Executive summary report ; Potential and suitability study...

Executive summary report ; Potential and suitability study of full-cycle palm oil extracting plant in commercial scale for biodiesel production in north-eastern of Thailand.

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Executive summary

Potential and suitability study of full-cycle palm oil extracting plant in commercial scale for biodiesel production in north-eastern of Thailand.

1. Rational

Thailand oil consumption vitally relies on import. From current global oil price situation trends to increase and remain fossil fuel volume trends to decrease, the situation so directly effects to Thailand. The government is consciously concern this problem, therefore government has developed policy to promote other sources of energy specifically alternative energy to compensate petroleum oil. The alternative energy development plan (AEDP) 2012-2020 targets 25% of overall energy consumption will be compensated by alternative energy in year 2020. Biodiesel consumption is targeted average 7.2 million liters/day in year 2020. For this target, the Ministry of energy and Ministry of agriculture and cooperative join to develop strategic plan for oil palm industry development. The strategic methods to improver oil palm industry are expand cultivation area, replace new palm tree over the old, improve cultivated yield, and increase oil content for support the increasing demand of palm oil in energy industry.

The ministry of agriculture and cooperative announced southern and eastern region of Thailand are promoting area for oil palm plantation by government policy, but other areas are studying area. There are other areas concurrently planted oil palm such as Rungsit district of Pathumthani province and north-eastern region of Thailand. So this study is conducted to find potential and suitability of north-eastern region of Thailand on full-cycle palm oil extraction plant establishment to support biodiesel production.

2. Project objective

To study potential and suitability of full-cycle palm oil extraction plant establishment for commercial scale biodiesel production.

3. Project duration

9 months.

4. Extent and concept of the project

4.1 Survey plantation area and volume of palm tree in north-eastern of Thailand, estimate next 10 years palm oil as biodiesel feedstock, compare cultivation yield between


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north-eastern, southern, and eastern region of Thailand, and analyze strength and weakness of palm plantation in north-eastern region of Thailand.

4.2 Study proper palm fruit accumulating method for sending to palm oil extraction plant that will be established by this project to support the increasing palm volume.

4.3 Study technology of palm oil extraction, biodiesel production, biogas production from process waste, electricity generation from biomass according to potential of feedstock for palm oil extraction plant and biodiesel production plant in north-eastern of Thailand.

4.4 Study and analyze size and number of commercial scale and full-cycle palm oil extraction plant and biodiesel production plant those can obtain all feedstock in article 4.3

4.5 Conduct workshop meeting both upper area and lower area of north-eastern region for related people brainstorming by at least 150 peoples in each meeting.

4.6 Study suitable crude palm oil selling choice of palm oil extraction plant in north-eastern of Thailand. The study compares way of biodiesel production plant establishment in north-eastern region compare to transport crude palm oil to sell at other regions by economical and financial analysis of investment.

4.7 Conduct seminar for result dissemination and opinion accumulation from at least 150 related peoples and use opinion from seminar to improve studying result.

5. Surveying of oil palm plantation area and palm product volume in north-eastern region

Planting area and palm product volume survey are defined for comprehensive area characteristics. So survey locations are specified as these following manners.

5.1 There are both sufficiency and insufficiency of water source. 5.2 There are 3 size of planting area ; small (<20 rai), medium (20-100 rai), and large

(>100 rai). 5.3 There are both upper and lower section of north-eastern region. 5.4 There are both industrial corporation and small farmer. 5.5 There are both intensive planting area and fractional planting area.

The survey start by secondary data accumulation from many data sources. Many

useful statistic and data such as planting area size, number of farmer, palm product volume, geographical characteristic of area, water resource, etc. Example of useful information that use to specify survey location is water resource condition of area. In north-eastern region has 4 grand water sources those are Makong river, Lam pao dam, Ubonrat dam, and Sirikit dam. There are various planting areas from less than 10 rais up to thousand rais in various farmers. The intensive planting areas locate in Kantharalak of Srisaket, Ponepisai of Nongkhai, and Chieangkhan of Loei, etc. The fractional and light planting areas such as Borabue of Mahasarakham. So these information were used to plan the survey areas.


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From the accumulated data and statistic, surveyed plantations are defined 18 locations as show in table 1.

