Under the national plan unveiled almost a year ago, the government aimed for Thailand, heavily dependent on oil imports, to produce 300,000 litres of palm-based biodiesel a day by next year and double that by 2009.

But Krisada said reaching the 2007 target would mean an additional 640,000-800,000 hectares of palm plantations.

No such lands development has been made yet.

Thailand has been hurt by high oil prices and is trying to boost the use of natural gas, biodiesel from palm oil and gasoline blended with ethanol.

So far, the use of palm-based biodiesel in Thailand is limited to small rural areas for farming purposes.

Stubbornly high oil prices have restored worldwide interest in biofuels and other clean energy sources.

Oil climbed towards US$68 on Monday as tensions ratcheted up between the West and Iran over its nuclear programme and militants threatened further violence against oil workers in Nigeria.

UNATTRACTIVE RETURNS

One factor discouraging farmers from expanding into palm oil was the limited financial reward, Krisada said.

Palm oil, as a raw material, could not be sold for more than 15 baht a litre or it would make biodiesel less competitive than diesel, he said.

"Who then would want to grow more palm, knowing that they will receive limited money?" Krisada said.

Oil palms are grown in the south, also Thailand's major producer of rubber, the price of which has more than doubled in the past few years.

Reflecting a lack of interest among farmers in expanding palm, Thailand's output is estimated at 5.7 million tonnes of fruit this year, little changed from last year, according to the Agriculture Ministry.

All of that would be used to produce palm oil, yileding about 700,000 tonnes and used mostly for domestic consumption.