BOI Frankfurt Monthly Enewsletter

Oil refineries have been told to move forward plans to upgrade their refineries to comply with the Euro IV standard, despite facing uncertain regulations following Map Ta Phut's designation as a pollution-control area.

The Energy Ministry has declared that refineries of all types of oil products must meet Euro IV standards by 2012.

"If we do not invest [in Euro IV compliance] now, we will not be able to produce Euro IV-standard oil products within the Energy Ministry's time frame. We are ready to make such an investment, but�we are not sure whether the new regulations will have any negative effects on our environmental impact assessment [EIA]," said Chainoi Puankosoom, CEO of PTT Aromatics and Refining (PTTAR) and chairman of the Federation of Thai Industries' refining club.

So far, three oil refineries have received EIAs: PTTAR, Esso and Star Petroleum Refining Company.

Chainoi said it would take about two and a half to three years to complete the Euro IV upgrades.

An industry source said the designation of Map Ta Phut as a pollution-control zone would raise costs to an uncompetitive level and could see investors withdraw from Thailand or stop considering new investment projects.

"Some giants in the petrochemical industry have been hurt by the financial meltdown and low global consumption, but they are also exploring places for new investments in a bid to boost competitiveness. But uncertainties concerning regulations make other countries more favourable to investors," he said.

If the completion of new pollution-reduction plans are delayed, he said, it would create a lot of trouble for investors, because the related public agencies would be uncertain about their authority and the regulations that they have to follow.

"This will definitely create great confusion for investors, and new investment projects will have to be postponed," he said.

William L Stone, CEO of Star Petroleum, said firms would be concerned about the uncertainty that they face.

He said he supported the goal of raising awareness of the environment, but agreed that the designation of Map Ta Phut as a pollution-control zone could affect future foreign direct investment.

Star Petroleum's plan for upgrading to meet Euro IV will cost about US$550 million (Bt19.3 billion). Construction has not begun, but the firm has started the search for a contractor and prepared equipment and material.