Table 1 Surveyed plantations

Items Name-surename District Province Planting area

(Rai) 1 Mrs.Seng Larmpath Borabue Mahasarakham 19 2 Mr.Somchai Chaisawad Yangtalad Kalasin 21 3 Mr.Boonlerd Sansamrong Doungluang Mukdahan 15 4 TPS material co.,ltd. Nathom Nakornpanom 1,000 5 Mr.Suvet Kotchali Seka Beung kan 23 6 Mr.Prakit Peangkheung Seka Beung kan 16 7 Mr.Yutharong Sanwang Ratanavapi Nongkhai 40 8 Mr.Sompong Therawat- Ponepisai Nongkhai 2,600 9 Mr.Khamsan Khamwongsa Srichieangmai Nongkhai 20 10 Mr.Thumnieb Arayasil- Chieangkhan Loei 10 11 Mr.Sompoj kulsuwan Sribunrueng Nongbualampoon 260 12 Mr.Theam Pruprong Pathumvongsa Amnajchareuan 34 13 Mr.Pun Charith Boontrig Ubonratchathani 10 14 Mr.Vanit Kingkaew Nachaluare Ubonratchathani 30 15 Mr.Thong-in Kukhamsai Namyeurn Ubonratchathani 120 16 Mrs.Sunita Kaewnaborn Kantharaluk Srisaket 12 17 Mr.Wirote Kaewsod Sawangverawong Ubonratchathani 10

18 Ubonwiboonpalm ltd.,part. Nayear Ubonratchathani 300

The plantation was surveyed at 11 – 18 December 2014, by cooperation of farmers, cooperatives, or agriculture office of each area to cooperate opinion of related peoples and organizations for the best survey result. The example pictures of survey as show in figure 1.

Mr.Boonlerd Sansamrong


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TPS material co.,ltd. ; Manager Mr.Anuchit Khaikaew

Mr.Sompong Therawatdamrongkul

Mr.Sompoj kulsuwan

Figure 1 Example of surveyed oil palm plantations

The summary result of plantation survey can be illustrated in figure 2


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Figure 2 Proportion of survey result categorize by each question


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Figure 2 Proportion of survey result categorize by each question (Continue)


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The result in figure 3 shows plantation in north-eastern area of Thailand has many different characteristics such as palm tree age, quantity of water, garden administration, cultivation yield, demand or buyer availability, etc. These different characteristics dominate fluctuated different volume of fruit. However, overall trend of plantation area seem to be expanded slowly in the future.

6. Palm volume projection of north-eastern of Thailand

The regression model is used to be quantitative forecasting method of this project. The model finds previous changing pattern and recognizes it as same changing pattern in the future. So the future value can be determined by calculation from current value with exist changing pattern. The values that are forecasted be productive area and fruit volume of oil palm by use data in year 2008-2014 from Office of agricultural economics, The ministry of agriculture and cooperative to forecast value of year 2015 – 2029.

These forecasting use 2 types of regression models for comparing check the result. 2 types of regression model are simple linear regression model and multiple linear regression model.

This forecasting is performed on planting area, productive area, cultivation yield, and palm fruit volume of north-eastern of Thailand. The result shows vital lower potential of planting area and yield than southern and eastern region of Thailand. However this study concentrates on conceptual planning of exist palm fruit value adding, so the feasibility of palm oil extraction plant establishment still in detail evaluation.

The forecasted result that is used in feasibility study of palm oil extraction plant and biodiesel production plant establishment is palm fruit volume. If forecasting uses simple linear regression model, the result as show in table 2 and figure 5.


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Table 2 Forecasting of provincial palm fruit volume of north-eastern region in year 2015-2029 (unit : ton) จังหวัด\ป 2558 2559 2560 2561 2562 2563 2564 2565 2566 2567 2568 2569 2570 2571 2572

Loei 13,861 16,178 18,491 20,798 23,101 25,400 27,693 29,983 32,267 34,546 36,822 39,092 41,359 43,619 45,875

Nongbualumpu 1,040 1,318 1,628 1,969 2,344 2,748 3,184 3,651 4,152 4,682 5,244 5,837 6,465 7,121 7,809

Udonthani 5,620 6,592 7,587 8,603 9,640 10,701 11,783 12,885 14,010 15,158 16,325 17,516 18,729 19,962 21,218

Nongkhai 10,608 12,136 13,751 15,452 17,238 19,109 21,066 23,109 25,237 27,451 29,750 32,133 34,604 37,160 39,801

Bungkharn 11,093 14,094 17,414 21,052 25,008 29,283 33,874 38,786 44,016 49,564 55,431 61,616 68,119 74,941 82,081

Sakonnakorn 2,613 3,160 3,707 4,255 4,803 5,351 5,900 6,449 6,998 7,548 8,098 8,649 9,199 9,750 10,302

Nakornphanom 1,721 1,979 2,237 2,496 2,755 3,014 3,272 3,531 3,790 4,049 4,309 4,567 4,827 5,087 5,346

Mukdaharn 919 1,027 1,136 1,244 1,353 1,461 1,569 1,676 1,784 1,891 1,998 2,105 2,211 2,318 2,424

Yasothorn 851 952 1,052 1,153 1,253 1,353 1,453 1,553 1,652 1,751 1,851 1,949 2,048 2,146 2,245

