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    The county of Chicheng in China's Hebei Province recently signed a cooperative contract with the Australian investment and advisory firm Babcock & Brown to invest RMB480 million (€47.2/US$62.9 million) in a biomass power project, state media reported today. Interfax China - June 14, 2007.

    A new two-stroke ICE engine developed by NEVIS Engine Company Ltd. may nearly double fuel efficiency and lower emissions. Moreover, the engine's versatile design means it can be configured to be fuelled not only by gasoline but also by diesel, hydrogen and biofuels. PRWeb - June 14, 2007.

    Houston-based Gulf Ethanol Corp., announced it will develop sorghum as an alternative feedstock for the production of cellulosic ethanol. Scientists have developed drought tolerant, high-yield varieties of the crop that would grow well in the drier parts of the U.S. and reduce reliance on corn. Business Wire - June 14, 2007.

    Bulgaria's Rompetrol Rafinare is to start delivering Euro 4 grade diesel fuel with a 2% biodiesel content to its domestic market starting June 25, 2007. The same company recently started to distributing Super Ethanol E85 from its own brand and Dyneff brand filling stations in France. It is building a 2500 ton/month, €13.5/US$18 million biodiesel facility at its Petromidia refinery. BBJ - June 13, 2007.

    San Diego Gas & Electric (SDG&E), a utility serving 3.4 million customers, announced it has signed a supply contract with Envirepel Energy, Inc. for renewable biomass energy that will be online by October 2007. Bioenergy is part of a 300MW fraction of SDG&E's portfolio of renewable resources. San Diego Gas & Electric - June 13, 2007.

    Cycleenergy, an Austrian bioenergy group, closed €6.7 million in equity financing for expansion of its biomass and biogas power plant activities in Central and Eastern Europe. The company is currently completing construction of a 5.5 MW (nominal) woodchip fired biomass facility in northern Austria and has a total of over 150 MW of biomass and biogas combined heat and power (CHP) projects across Central Europe in the pipeline. Cycleenergy Biopower [*.pdf] - June 12, 2007.

    The government of Taiwan unveils its plan to promote green energy, with all government vehicles in Taipei switching to E3 ethanol gasoline by September and biofuel expected to be available at all gas stations nationwide by 2011. Taipei Times - June 12, 2007.

    A large-scale biogas production project is on scheme in Vienna. 17,000 tonnes of organic municipal waste will be converted into biogas that will save up to 3000 tonnes of CO2. 1.7 million cubic meters of biogas will be generated that will be converted into 11.200 MWh of electricity per year in a CHP plant, the heat of which will be used by 600 Viennese households. The €13 million project will come online later this year. Wien Magazine [*German] - June 11, 2007.

    The annual biodiesel market in Bulgaria may grow to 400 000 tons in two to three years, a report by the Oxford Business Group says. The figure would represent a 300-per cent increase compared to 2006 when 140 000 tons of biodiesel were produced in Bulgaria. This also means that biofuel usage in Bulgaria will account for 5.75 per cent of all fuel consumption by 2010, as required by the European Commission. A total of 25 biofuel producing plants operate in Bulgaria at present. Sofia Echo - June 11, 2007.

    The Jordan Biogas Company in Ruseifa is currently conducting negotiations with the government of Finland to sell CER's under the UN's Clean Development Mechanism obtained from biogas generated at the Ruseifa landfill. Mena FN - June 11, 2007.

    Major European bank BNP Paribas will launch an investment company called Agrinvest this month to tap into the increased global demand for biofuels and rising consumption in Asia and emerging Europe. CityWire - June 8, 2007.

    Malaysian particleboard maker HeveaBoard Bhd expects to save some 12 million ringgit (€2.6/US$3.4 million) a year on fuel as its second plant is set to utilise biomass energy instead of fossil fuel. This would help improve operating margins, group managing director Tenson Yoong Tein Seng said. HeveaBoard, which commissioned the second plant last October, expects capacity utilisation to reach 70% by end of this year. The Star - June 8, 2007.

