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    Spanish company Ferry Group is to invest €42/US$55.2 million in a project for the production of biomass fuel pellets in Bulgaria. The 3-year project consists of establishing plantations of paulownia trees near the city of Tran. Paulownia is a fast-growing tree used for the commercial production of fuel pellets. Dnevnik - Feb. 20, 2007.

    Hungary's BHD Hõerõmû Zrt. is to build a 35 billion Forint (€138/US$182 million) commercial biomass-fired power plant with a maximum output of 49.9 MW in Szerencs (northeast Hungary). Portfolio.hu - Feb. 20, 2007.

    Tonight at 9pm, BBC Two will be showing a program on geo-engineering techniques to 'save' the planet from global warming. Five of the world's top scientists propose five radical scientific inventions which could stop climate change dead in its tracks. The ideas include: a giant sunshade in space to filter out the sun's rays and help cool us down; forests of artificial trees that would breath in carbon dioxide and stop the green house effect and a fleet futuristic yachts that will shoot salt water into the clouds thickening them and cooling the planet. BBC News - Feb. 19, 2007.

    Archer Daniels Midland, the largest U.S. ethanol producer, is planning to open a biodiesel plant in Indonesia with Wilmar International Ltd. this year and a wholly owned biodiesel plant in Brazil before July, the Wall Street Journal reported on Thursday. The Brazil plant is expected to be the nation's largest, the paper said. Worldwide, the company projects a fourfold rise in biodiesel production over the next five years. ADM was not immediately available to comment. Reuters - Feb. 16, 2007.

    Finnish engineering firm Pöyry Oyj has been awarded contracts by San Carlos Bioenergy Inc. to provide services for the first bioethanol plant in the Philippines. The aggregate contract value is EUR 10 million. The plant is to be build in the Province of San Carlos on the north-eastern tip of Negros Island. The plant is expected to deliver 120,000 liters/day of bioethanol and 4 MW of excess power to the grid. Kauppalehti Online - Feb. 15, 2007.

    In order to reduce fuel costs, a Mukono-based flower farm which exports to Europe, is building its own biodiesel plant, based on using Jatropha curcas seeds. It estimates the fuel will cut production costs by up to 20%. New Vision (Kampala, Uganda) - Feb. 12, 2007.

    The Tokyo Metropolitan Government has decided to use 10% biodiesel in its fleet of public buses. The world's largest city is served by the Toei Bus System, which is used by some 570,000 people daily. Digital World Tokyo - Feb. 12, 2007.

    Fearing lack of electricity supply in South Africa and a price tag on CO2, WSP Group SA is investing in a biomass power plant that will replace coal in the Letaba Citrus juicing plant which is located in Tzaneen. Mining Weekly - Feb. 8, 2007.

    In what it calls an important addition to its global R&D capabilities, Archer Daniels Midland (ADM) is to build a new bioenergy research center in Hamburg, Germany. World Grain - Feb. 5, 2007.

    EthaBlog's Henrique Oliveira interviews leading Brazilian biofuels consultant Marcelo Coelho who offers insights into the (foreign) investment dynamics in the sector, the history of Brazilian ethanol and the relationship between oil price trends and biofuels. EthaBlog - Feb. 2, 2007.

    The government of Taiwan has announced its renewable energy target: 12% of all energy should come from renewables by 2020. The plan is expected to revitalise Taiwan's agricultural sector and to boost its nascent biomass industry. China Post - Feb. 2, 2007.

    Production at Cantarell, the world's second biggest oil field, declined by 500,000 barrels or 25% last year. This virtual collapse is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos. Wall Street Journal - Jan. 30, 2007.

    Dubai-based and AIM listed Teejori Ltd. has entered into an agreement to invest €6 million to acquire a 16.7% interest in Bekon, which developed two proprietary technologies enabling dry-fermentation of biomass. Both technologies allow it to design, establish and operate biogas plants in a highly efficient way. Dry-Fermentation offers significant advantages to the existing widely used wet fermentation process of converting biomass to biogas. Ame Info - Jan. 22, 2007.

    Hindustan Petroleum Corporation Limited is to build a biofuel production plant in the tribal belt of Banswara, Rajasthan, India. The petroleum company has acquired 20,000 hectares of low value land in the district, which it plans to commit to growing jatropha and other biofuel crops. The company's chairman said HPCL was also looking for similar wasteland in the state of Chhattisgarh. Zee News - Jan. 15, 2007.

    The Zimbabwean national police begins planting jatropha for a pilot project that must result in a daily production of 1000 liters of biodiesel. The Herald (Harare), Via AllAfrica - Jan. 12, 2007.

    In order to meet its Kyoto obligations and to cut dependence on oil, Japan has started importing biofuels from Brazil and elsewhere. And even though the country has limited local bioenergy potential, its Agriculture Ministry will begin a search for natural resources, including farm products and their residues, that can be used to make biofuels in Japan. To this end, studies will be conducted at 900 locations nationwide over a three-year period. The Japan Times - Jan. 12, 2007.

    Chrysler's chief economist Van Jolissaint has launched an arrogant attack on "quasi-hysterical Europeans" and their attitudes to global warming, calling the Stern Review 'dubious'. The remarks illustrate the yawning gap between opinions on climate change among Europeans and Americans, but they also strengthen the view that announcements by US car makers and legislators about the development of green vehicles are nothing more than window dressing. Today, the EU announced its comprehensive energy policy for the 21st century, with climate change at the center of it. BBC News - Jan. 10, 2007.