Amnajchareoun 3,570 4,133 4,718 5,322 5,946 6,591 7,257 7,943 8,649 9,375 10,122 10,891 11,679 12,487 13,316

Ubonratchatani 23,155 25,428 27,565 29,567 31,434 33,165 34,761 36,222 37,547 38,739 39,793 40,713 41,497 42,145 42,659

Srisaket 4,893 5,348 5,806 6,264 6,723 7,183 7,645 8,108 8,573 9,039 9,506 9,975 10,446 10,917 11,390

Surin 1,325 1,691 2,057 2,423 2,790 3,158 3,525 3,893 4,262 4,631 5,000 5,370 5,741 6,112 6,483

Burirum 3,243 3,817 4,397 4,986 5,583 6,188 6,799 7,420 8,049 8,684 9,328 9,980 10,640 11,307 11,983

Roi-et 640 765 897 1,036 1,182 1,338 1,500 1,670 1,847 2,034 2,227 2,427 2,635 2,853 3,076

Kalasin 919 1,161 1,429 1,722 2,041 2,386 2,756 3,152 3,574 4,019 4,492 4,990 5,514 6,064 6,637

Khonkan 229 275 323 370 418 467 516 567 618 669 721 774 828 882 937

Chaiyaphum 860 1,038 1,229 1,430 1,643 1,866 2,101 2,345 2,602 2,868 3,147 3,435 3,736 4,046 4,369

Nakornratchasrima 5,908 7,308 8,800 10,386 12,066 13,839 15,705 17,665 19,720 21,866 24,107 26,442 28,870 31,390 34,007

Mahasarakham - - - - - - - - - - - - - - -

Total 93,068 108,400 124,224 140,528 157,321 174,601 192,359 210,608 229,347 248,564 268,271 288,461 309,147 330,307 351,958


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Figure 5 Forecasting of provincial palm fruit volume of north-eastern region in year 2015 – 2029 (Ton)

Year

Tota

l out

put (

ton)

Loie

Nongbualumphu

Udonthani

Nongkhai

Bungkhan

Sakonnakorn

Nakornpanom

Mukdaharn

Yasothonr

Amnajchaleorn

Ubonratchathani

Srisaket

Surin

Buriram

Roi-et

Kalasin

Khonkhan

Chaiyaphum

nakornratchasima

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

2558 2559 2560 2561 2562 2563 2564 2565 2566 2567 2568 2569 2570 2571 2572


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The multiple linear regression model uses 4 independent variables composed of crude palm oil demand, diesel price, fresh fruit brunch price, and ribbed smoke sheet grade 3 (RSS3) to calculate for total palm fruit volume in year 2015 – 2029. The calculation perform on north-eastern, southern, and eastern region. The calculated palm fruit volume in table 3 and figure 6 show they are same value that develop credible result of forecasting.

7. Strength and weakness analysis of north-eastern palm plantation compare to southern and eastern region.

North-eastern is low palm planting area compared to southern and eastern region. Although end of forecasting period in year 2029, it still has low palm planting area and yield. These actual situation can be considered north-eastern region is in-potential area for palm plantation. Anywise it still increases slightly in the future as forecasting result.

The many factors those obstacle on north-eastern region for palm plantation such as soil characteristic, rainfall volume, farmer knowledge and skill, and lack of consistent demand.

Figure 6 Related factors of palm cultivation

From specific related factors of palm plantation, they are compared between north-eastern, eastern, and southern region of Thailand by expert scoring. The result shows the southern region is highest and the north-eastern is lowest potentiality.

Table 3 Comparison of palm plantation related factors between different region of Thailand. Factor North-eastern Eastern Southern

Soil fertility 1 2 3 Rainfall 1 2 3


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Distribution of rainfall 1 2 3 Weather 1 2 3 Seed 1 2 3 Fertilizer ministration 1 2 3 Garden administration 1 2 3 Basic knowledge 1 2 3 Public sector promotion 1 2 3 Finance 1 2 3 Support from academician 1 2 3 Factory availability 1 2 3 Farmer capability 1 2 3 Area size 3 1 2 Number of labor 3 1 2 Remark : 1 = low, 2 = medium, 3 = high

Strength and weakness of oil palm plantation in north-eastern region are followings. 1) Almost of planting areas are small farm with own by small farmer. Some farmers

grow oil palm together with other career, so they don’t concentrate in palm ministration.

2) They grow palm by primitive method without good practice for full efficient method. The fertilizer ministration rate is low, inadequate financial capability, and low technology. So cultivating yield and oil content are lower than other regions.

3) Farmers improperly select, nurse, and hybridize palm sprout to be strong and high yield palm tree.

4) Low rainfall and water ministration. 5) Inadequate buyers, not cover all area and unsteady to make free market. 6) Absence of downstream industry such as palm oil extraction, biodiesel

production, or RBD oil production. 7) Lack of provincial efficient support to research and development on palm seed

improvement and palm oil industry establishment. 8) Lack of efficient controlling of palm fruit selling yard, that make price, weighing,

storage, and preservation of palm fruit are low efficiency.