    Japan's Itochu Corp will team up with Brazilian state-run oil firm Petroleo Brasileiro SA to produce sugar cane-based bioethanol for biofuels, with plans to start exporting the biofuel to Japan around 2010. Itochu and Petrobras will grow sugarcane as well as build five to seven refineries in the northeastern state of Pernambuco. The two aim to produce 270 million liters (71.3 million gallons) of bioethanol a year, and target sales of around 130 billion yen (€800million / US$1billion) from exports of the products to Japan. Forbes - June 8, 2007.

    Italian refining group Saras is building one of Spain's largest flexible biodiesel plants. The 200,000 ton per year factory in Cartagena can handle a variety of vegetable oils. The plant is due to start up in 2008 and will rely on European as well as imported feedstocks such as palm oil. Reuters - June 7, 2007.

    The University of New Hampshire's Biodiesel Group is to test a fully automated process to convert waste vegetable oil into biodiesel. It has partnered with MPB Bioenergy, whose small-scale processor will be used in the trials. UNH Biodiesel Group - June 7, 2007.

    According to the Barbados Agricultural Management Company (BAMC), the Caribbean island state has a large enough potential to meet both its domestic ethanol needs (E10) and to export to international markets. BAMC is working with state actors to develop an entirely green biofuel production process based on bagasse and biomass. The Barbados Advocate - June 6, 2007.

    Energea, BioDiesel International and the Christof Group - three biodiesel producers from Austria - are negotiating with a number of Indonesian agribusiness companies to cooperate on biodiesel production, Austrian Commercial Counselor Raymund Gradt says. The three Austrian companies are leading technology solution providers for biodiesel production and currently produce a total of 440,000 tons of biodiesel per annum in Austria, more than half of their country’s annual demand of around 700,000-800,000 tons. In order to meet EU targets, they want to produce biodiesel abroad, where feedstocks and production is more competitive. BBJ - June 6, 2007.

    China will develop 200 million mu (13.3 million hectares) of forests by 2020 in order to supply the raw materials necessary for producing 6 million tons of biodiesel and biomass per year, state media reported today. InterFax China - June 6, 2007.

    British Petroleum is planning a biofuel production project in Indonesia. The plan is at an early stage, but will involve the establishment of an ethanol or biodiesel plant based on sugarcane or jatropha. The company is currently in talks with state-owned plantation and trading firm Rajawali Nusantara Indonesia (RNI) as its potential local partner for the project. Antara - June 6, 2007.

    A pilot project to produce biodiesel from used domestic vegetable oil is underway at the Canary Technological Institute in Gran Canaria. Marta Rodrigo, the woman heading up the team, said the project is part of the EU-wide Eramac scheme to encourage energy saving and the use of renewable energy. Tenerife News - June 6, 2007.

    Royal Dutch Shell Plc is expanding its fuel distribution infrastructure in Thailand by buying local petrol stations. The company will continue to provide premium petrol until market demand for gasohol (an petrol-ethanol mixture) climbs to 70-90%, which will prove customers are willing to switch to the biofuel. "What we focus on now is proving that our biofuel production technology is very friendly to engines", a company spokesman said. Bangkok Post - June 5, 2007.

    Abraaj, a Dubai-based firm, has bought the company Egyptian Fertilizers in order to benefit from rising demand for crops used to make biofuels. The Abraaj acquisition of all the shares of Egyptian Fertilizers values the company based in Suez at US$1.41 billion. Egyptian Fertilizers produces about 1.25 million tons a year of urea, a nitrogen-rich crystal used to enrich soils. The company plans to expand its production capacity by as much as 20 percent in the next two years on the expected global growth in biofuel production. International Herald Tribune - June 4, 2007.

    China and the US will soon sign a biofuel cooperation agreement involving second-generation fuels, a senior government official said. Ma Kai, director of the National Development and Reform Commission, said at a media briefing that vice premier Wu Yi discussed the pact with US Secretary of Energy Samuel Bodman and other US officials during the strategic economic dialogue last month. Forbes - June 4, 2007.

    German biogas company Schmack Biogas AG reports a 372% increase in revenue for the first quarter of the year, demonstrating its fast growth. Part of it is derived from takeovers. Solarserver [*German] - June 3, 2007.

