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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, August 10, 2006

An in-depth look at South Africa's nascent biofuels sector

South Africa is leading the development of biofuels in Africa. Today, we have a look at the potential, the production facilities being built and planned, the government policies being crafted, and the social, economic and environmental effects of the country's transition to the biofuels economy. Biofuels are considered to be the biggest single economic opportunity for South Africa, comparable to that of its vast mining industry which was established early last century.

Southern Africa Biofuels Association (Saba) CEO Erhard Seiler tells Engineering News that the country's biofuels industry has the potential to produce 10% of South Africa’s petrol and diesel needs by 2010. South Africa currently consumes about 11 bn litres (2.9 bn gallons) of petrol and 8 bn litres (2.1 bn gallons) of diesel a year.

Like Brazil, Malaysia, Indonesia and other developing nations, South Africa's initiative to develop the local biofuels industry is part of a larger framework aimed at poverty alleviation and socio-economic development. Biofuels are a priority sector of South Africa's Accelerated and Shared Growth Initiative (Asgisa), which aims to stimulate economic growth, create a large number of new jobs and halve poverty by 2014.

The government itself is investing heavily in biofuels development and is finalising a much-awaited national biofuels strategy, which will probably be released in October. It is expected that the strategy will enforce a mandatory biofuels blending regime on oil companies and allow the development of 100% biofuel supply and distribution systems.

Independent biofuels producers are already implementing a number of projects to produce ethanol and biodiesel in anticipation of the strategy and in response to growing local market demand for cleaner and cheaper liquid fuels. In one of the most significant developments, Ethanol Africa last month launched South Africa’s first large-scale bioethanol production plant in Bothaville, in the Free State.

The planned R700 million (€80 million/US$ 120 million) plant is the first of eight the company intends building in South Africa. Bioethanol can be blended with conventional petrol and used as an additive to boost the octane number of unleaded petrol. The plant, which is scheduled to be in full production by the end of next year, will be able to process 1 125 tons / day of maize – which equates to about 375000 tons of maize a year – and produce 473000 liters of alcohol and 63000 liters of biodiesel. The plant will also produce 270 tons/day of distillers’ dried grains as well as coproducts, which will be either a high-protein animal-feed or an organic fertiliser. The seven other Ethanol Africa plants will be located elsewhere in the Free State, Mpumalanga and the North West province. At full capacity, the company’s eight plants could supply up to 12,5% of South Africa’s fuel requirements by 2015.

Cheaper than oil
South African consumers are currently paying record prices for liquid fuels – R7,04 (€0.9) for a litre of petrol and R6,63 (€0.76) for a litre of diesel. And more increases are expected, as geopolitical issues, such as the war in the Middle East and militia activities in the Niger Delta, take their toll. Other issues that are driving up the price of oil include growing demand and the rapid depletion of fossil-fuel reserves:

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Ethanol Africa CEO Johan Hoffman assures that the production of biofuels in South Africa is profitable, even at an oil price below $50/barrel and regards local bioethanol production as the best hedge that South Africa can have against high oil prices. Concerning fears that a sharp rise in the maize price will negatively affect bioethanol production, he counters that, at the current international price at which bioethanol is sold, the ethanol can be manufactured at a profit in South Africa, even if maize is bought at import-parity prices. “Even if maize prices rise and the oil price drops below profitable margins, the government should keep the bioethanol industry operating, as it is an insurance policy against high oilprices,” Hoffman advocates.

A job creation machine
Besides acting as a natural hedge to cushion the effects of the oil price on the economy, the large-scale production of biofuels in South Africa also provides several other benefits, probably the most important of which is job creation at a lower cost than in most other industries.

For instance, the estimated cost for every fulltime job opportunity established by the motor industry is R250000 (€29000), while the cost in the biofuels industry is only R12000 (€1400).

In addition, the production of biofuels willcreate 100 times more jobs than oil refining. For instance, it is expected that the establishment of every Ethanol Africa plant will result in up to 10000 direct and indirect jobs. Moreover, most jobs will go to people in the rural areas where the biofuel plants will be situated, thereby boosting rural economies and stemming migration to urban areas.

Speaking at the launch of Ethanol Africa’s plant in Bothaville, Free State Premier Beatrice Maarshoff said that the agricultural sector was at the core of rural development and occupied a central place in the Free State Growth and Development Strategy. She added that the Ethanol Africa initiative could not have come at a better time, given the “deteriorating agricultural economy and the drastic decline of the mining industry in the Free State”.

The advent of the bioethanol industry is viewed as the largest single economic investment in the Free State since the inception of the gold-mining industry. “The only difference is that our gold will never run out, as maize is a renewable gift from God,” Hoffman says. Small farmers, in particular, will benefit.

Ethanol Africa’s crop securitisation division, EA Crop Securities, is managing the company’s emerging-farmer programme, which is one of the first large local programmes to focus on small-scale farmers. Small-scale farmers could potentially supply up to 30% of the maize required as feedstock by the Bothaville plant. The emerging-farmer programme will assistsmall-scale farmers with detailed grower plans, budgets and cash flows, financing andmentorship. “The ultimate aim is to achieve sustain-ability,” Hoffman adds. EA Crop Securities will also assist commercial farmers, who have been hit hard by negative movements in the maize market.

This year, only 1,5-million hectares of maize was planted in South Africa, which is a third of the potential area of 4,5-million hectares that is suitable for the cultivation of maize. Hoffman is confident that South Africa can comfortably produce a maize harvest of up to 14 million tons a year, which will supplysufficient maize for local consumption andbiofuels production. He points out that the planting of maize for the production of bioethanol is not a threat to food security, as Ethanol Africa will use only yellow maize, which is not planted for human consumption.