8. Palm fruit accumulation for palm oil extraction

Current palm fruit accumulation of north-eastern region is different from eastern and southern region, because different related factors and constraints such as smaller size of each plantation, low volume of palm fruit, fractional location of plantation, and absence of palm oil extraction plant located close to plantation. So these factors and constraints make oil fruit accumulation manner is different. The figure 7 is the manner of north-eastern region.


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Figure 7 Palm fruit accumulation channel for deliver to extraction plant.

More than 10 north-eastern provinces grow oil palm and have many plantation area, but don’t have enough and stable oil extraction plant. So almost of palm fruits are transported to oil extraction plant in eastern and middle region of Thailand. Because planting areas are fractional location and different characteristics, so there are different ways to sell palm fruit to extraction plant. Figure 7 is several palm fruit channel to extraction plant, that each process such as selling, buying, transporting, etc. may be performed by farmer, merchant, cooperative or company. The entire channel can be divided to be 4 pathways.

(1) Small farmer -> extraction plant ; far traveling distance make it not popular. (2) Small farmer -> small fruit selling yard -> oil extraction plant ; farmers sell

palm fruit directly to buyers, and then buyers travel to many yards or gardens until full truck load to transport.

(3) Small farmer -> small fruit selling yard -> big fruit selling yard -> oil extraction plant ; the big fruit selling yards buy palm fruit and collect it until meet the full truck load to transport, then transport palm fruit to deliver at biodiesel production or oil refinery plant.

(4) Small farmer -> big fruit selling yard -> oil extraction plant ; this channel slightly different from channel 3 at big fruit selling yards are located near plantation. So the small farmer can transport their palm fruit directly to plant.

These channels are farmer choices depend on characteristic and constraint of each plantation. If oil extraction plant is started at closed area of plantation, the farmers trend to sell directly to factory. The reasons are near distant to transport, don’t need the middle

Farmer

Small fruit selling yard

Large fruit selling yare

Extraction plant


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man or agent. So analyze of feasibility study for palm oil extraction plant must vitally concern cost from transportation.

9. Analysis of crude palm oil extraction plant establishment

From palm plantation survey, farmer notion, and brainstorming in 4 meetings and 1 seminar, the study found almost of farmers want palm oil extraction plant locates close to their plantation. That will make their harvesting, transportation, selling and price are better than locate far from them. Because they can harvest and sell palm fruit directly and frequently as comfortable to plant, that eliminate middle man in supply chain. So they will be more motivated to concentrate on their plantation. So oil extraction plants establishment concept should be small size and distributed locate close to plantation.

The palm oil extraction plant size can be categorized to be 3 sizes. These categories are used to be analyzing parameters. The categorized sizes can be defined for capacity and planting area scope by following data.

Year 2015 ; average palm cultivation yield = 1.060 ton/rai/year Year 2022 ; average palm cultivation yield = 1.243 ton/rai/year Year 2029 ; average palm cultivation yield = 1.427 ton/rai/year The annual working day of extraction plant is 300 days, daily working hour = 22

hours. We can calculate even productive planting area for each size in year 2015, 2022, and 2029 as show in table 4.

Table 4 Production capacity and even planting area for each size of oil extraction plant.

Size Capacity

(ton ffb/hr) Capacity

(ton ffb/yr)

Investment Even productive planting area (rai)

(million baht) 2558 2565 2572

Small 2 13,156 31.5 12,411 10,584 9,219 Medium 30 197,340 200 186,170 158,761 138,290 Large 60 394,680 400 372,340 317,522 276,580

From table 2 and table 4, those show capacity of each extraction plant size and available productive plantation. If they are compared and calculated to find number and location of extraction plant, the result is shown in table 5 that come from conceptual idea to maximize stakeholder benefit.

If the extraction plants is rapidly established in north-eastern region, they will increase the value of existing unutilized palm fruit. Because current situation farmers lose their output, because uncontrolable palm fruit selling time and place and low price. And they gave suggestion to public sector to support the establishment.


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From the related persons and organizations opinion, the conclusion of palm oil extraction establishment concept would be initial set up with small even size to support exist losing palm fruit. Then expand the capacity of exist plant or start new small plant at adjacent intensive palm fruit volume when volume increases more than capacity of small size in the future. These concept gets the advantages as follows.

(1) Low investment, high rate of return on investment. (2) Farmer near extracting plant and adjacent area can get fully benefit from

plant. (3) Reduce the transportation cost from fresh fruit brunch heavy and distant

transportation to be crude palm oil transportation that remain only 17% by weight.


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Table 5 The forecasting productive plantation and calculating result of palm oil extraction plant to support productive planting area.