    Anglo-Dutch oil giant Royal Dutch Shell PLC has suspended the export of 150,000 barrels per day of crude oil because of community unrest in southern Nigeria, a company spokesman said. Villagers from K-Dere in the restive Ogoniland had stormed the facility that feeds the Bonny export terminal, disrupting supply of crude. It was the second seizure in two weeks. Shell reported on May 15 that protesters occupied the same facility, causing a daily output loss of 170,000 barrels. Rigzone - June 2, 2007.

    Heathrow Airport has won approval to plan for the construction of a new 'green terminal', the buildings of which will be powered, heated and cooled by biomass. The new terminal, Heathrow East, should be completed in time for the 2012 London Olympics. The new buildings form part of operator BAA's £6.2bn 10-year investment programme to upgrade Heathrow. Transport Briefing - June 1, 2007.

    A new algae-biofuel company called LiveFuels Inc. secures US$10 million in series A financing. LiveFuels is a privately-backed company working towards the goal of creating commercially competitive biocrude oil from algae by 2010. PRNewswire - June 1, 2007.

    Covanta Holding Corp., a developer and operator of large-scale renewable energy projects, has agreed to purchase two biomass energy facilities and a biomass energy fuel management business from The AES Corp. According to the companies, the facilities are located in California's Central Valley and will add 75 MW to Covanta's portfolio of renewable energy plants. Alternative Energy Retailer - May 31, 2007.

    Two members of Iowa’s congressional delegation are proposing a study designed to increase the availability of ethanol across the country. Rep. Leonard Boswell, D-Ia., held a news conference Tuesday to announce that he has introduced a bill in the U.S. House, asking for a US$2 million study of the feasibility of transporting ethanol by pipeline. Sen. Tom Harkin, D-Ia., has introduced a similar bill in the Senate. Des Moines Register - May 30, 2007.

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Monday, March 26, 2007

Crisis in European biodiesel industry, as Brazil and Argentina produce at full capacity

The European biodiesel industry is going through a deep crisis. In several countries, including in biodiesel leader Germany, generous tax exemptions are being lifted and the green fuel now has to compete on the free market with petro-diesel. None of the major biodiesel producers on the continent succeeds in producing an affordable fuel. The result: demand has dropped considerably and plants are operating well below their capacity. Some are warning the industry faces collapse.

At the same time, Brazil and Argentina are going full steam ahead in producing plant-based diesel substitutes that are cheaper than the fossil fuel variant. And obviously much less costly to make than European biodiesel. Argentina can make biodiesel for US$0.22 a liter, according to Argentine agribusiness consulting firm Abaceb. Petro-diesel before taxes currently costs around US$0.42 per liter in Europe. Biodiesel made from rapeseed - the most commonly used feedstock - before taxes but with agricultural subsidies comes at around US$0.70.

In Europe, many new biodiesel plants have been built in recent years, but many of them have hardly any markets in which to sell, as several countries have been slow to implement promises to increase biofuel use. "We have been promised a market but it is not yet there," said Raffaello Garofalo, secretary general of the European Biodiesel Board, an industry association. "It will come, but in the short term we have to go through a desert."

Much of the European biodiesel industry is working under its capacity, Garofalo said, although no precise figures are available. Biodiesel sales in the biggest consuming country, Germany, have fallen dramatically this year after Berlin actually started taxing biofuels at a time when the EU wants to promote green fuel consumption. An overview of the crisis as it affects producers across Europe:
:: :: :: :: :: :: :: :: ::

Medium-term prospects appeared excellent following the decision by EU leaders on March 9 for a strategic cut in greenhouse gases by using more renewable energy.

But several important countries including Britain, Italy and Spain have not fully implemented past promises to raise biofuel use, Garofalo said. Germany's biofuel tax showed the country was putting financial considerations above the environment, he added.

"Biodiesel is suffering from overcapacity because it is much easier to build production plants than it is to pass legislation," Garofalo said. "If there is no legislative support on taxation or binding targets, there is no real market for biodiesel."

In Europe, biodiesel is more expensive to produce than diesel from fossil fuels, and it needs tax breaks or a legal requirement to blend it with fossil fuels at oil refineries to encourage its use.

