Airplanes parked at Suvarnabhumi Airport in Bangkok. (Photo: Unsplash)
To assist the aviation industry in its decarbonization efforts, the Thai government and businesses are focusing on Sustainable Aviation Fuel (SAF). Two major oil companies in Thailand have partnered with Japanese firms to increase raw material supply and sales channels.
The Thai Board of Investment (BOI) has also recently introduced a tax incentive program aimed at attracting more companies to develop aviation biofuels.
Thailand introduces three tax incentives to boost SAF
In line with the International Civil Aviation Organization’s (ICAO) 2050 net-zero target, Thailand requires local airlines to use blended SAF fuel by 2026, with a minimum blend of 1%. At the end of January this year, the BOI approved an SAF incentive program that provides three types of tax benefits:
- Companies producing SAF from agricultural waste will be exempt from corporate income tax for 8 years.
- Companies assisting in the development of bioenergy industrial zones will receive a 5-year tax exemption.
- Companies producing blended SAF with conventional aviation fuel will receive a 3-year tax exemption.
On the corporate front, PTT, Thailand’s state-owned oil company, began commercial SAF production in January with an expected annual output of 6 million liters, supporting 2,000 flight cycles for medium-sized aircraft, each covering 2,000 to 3,000 kilometers. PTT also signed a Term Sheet with Japan's Sojitz Corporation to jointly develop aviation biofuels.
Another energy giant, Bangchak Corporation, is set to start operations at its SAF plant in the suburbs of Bangkok in June, with a daily production capacity of 1 million liters. To tap into the Japanese market, Bangchak has signed procurement agreements with Sumitomo Corporation and Cosmo Oil, the latter of which has a contract term of up to 10 years.
PTT's Global Chemical (GC) launches SAF commercial production in 2025. (Photo: PTT GC)
Boeing highlights ASEAN's strong SAF production potential
The Bank of Ayudhya (Krungsri) in Thailand estimates that flights to and from Thailand will increase by 10%-20% by 2026, further driving SAF demand. However, the market is currently facing a supply shortage, and the production cost remains high, making SAF approximately 3 to 5 times more expensive than conventional fossil jet fuel.
In addition to Thailand, other ASEAN countries are also optimistic about SAF's development. A report from Boeing, the U.S. aircraft manufacturer, highlighted that Southeast Asia has abundant biomass resources, with an estimated annual SAF production capacity of 45.7 million tons, accounting for 12% of global supply. The report specifically mentioned Indonesia, Thailand, Vietnam, Malaysia, and the Philippines as key SAF suppliers in the region.
Source: Nikkei Asia, Money and banking, Boeing