* Productive plantation (rai)

Items Province 2015 2022 2029

Area * Number** Area * Number ** Area * Number** 1 Ubonratchatani 14,670 1 27,459 3 40,249 4 2 Loei 12,489 1 27,206 3 41,922 5 3 Bungkharn 9,421 1 20,858 2 32,296 3 4 Nongkhai 8,825 1 14,984 1 21,143 2 5 Udonthani 4,200 - 8,873 1 13,547 2 6 Nakornratchasrima 4,009 1 9,240 1 14,472 2 7 Sakonnakorn 3,862 - 9,512 1 15,161 2 8 Amnajchareoun 3,637 - 7,034 1 10,430 1 9 Burirum 3,309 1 7,206 1 11,103 2 10 Srisaket 3,222 - 5,281 - 7,339 1 11 Nakornphanom 2,343 - 4,804 - 7,265 1 12 Surin 1,901 - 5,561 1 9,222 1 13 Yasothorn 1,215 - 2,232 - 3,249 - 14 Kalasin 1,025 - 2,214 - 3,402 - 15 Nongbualumpu 896 - 1,863 - 2,831 - 16 Mukdaharn 888 - 1,631 - 2,375 - 17 Chaiyaphum 732 - 1,568 - 2,405 - 18 Roi-et 642 - 1,302 - 1,962 - 19 Khonkan 326 - 765 - 1,204 - 20 Mahasarakham - - - - - -

Total 77,610 6 159,594 15 241,577 26 Calculating result for medium plant 0.42 - 1.00 - 1.75

Calculating result for large plant 0.21 - 0.50 - 0.87


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** Number of small extracting plants (plant)


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At the bottom section of table 5, year 2015 the 6 small palm oil extracting plants would be established, but medium or large size is not suitable to small volume of palm fruit in north-eastern region. Because it lower than medium size production capacity.

Year 2022, if select the medium size, palm fruit volume from all plantations in north-eastern is even to only 1 plant. It make distant transportation for almost farmers or buyers. So high transportation cost in supply chain will occure. Also farmers can’t deliver their product to extracting plant, so they must sell their product to middle man with un-consistent time and price to buy. When farmer unsatisfies their income, they will leave from concentration.

In the year 2029, only 1 or 2 medium palm oil extracting plants can be established according to palm fruit volume of north-eastern region. If decide to establish medium size, the problem and lose are same as year 2022. Otherwise large palm oil extracting plant can’t established in north-eastern region of Thailand according to forecasting volume and productive area eventhrough year 2015, 2022, and 2029.

The economical feasibility study of each small palm oil extracting plant under desired plant utilization, adequate feedstock, feedstock price competition, etc. The parameters composed of investment capital, annual operation cost, crude palm oil price, and production capacity of plant. The calculation can perform as followings.

Investment capital 31 million baht Fixed operation cost 3.716 million baht / year Variable operation cost 45.707 million baht / year Total cost 49.423 million baht / year Income from crude palm oil 57.478 million baht / year Income from byproduct 2.763 million baht / year Total income 62.478 million baht / year The life time of plant is 20 years with zero scrap value. Discount rate is 7.875%.

Return on investment can be calculated. Pay back period = 2 years 5 months Net present value = 88.394 million baht Internal rate of return = 41.85 % So this investment return in short time, net present value and internal rate of reture

are high.

10. Crude palm oil selling channel Crude palm oil from extraction plants can be used to many kinds of downstream

products as 3 categories comprised of food, consumer product, and biodiesel. Also small volume are send to produce animal feed, export, or othre purposes. Figure 8 show crude palm oil supply chain start from fresh fruit brunch at palm plantation to extracting plant.


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The crude palm oil from extracting plant are sent to palm oil refinery plant to produce RBD palm oil for food product or downstream industry those almost of them are apply in food and consumer product industry. Also today major proportion of RBD palm oil and palm sterin are used to produce biodiesel like crude palm oil.

Table 6 Saving value from waste residue fruit brunch to be heating fuel.

Fuel type Fuel price (Bath per liter) Annual saving (Bath per year) (Liquid Petroleum Gas) Approx. 13.51 3,349,586 × 13.51 = 45,252,906

Gasohol 91 (E10) 27.38 2,832,465 × 27.38 = 77,552,891 Diesel oil 23.69 2,448,270 × 23.69 = 57,999,516

Waste water from palm oil extracting process of small size factory is 13,200 tons of fresh fruit brunch per year. They will create 3,036 cublic meter per year or 10.2 cublic meter per day. If we calculate to find biogas volume that can use to produce biogas, we will gain 171.36 cublic meter per day. Therefore, if we calculates to find biogas volume and calculates to find proper capacity of to construct in CPO extracting plant with 13,200 tons of fresh fruit brunch per year is 200 kilowatts of power plant as following details. Investment capital for 200 kilowatt power plant 24,899,000 THB per year