    The new Canadian government is investing $840,000 into BioMatera Inc. a biotech company that develops industrial biopolymers (such as PHA) that have wide-scale applications in the plastics, farmaceutical and cosmetics industries. Plant-based biopolymers such as PHA are biodegradable and renewable. Government of Canada - Jan. 9, 2007.

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Thursday, November 16, 2006

First generation biofuels dominated by agribusiness, 'second generation' by oil majors?

Major oil companies have been conspicuously absent from biofuels production so far, but they are set to play a bigger role with the advent of new technology that better fits oil industry skills. Global biofuels output has soared in recent years amid Western governments’ concerns about security of energy supply and global warming.

The industry so far has been led by small independent producers such as Switzerland’s Biopetrol Industries AG and by large agribusinesses such as US trader Cargill and Illinois-based Archer Daniels Midland.

The oil companies’ lack of involvement is partly due to the relatively small size of the market – around 1% of global road-transport fuel consumption in 2005, according to the International Energy Agency. Critics also point to the industry’s long history of conservatism.

But oil executives say technology is a key problem, because the current first generation of biofuels technology gives a competitive edge to agribusinesses rather than oil companies.

The simple manufacturing processes employed today mean that the key to profitability in biofuels production is feedstock costs. Access to cheap seeds and grain provides an edge, not expertise in operating complex facilities, the oil companies’ speciality.

Oil companies are developing new technologies that will allow them to create a biofuels business model that looks a lot more like the one they are used to.

First versus second generation
Biofuels come in two main forms – biodiesel and ethanol. Under simple 'first-generation' technology, biodiesel is made by mixing vegetable oils and animal fats with alcohol. Gasoline substitute ethanol is made by distilling corn, sugar cane or sugar beet.
:: :: :: :: :: :: :: :: :: :: ::

To increase use, governments in Europe and the US are bringing in rules that force oil retailers to include a percentage of biofuels in the motor fuels they sell.
This has prompted some refiners such Hungary’s MOL and Spain’s Cepsa to announce first-generation schemes.

However, a more wholehearted move by oil companies into the sector hinges on the use of technology that shifts the economic power away from the feedstock onto infrastructure.

So-called 'second-generation' processes involve thermochemical biomass-to-liquids technologies such as producing syngas from cellulose-rich material, including straw and waste lumber, which is then converted into synthetic liquid fuels by, for example, the Fischer-Tropsch reaction. Biochemical conversion technologies consist of fermenting cellulosic feedstocks by specially designed enzymes (picture: Iogen's experimental fermentor).

Oil majors used to capital-intensive projects
The feedstock costs much less than vegetable oils, and less land is needed to produce a given quantity of fuel. The capital costs are higher, but this is no deterrent to a cash-rich sector used to investing billions in single projects.

“We believe oil majors will play a significant direct investment role only in second-generation technologies,” investment bank Morgan Stanley recently said in a research note. Oil major Royal Dutch Shell Plc plans to build a biomass-to-liquids plant with German company Choren Industries, which Goldman Sachs estimates will cost around $2,000 per tonne of capacity to construct, compared with $190 per tonne for a first-generation plant Biopetrol plans to build in Rotterdam.

Second-generation techniques have the potential to produce fuel more efficiently and cheaply, which could dislodge first-generation producers, but it won’t happen in this decade.

The Shell/Choren plant and another plant Shell plans with US biotech firm Iogen Corp to produce cellulose ethanol are not expected to be up and running before 2009. At Chevron Corp and BP Plc, second-generation activities are mainly at the research stage.

Eager to become involved sooner but unhappy with the economics of first-generation technology, some European oil companies are backing a new technology developed by Finnish refiner Neste Oil. Neste’s NExBTL system can use cheaper feedstock and produces a biodiesel that can be used in current engines without being blended with mineral diesel. Neste is building a NExBTL plant near Helsinki and plans two more units with OMV and French oil major Total.

“If you want to be a leader there, you need to be a leader in technology,” said Neste Chief Executive Risto Rinne.

The NExBTL plants and traditional first-generation projects will give oil companies around 17% of the European biofuels market by 2010, said Mariano Alarco, a biofuels analyst at Goldman Sachs.

That’s a big jump from almost zero now, but Alarco expects agribusinesses to remain the market leaders with a 30% share, followed by independent producers with 20%.

From the middle of the next decade, when second-generation technology is expected to be widely adopted, the situation could change.

Western governments’ desire to reduce their reliance on imported energy should also help boost oil majors’ involvement.

The EU currently has a voluntary target that biofuels make up 5.75% of road fuel consumption by 2010. Industry players expect the target to become obligatory and to rise. France wants a 10% target by 2015, and Morgan Stanley thinks this will more than likely be adopted.

While this would create a multi-billion euro market for biofuels, oil majors are expected to keep their primary focus firmly on hydrocarbons, which analysts expect to underpin the energy mix for many decades to come.

“BP and Shell are a lot more interested in spending their money in the upstream (oil production). That’s where they make their money. That’s where they have the advantages,” Alarco said.


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