EA Crop Securities’ aim is to secure sufficient maize for Ethanol Africa’s plants by contracting producers to grow maize exclusively for the company. It provides farmers with two options that make provision for the participation of as many suppliers as possible. The first option is a standard production loan with a cession, comprehensive insurance and a mandatory contract. The second option entails that farmers enter into a contract to supply the company with maize. The price grading will depend on the fermentable-starch grading of the maize, and farmers will be assisted to select the best varieties to plant.

Eco-enviro spin-offs
A 10% bioethanol-blending ratio with conventional petrol would save South Africa billion of rands on the import of crude oil and aromatic reformants, such as MMT and ferrocene. Some local liquid-fuels producers add these reformants to unleaded petrol as an octane enhancer.

Hoffman says that the use of the 10% bio-ethanol blend, E-10, would reduce the import of MMT and ferrocene and could save South Africa up to R2 billion a year in foreign exchange (forex). The forex savings on crude oil purchases for the local refining of liquid fuels and other petroleum products would be even greater. It is expected that each Ethanol Africa plant will have average turnover of R550 million a year.

If this eventuates, every plant will add atleast 0,05% to the gross domestic product (GDP), or 0,074% of the planned national growth of 6% a year. The eight Ethanol Africa plants would thus contribute up to 0,4% of South Africa’s GDP, and 0,6% to the growth rate. Though the export of biofuels could also earn forex for South Africa, as there is worldwide demand for these fuels, Hoffman says that Ethanol Africa is committed primarily to supplying the local market.

Another economic benefit of bioethanol production is the sale of carbon credits under the Kyoto Protocol. Environmental finance group Sterling Waterford Securities, which owns 50% of Ethanol Africa, listed one of the world’s first carboncredit investment products on the Johannesburg Stock Exchange last year. One litre of bioethanol produces half the greenhouse-gas emission of a litre of conventional petrol. Hence, the production and use of bioethanol could assist South Africa to earn valuable carbon credits by reducing greenhouse-gas emissions.

South Africa is the third-worst offender in the world concerning the per-capita production of greenhouse-gas emissions and the use of cleaner fuels will improve air quality in urban areas.

Ethanol Africa plans to list on the Alternative Investment Market of the London Stock Exchange by year-end to raise R700-million for the roll-out of the company’s first plants in South Africa and will also raise R500-million in a private share sale, facilitated by Absa Bank. Besides Sterling Waterford Securities, the other two shareholders in the company are a consortium of farmers and agronomists, Eco Fields, and local maize-producer investment company, Grain Alcohol Investments.

The South African government has the option to buy a 25,1% stake in the company through the Energy Development Corporation (EDC), which is part of the State-owned Central Energy Fund. Should the EDC exercise its option, the transaction could be funded by the State-owned Industrial Development Corporation, which earlier this year announced that it would be investing in at least five biofuels projects. EDC commercial manager Sibusiso Ngubane says that Ethanol Africa is but one of several biofuel projects which the EDC is evaluating.

German support
Grain-based ethanol-technology company Katzen International, of the US, is supplying the technology for Ethanol Africa’s Bothaville plant. Uhde, a subsidiary of German group Thyssen-krupp Engineering, is the main engineering contractor for the project. Seiler, who, besides being Saba CEO, is also the head of the business development department of the German Chamber of Commerce and Industry in South Africa, says that Germany is actively supporting the establishment of the South African biofuels industry.

The German Chamber is hosting Saba and several German companies providing products and services to South African projects. Germany is the largest producer of biodiesel and biogas in the world, and the eighth-largest producer of bioethanol. The country is also the largest exporter of biofuels technology, equipment and expertise worldwide.

National strategy ‘imperative’
The lack of a national biofuels strategy is viewed as the main challenge that could impede the growth of the South African bio-fuels industry. While the government has stated that biofuels should account for 40% of South Africa’s renewable energy to achieve a target of 10 000 GWh of renewable energy by 2014, the blending of biofuels with conventional liquid fuels is still voluntary. Seiler says that it is imperative that government create a reliable and supportive business environment for biofuels. The strategy should include a mandatory blending regime and 100% biofuel supply systems.

Seiler says both blending and pure biofuel consumption require government regulation and clear quality-management systems in order for the industry to win support from international and local investors. South Africa is believed to be the only member of the Southern African Development Community – which is regarded as the area with the largest untapped potential for the production of energy crops in the world – that is still working on a national biofuels strategy.

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Brazil's ethanol production costs decreased 75% in 25 years

Via Ethablog. The following chart prepared by Brazil's federal development bank shows how ethanol production costs in the country decreased significantly between 1980 and 1998.

The vertical (y) axis shows the amount of US dollars spent to produce one cubic meter of ethanol; the x axis shows the cumulative consumption in Brazil over the same period of time, measured in millions of cubic meters.

As the chart indicates, between 1980 and 1998, the cost of producing one cubic meter of ethanol went from approximately US$680/cubic meter of ethanol to US$200/cubic meter. A projection to 2006 points to a further decrease in the dollars-to-volume ratio of ethanol output; the actual cost today is likely to be about 1/4 of what it was just 25 years ago.

The graph is important because it indicates at what stage ethanol producers elsewhere in the world may find themselves right now. Moreover, when we attempt to establish South-South relations with Brazil as a driving force behind technology transfers, we may well see developing nations 'leapfrog' towards a highly efficient and productive biofuel economy.
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