Germany's biodiesel industry is facing a crisis, with sales at gas pumps down by about 30 to 40 percent compared with last December, said Petra Sprick, chief executive of the biofuels industry association Verband Deutscher Betoningenieure, or VDB. "Sales in the petrol station market have collapsed this year," she said. "Our price attraction has gone."

Germany is the EU's largest biodiesel producer, with production capacity rising to 3.2 million tons in 2006 from 2 million tons in 2005.

But the German government said it could not afford the loss of revenues as drivers switched from regular diesel, which is heavily taxed, and Berlin started taxing biodiesel in August 2006. For a time, high fossil fuel prices cushioned the effect of the new tax, but falling fossil fuel prices mean drivers now have no incentive to buy biodiesel.

Because vehicles consume more biodiesel than fossil fuels and need more engine overhauls, biodiesel must be cheaper, she said. "If the government further raises taxes on biodiesel in 2008 as it plans, the whole industry will close down," she said. "This would be a tragedy at a time we need biofuels to cut greenhouse gas."

High prices for rapeseed oil, the main component of biodiesel in Germany, mean that biodiesel is being produced at a loss, she said. Germany had introduced compulsory blending of biodiesel with fossil fuels from January, but this is only expected to generate demand for 1.5 million tons annually.

German production is being cut and the first biodiesel refinery in the country, BioWerk Kleisthohe, has actually stopped production at its 6,500-ton-a- year plant.

"We just cannot sell any biodiesel this year," said BioWerk's chief executive, Thomas Vahle. "The new tax means it is just not competitive." "I just do not understand the politicians," he added. "They say it is so important to stop global warming and then introduce a tax to stop me selling my biodiesel, which protects the environment."

Shares in German biodiesel companies have fallen this year as the problems became apparent. One producer, Verbio, issued a profit warning on Monday because of low sales and high costs, causing its share price to fall 40 percent at one point.

On Thursday, Verbio's shares closed up 12 cents, or 1.7 percent, at €7.04, or $9.38. The shares were issued in October at €14.50.

Biodiesel producers in Britain also have problems. The largest British producer, Biofuels, announced this month that due to unfavorable market conditions it had restricted production to 25 percent of capacity in January and February and output would remain low for the immediate future.

The company, which operates a 250,000-ton-a-year plant in north England, has seen its stock price fall to around 15 pence, or $.30, compared with more than 200 pence in May last year.

Another key producer, D1 Oils, has also said it is operating below capacity due to difficult market conditions.

Many in the sector were disappointed that Gordon Brown, the British chancellor of the Exchequer, did not improve incentives in a budget introduced Wednesday.

Britain is phasing in a rule mandating that from April 2008, biofuels must make up at least 2.5 percent of oil company sales.

Brazil and Argentina
On the other side of the Atlantic, a crisis is in the making on tax and trade barriers as well, between Argentina and Brazil. But here it is precisely because biodiesel can be produced in a competitive way.

Brazil soy oil is the number one ingredient used in making biodiesel. Soy oil companies think Argentina's cheaper costs will cut them out of the market, especially the export markets.

"We're going to convince the government that they have to gun for Argentina on this issue, play tough," said Carlo Lovatelli, president of the Brazilian Vegetable Oils Industry Association, or Abiove.

"Biodiesel investments are heading to Argentina and not Brazil because it makes more sense to produce it there than here because of tax and trade incentives. We can be importing biodiesel from Argentina very soon," Lovatelli said.

Brazil wants to become the world's hub for biofuels. It's already the world's leading sugarcane ethanol producer and just entered into a partnership with the U.S. to promote world ethanol use. Brazil President Luiz Inacio Lula da Silva has said repeatedly that Brazil's agricultural revolution depends on a future where "we plant and harvest fuel."

While Brazil's ethanol program is mature and growing, the biodiesel segment is "crawling," Lovatelli said, adding that major companies such as Bunge prefer to invest in Argentina and are leaving Brazil behind. Miguel Biegai, a biodiesel analyst for Safras & Mercado, an agribusiness consulting firm, said Lovatelli has a point.
"Brazil can import from Argentina. I'm sure they can make biodiesel for less," Biegai said.