Operation and maintenance 2,489,900 THB per year

Income from electricity feed into grid 5,623,200 THB per year

Profit 3,133,300 THB per year

11. Crude palm oil selling channel

Crude palm oil from extraction plants can be used to many kinds of downstream products as 3 categories comprised of food, consumer product, and biodiesel. Also small volume are send to produce animal feed, export, or othre purposes. Figure 8 show crude palm oil supply chain start from fresh fruit brunch at palm plantation to extracting plant. The crude palm oil from extracting plant are sent to palm oil refinery plant to produce RBD palm oil for food product or downstream industry those almost of them are apply in food and consumer product industry. Also today major proportion of RBD palm oil and palm sterin are used to produce biodiesel like crude palm oil.


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Source : Agriculture product promotion office

Figure 8 Crude palm oil supply chain

12. Analysis of commercial scale biodiesel production plant establishment

From table 2, if we use 17% oil content of fresh fruit brunch, specific gravity of crude palm oil is 0.9 and biodiesel production plant work 300 days / year to calculate the crude palm oil feedstock to biodiesel production plant in year 2015, 2022, and 2029 by this calculations.

Crude palm oil (Liter/day) = Fresh fruit brunch (ton) x 0.17 x 1,000 / (0.9 x 300) The results show in table 6.

Table 6 Provincial palm fruit volume at year 2015, 2022, and 2029 Province Fresh fruit brunch (ton) Crude palm oil (Liter/day)

2558 2565 2572 2558 2565 2572

Loei 13,861 29,983 45,875 8,727 18,878 28,884 Nongbualumpu 1,040 3,651 7,809 655 2,299 4,917 Udonthani 5,620 12,885 21,218 3,539 8,113 13,359 Nongkhai 10,608 23,109 39,801 6,679 14,550 25,060 Bungkharn 11,093 38,786 82,081 6,984 24,421 51,681 Sakonnakorn 2,613 6,449 10,302 1,645 4,060 6,486 Nakornphanom 1,721 3,531 5,346 1,084 2,223 3,366 Mukdaharn 919 1,676 2,424 579 1,055 1,526 Yasothorn 851 1,553 2,245 536 978 1,414 Amnajchareoun 3,570 7,943 13,316 2,248 5,001 8,384 Ubonratchatani 23,155 36,222 42,659 14,579 22,806 26,859 Srisaket 4,893 8,108 11,390 3,081 5,105 7,171 Surin 1,325 3,893 6,483 834 2,451 4,082 Burirum 3,243 7,420 11,983 2,042 4,672 7,545 Roi-et 640 1,670 3,076 403 1,051 1,937 Kalasin 919 3,152 6,637 579 1,985 4,179 Khonkan 229 567 937 144 357 590


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Province Fresh fruit brunch (ton) Crude palm oil (Liter/day)

2558 2565 2572 2558 2565 2572

Chaiyaphum 860 2,345 4,369 541 1,476 2,751 Nakornratchasrima 5,908 17,665 34,007 3,720 11,122 21,412 Mahasarakham - - - - - - Total 93,068 210,608 351,958 58,598 132,605 221,603

From calculating value in table 6, if biodiesel production plant is established at 2015, the crude palm oil will daily deliver to plant 58,598 liters. If we compare to other commercial plants around country, we found this capacity is namly low. The extracting plant will has high utilization at first time of establishment, while the feedstock volume are enough for plant capacity. While feedstock volume is increase until over plant capacity, the extracting plant can expand it’s capacity according to feedstock volume. This way give higher efficiency and utilization than start with larger size with low utilization at initial period. Because capacity expansion of biodiesel production plant is flexible adaptation.

Therefore industrial scale biodiesel production plant establishment of this project is small plant and fit to feedstock availability or a little more over, then expand the capacity of plant when feed stock volume increases. Output of industrial scale biodiesel production plant establishment feasibility, also concern transportation cost from north-eastern region to middle region of 2015 information will be evaluated. They return the result as follow;

• Year 2015; palm fresh fruit brunch volume of north-eastern region is 93,086 tons per year. These annual volume can be produced 55,679 liters per day of biodiesel B100.

• Year 2019; palm fresh fruit brunch volume of north-eastern region is 210,608 tons per year. These annuan volume can be produced 102,039 liters per day.

• Year 2029; palm fresh fruit brunch volume of north-eastern region is 351,958 tons per year. These annual volume can be produced 170,523 liters per day.

12.1 Economical study of biodiesel production plant establishment at Khonkan in year 2015.

From total biodiesel production volume in year 2015, we can analyze investment break even of biodiesel production plant by detail of cost, income, and economical values as follows.

