BANGKOK (Commodity Online) : Anticipating excessive palm oil production this year, Thailand is considering increasing palm oil use in fuel.

According to Thai Oil Palm and Palm Oil Association, palm production in the country this year is forecast at 1.5 million tones, and the industry has an additional 200,000 tones in producers' stockpiles.

They said the country should move quickly to use more palm oil in fuel as a rapid increase in production will cause a surplus of the commodity soon.

Currently, 70% of palm oil is used for consumption and the rest in the energy sector, mainly for fuel. Energy usage this year has been estimated at between 400,000 and 500,000 tones.

Today if we make use of palm oil for domestic use, it will not only replace the need for imports but also be a way of managing resources efficiently to reap the most benefits, said the Association.

If we move forward with the alternative energy plan, there will be a surplus of 400,000 to 500,000 litres per day, which is much more than we expected. It added.

Thailand introduced B2 biodiesel, a blend of 2% palm-derived biofuel in diesel, last year. B5 biodiesel with 5% biofuel content became available early this year under a voluntary scheme among oil traders.

High-speed, or 100%, diesel has been phased out completely, replaced by B3 in June. B3 in turn will be replaced by B5 in January.

The country has 14 or 15 plants that produce a 100% biofuel or B100, with a production capacity of more than 6 million litres per day, or 450,000 litres per factory.

Palm prices are currently around five baht a kilogramme, a level considered sufficient to provide good returns to farmers.

The price is up from 2-3 baht a kilogramme in 2008, when world oil prices were surging toward their record high of $147 a barrel before collapsing when the recession set in.

The palm price trend this year will depend on the climate and on output of soybeans, which can substitute for palm in some applications.

Thailand has currently 4.3 million rai of land for palm plantations, with about 3.6 million rai currently producing. The area is forecast to increase by 580,000 rai next year.