Brazil produces biodiesel at roughly $0.50 a liter, or 1.40 Brazilian reals on the low end, according to Safras & Mercado. Production costs can be as high as BLR1.60 a liter. Argentina can make it for $0.22 a liter, according to Argentine agribusiness consulting firm Abaceb.

In early February, Argentine President Nestor Kirchner signed an executive order to create a national biofuel law designed to make Argentina a biodiesel exporter. Kirchner put a low 5% export tax on biofuels, compared with a 24% export tax on soyoil. That makes it more beneficial for soyoil companies to sell their soyoil to fuel refineries for export than it does to export pure soybean oil for human consumption, Lovatelli said.

Domestic demand is also assured as Argentina's Biofuels Act mandates a 5% content of biodiesel or ethanol in the nation's fuel by 2010. The measure also provides tax breaks for companies investing in the sector. Santa Fe Province, which dominates soybean production and processing, has also offered a host of tax breaks to stimulate biofuel production.

But analysts here say Argentina is much more interested in exporting. Argentina wants to export biodiesel to the European and U.S. biofuels market, while its rival to the north is worried that Argentina's cheaper product will simply cut Brazil out of the export market and surely make investing difficult.

"We are only now realizing that there are a lot of opportunities to export biodiesel, but this is not ethanol. This is a very young segment and investments are being made contrary to what competing interests say," said Oswaldo Oliva Neto, chief of the Strategic Planning Department of the Presidential Palace.

Archer Daniels Midland is building a biodiesel plant in Mato Grosso state and state oil firm Petrobras is investing millions in a fuel called H-Bio, which is a blend of refined soyoil with diesel (earlier post).

Lovatelli, who also has ties to Brazil-based oilseed and biodiesel giant, Bunge, said Abiove would be lobbying Lula's office and the Foreign Relations Ministry on making biodiesel more attractive for corporate investors. Current investments aren't enough.
Brazil's current biodiesel program was designed as a social program. It gives benefits to biodiesel makers who buy raw materials from poor family farmers from the north east. The benefits of this 'Social Fuel Seal' policy include complete tax exemption on all biodiesel made from oilseeds purchased on family farms in that region (earlier post).

Brazil law will require a 2% mixture of biofuels in all diesel by 2008, or 850 million liters. Most of that biodiesel will be made from soyoil, a product Brazil and Argentina have in abundance.

"As a biodiesel producer, Argentina simply has the benefits of better logistics, better policies, and increased capacity," said Biegai.

Other market players suggest that some companies contracted by Brazil's National Petroleum Agency, or ANP, to produce and sell biodiesel will be unable to supply the tax-free oils to make biodiesel. Companies that participate in the ANP biodiesel auctions are required to sell biodiesel made from oilseeds purchased from family farmers.

If companies have to declare they are making the fuel from soyoil, most of it produced on large commercial farms, they'd have to pay a tax, raising their costs. Those costs would be passed on to the consumer and could make biodiesel as expensive as diesel fuel.

Should those companies be unable to meet the ANP requirements, Argentina would likely be called in to fill in the gaps.

Nevertheless, Brazil is expected to supply the 850 million liters required by 2008. The years beyond are anybody's guess.

Neto said the government has no plans on changing the current tax structure for biodiesel production. Whether the industry can convince Brasilia to go after Argentina, however, will be known in the months ahead.

Given the Argentine strategy to become a biofuels exporter, it is unlikely Brasilia negotiators will get very far with Kirchner.

More information:

International Herald Tribune (Paris): EU biodiesel firms blame politicians as demand falls - Politicians blamed for not delivering promised tax relief - March 22, 2007.

Market Watch: Brazil soy industryprepares for biodiesel war with Argentina - March 25, 2007.

Biopact: Brazil to quadruple biodiesel output by 2008, aiming to reduce rural poverty - August 16, 2006

Biopact: An in-depth look at Brazil's "Social Fuel Seal" - March 23, 2007


Roberrific said...

I have described a biodisel bus service in italy here. Might be kind of relevant,


2:13 PM  

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