Investment capital = 106.20 million baht Total cost = 458.59 million baht per year Total income = 494.01 million baht per year Net profit = 35.42 million baht per year MRR interest rate at 26 May, 2015 is 7.875% Decision will depend on economic calculation as follow


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Payback period (PB) = 2.99 or 3 years. Net present value (NPV) = 226.97 million baht. Internal Rate of Return (IRR) = 33% The calculation result show biodiesel production plant establishment in year 2558 is

worthy project for investor. But if we consider economical benefit by comparison between setup biodiesel production plant at Khonkan and transport CPO to sell at biodiesel production plant in middle region of Thailand without plant at Khonkan. The second case must pay for transportation cost 1.93 baht per ton-kilometer. The results are show in table 8

Table 8 Economical calculation result of biodiesel production plant establishment at Khonkan

Case 1 : Comparison of establish biodiesel production plant at Khonkhan and transport

crude palm oil to middle province

Case 2 : Comparison of establish biodiesel production plant at Khonkhan and transport

crude palm oil to eastern province PB NPV IRR PB NPV IRR

15.96 37,300,438 2 13.14 24,214,539.06 4

From table 8 economical calculation result indicates biodiesel production plant establishment at Khonkan in year 2015 isn’t break even. Because it shows long payback period and internal rate of return is lower than bank interest rate.

12.2 Economical study of biodiesel production plant establishment at Khonkan in year

2022. Because fresh palm fruit and brunch volume increases, the initial capacity of

biodiesel production plant at Khonkan can’t support all feedstock volume. Plant capacity would to expand according to expansion of fresh palm product. The detail of cost, income, and economical value as follows.

Investment capital (102,039 Liters/day) = 197.03 million baht Total cost = 1,013.62 million baht per year Total income = 905.34 million baht per year Net profit = 108.28 million baht per year MRR interest rate at 26 May, 2015 is 7.875% Decision will depend on economic calculation as follow Payback period (PB) = 1.82 or 1 years 9 months. Net present value (NPV) = 812.09 million baht. Internal Rate of Return (IRR) = 55% The calculation result show biodiesel production plant establishment in year 2565 is

worthy project for investor. Although investment capital is large, but many increasing palm


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feedstock will rise up income to investor. However if we consider economical benefit by comparison between setup biodiesel production plant at Khonkan and transport CPO to sell at biodiesel production plant in middle region of Thailand without plant at Khonkan, that caused from rising up of transportation cost according to increasing CPO transported volume.

Table 9 Analysis of industrial biodiesel production plant establishment at Khonkan in 2022. Case 1 : Comparison of establish biodiesel

production plant at Khonkhan and transport crude palm oil to middle province

Case 2 : Comparison of establish biodiesel production plant at Khonkhan and transport crude

palm oil to eastern province PB NPV IRR PB NPV IRR

10.87 16,176,257 7 8.99 18,521,203.14 9

12.1 Economical study of biodiesel production plant establishment at Khonkan in year 2029. Because fresh palm fruit and brunch volume increases, the initial capacity of

biodiesel production plant at Khonkan can’t support all feedstock volume. Plant capacity would to expand according to expansion of fresh palm product. The detail of cost, income, and economical value as follows.

Investment capital (170,523 Liters/day) = 329.26 million baht Total cost = 1,639.91 million baht per year Total income = 1,512.96 million baht per year Net profit = 180.95 million baht per year MRR interest rate at 26 May, 2015 is 7.875% Decision will depend on economic calculation as follow Payback period (PB) = 1.82 or 1 years 9 months. Net present value (NPV) = 1,357.11 million baht. Internal Rate of Return (IRR) = 55% Economical feasibility of biodiesel production plant establishment at Khonkan

province indicates break even of investment. But if we consider on the economical worthy of transporting cost reduction and investment capital, we will found in-worthy of investment. Exist transporting cost from north-eastern to middle area of Thailand is lower than investment return. This aspect hints the risk of inadequate feedstock supply, because farmer or trader may decide to send CPO to middle area of Thailand that give higher price. So analysis decision is un-worthy to investment, because risk from lack of feedstock. The calculation is shown in table 10

Table 10 Analysis of industrial biodiesel production plant establishment at Khonkan in 2029 Case 1 : Comparison of establish biodiesel

production plant at Khonkhan and transport Case 2 : Comparison of establish biodiesel

production plant at Khonkhan and transport


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crude palm oil to middle province crude palm oil to eastern province PB NPV IRR PB NPV IRR

15.00 103,585,915 3 8.57 47,893,282 10

The calculating result shows IRR value lower than MRR interest rate of bank and long payback period, so this project isn’t worth investment. When we consider overall decision, result of investment based on full capacity operation is break even and attractive benefit for investor, but calculation result based on comparison cost between biodiesel production plant establishment at Khonkan province and exist transporting system from north-eastern area to middle area of country are contra-direction. Cost of exist transporting system to middle area is cheaper than establish biodiesel production plant at Khonkan, it will conduct actual traders tend to sell and transport palm oil to middle province as they are done. Therefore break even result of factory investment with full capacity operation will not valid as the study.

