration with renewable energy sources. For instance, the CFP includes an energy recovery unit (ERU) sold to Global Power Synergy (GPSC) for $757 million, which generates power and steam using petroleum pitch, reducing the refinery’s energy costs and environmental footprint.
   • There’s also a push toward biofuels and biochemicals. Thailand’s policies, like the Alternative Energy Development Plan, promote biofuel production, with initiatives like ethanol blending in diesel fuels and advanced bio-oil production from plastic waste via pyrolysis.
4. Carbon Capture and Storage (CCS):
   • PTT Exploration and Production (PTTEP) is spearheading CCS efforts, with projects like the Eastern Thailand hub aiming to capture 6-10 million tonnes of CO₂ annually by 2030 and the Arthit gas field project targeting 1 million tonnes annually from 2027. These initiatives support the refining industry’s decarbonization efforts.

Broader Context of Thailand’s Energy Transition

• Policy Support: Thailand’s National Energy Plan and Power Development Plan (PDP 2018–2037) aim for 50% of new power generation capacity to come from renewables by 2040, with renewable electricity reaching 68% by 2040 and 74% by 2050 to achieve carbon neutrality. The refining industry aligns with these goals by reducing reliance on fossil fuels and integrating cleaner technologies.
• Renewable Energy Integration: The country is scaling up solar, wind, and biomass, with solar capacity targeted to reach 14,864 MW by 2037. Projects like the Sirindhorn Dam’s floating hydro-solar farm highlight innovative approaches to renewable energy that complement refining upgrades.
• Energy Security and Imports: Thailand’s depleting natural gas reserves and reliance on imported fuels (over 10% of electricity comes from coal-heavy neighboring countries) are pushing the refining industry to adopt cleaner, more efficient processes to enhance energy security.

Challenges and Opportunities

• Challenges:
  • High reliance on natural gas (60% of power generation) and imported fuels poses energy security risks.
  • Scaling up renewable energy infrastructure and CCS technologies requires significant investment and workforce upskilling.
  • Policy conflicts, such as fossil fuel subsidies and centralized power structures, hinder the transition to cleaner energy.
• Opportunities:
  • Thailand’s refining upgrades position it as a potential energy hub in Southeast Asia, boosting competitiveness in the cleaner fuel market.
  • Incentives from the Board of Investment (BOI) and green financing, like green bonds, support renewable energy and clean technology adoption.
  • Collaboration with international partners, such as Mitsubishi Heavy Industries and ABB, facilitates technology transfer and innovation in CCS and hydrogen.

Thailand’s refining industry is embracing the clean energy transition through major projects like Thai Oil’s Clean Fuel Project, which enhances capacity, shifts to low-sulfur fuels, and integrates energy-efficient technologies. Supported by national policies and international partnerships, these efforts align with Thailand’s goals of carbon neutrality by 2050 and net-zero emissions by 2065. While challenges like infrastructure development and policy barriers remain, the industry’s shift toward cleaner fuels and renewable integration positions Thailand as a leader in Southeast Asia’s energy transition.