At all of scheme the conclusion is biodiesel production plant should not setup, because it will encounter to partial capacity operation from lack of raw material.

13. Workshop meetings for related persons brainstroming and result dissemination seminar.

The workshop meeting for related persons and organizations brainstorming were conducted at 4 provinces in nort-eastern region of Thailand.

(1) Wednesday 29 April 2015 at ball room, U-place hotel, Ubonratchathani. (2) Thursday 30 April 2015 at Eakasit room, Eaklada hotel, Buriram. (3) Thursday 6 May 2015 at Putharaksa room, Loei palace hotel, Loei. (4) Friday 7 May 2015 at Meeting room, Ausawin hotel, Nongkhai After project study are completed, result dissemination seminar was conducted at 19

June 2015, at Orchid ball room, Pullman racha orchid hotel, Khonkhan. All of meetings and seminar were involved by related persons from public agencies, private corporations, and farmers. Meetings and seminar audiences suggested to concept of palm oil extracting plant establishment those can be concluded as follows.

(1) Agree with palm oil extracting plant establishment, because it will save current lost from distant transportation. Also with the inadequate and inconsistent middle man buyer will be eliminated.

(2) Agree with palm oil extracting plant establishment, because it will lift up price of palm fruit that come from middle man buyer are neglected.

(3) Agree with palm oil extracting plant establishment, because it will lift up income sustainability of farmer and also more confident on public agency policy.


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(4) Public agencies would support oil palm farmer in north-eastern region by lone, academic and knowledge, training, soil fertility analysis, and palm fruit price guarantee.

(5) The academician from public agencies suggest about north-eastern provinces aren’t oil palm promotion area, because low soil fertility, low rainfall, lack of knowledge and skill, etc. The farmers who plant oil palm would well study on technical, administration, and selling channel to get efficient outcome.

(6) The public agencies suggest to farmers about coordination with public support. The support will come from farmer group or organizations that may cooperate to establish palm oil extracting plant and manage by farmer organization. Also private sector can get the support from public agencies like farmer cooperation.

(7) Director of bureau of biofuel development finally concludes, north-eastern region has low plantation area and output volume. Nevertheless Department of alternative energy development and efficiency can cooperate to support palm fruit in region transfer to biodiesel production. These cooperation must join between farmer, agricultural agencies, and local energy agencies. So progressive development will come from these cooperation for maximize entire palm supply chain profit.


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Figure 9 Pictures of 4 workshop meetings and 1 result disseminating seminar.

14. Conclusion

The potential and suitability study of full-cycle palm oil extracting plant in commercial scale for biodiesel production in north-eastern of Thailand is completed with these results.

Field survey on 18 oil palm plantations in 11 provinces of north-eastern region. First planted palm trees in these areas start from year 2005 and still plants until now. Average age of palm tree is 5-7 years. Average yield lower than 2 ton/rai/year. The palm plantations are fractionally and slightly distributed over many province. Palm plantation farmers have low knowledge and skill with palm, but they slightly trend to increase planting area.

From the forecasting value of productive planting area (rai) palm product volume (ton) and planting yield (ton/rai/year), they show north-eastern area is lower palm plantation potential than southern and eastern region of Thailand. Because actual planting area, productive area, yield, and total volume are much lower than southern and eastern region. Also others important environmental factor for palm is lower value such as rainfall, soil fertility, water resource, garden administration, transportation, harvesting method, and buyer conditions.

There are several patterns of palm fruit or brunch logistics from planting areas to factories such as trader run to collect palm at farm, trader collect palm at fixed local yard, cooperative buyer, CPO extracting company is buyer, and large scale farmer transport their palm to factory at middle region province. However all farmers want local CPO factory establishment. It will return benefit of price, transportation cost, market consistency, and short time storage will improve product quality.

Study result shows 2 ton/hour plant capacity with low investment capital is suitable size for north-eastern region. They will be separately located close to comprehensive planting area that eliminates lose and middle man buyer, and fill more benefit to farmers and factory. Also return on investment analysis show break event on investment with this small CPO extracting plant size.


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For biodiesel production plant, the result show transporting cost of CPO to middle region of country that is exist system incurs lower cost than establish biodiesel production plant at Khonkan. This lower cost will induce many traders or farmers transport their CPO to middle region, that will effects to established biodiesel production plant will lack of raw material to operate with full capacity. Finally it will miss from target operation and return. Therefore Biodiesel production plant at Khonkan should not be setup according to north-eastern region palm planting area and feedstock volume.

Executive summary report ; Potential and suitability study...

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