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    Biodiesel producer D1 Oils, known for its vast jatropha plantations in Africa and Asia, is to invest CNY 500 to 700 million (€48.9-68.4 / US$65.5-91.7) to build a refinery in Guangxi Zhuang autonomous region, in what is expected to be the first biodiesel plant in the country using jatropha oil as a feedstock. South China Morning Post - June 18, 2007.

    After Brazil announced a record sugar crop for this year, with a decline in both ethanol and sugar prices as a result, India too is now preparing for a bumper harvest, a senior economist with the International Sugar Organization said. Raw sugar prices could fall further towards 8 cents per lb in coming months, after their 30% drop so far this year. Converting the global surplus, estimated to be 4 million tonnes, into ethanol may offer a way out of the downward trend. Economic Times India - June 18, 2007.

    After Brazil announced a record sugar crop for this year, with a decline in both ethanol and sugar prices as a result, India too is now preparing for a bumper harvest, a senior economist with the International Sugar Organization said. Raw sugar prices could fall further towards 8 cents per lb in coming months, after their 30% drop so far this year. Converting the global surplus, estimated to be 4 million tonnes, into ethanol may offer a way out of the downward trend. Economic Times India - June 18, 2007.

    A report from the US Department of Agriculture Foreign Agricultural Services (USDA FAS) estimates that the production of ethanol in China will reach 1.45 million tonnes (484 million gallons US) in 2007, up 12% from 1.3 million tonnes in 2006. Plans are to increase ethanol feedstocks from non-arable lands making the use of tuber crops such as cassava and sweet sorghum. USDA-FAS - June 17, 2007.

    The Iowa State University's Extension Bioeconomy Task Force carried out a round of discussions on the bioeconomy with citizens of the state. Results indicate most people see a bright future for the new economy, others are cautious and take on a distanced, more objective view. The potential for jobs and economic development were the most important opportunities identified by the panels. Iowa is the leading producer of corn based ethanol in the US. Iowa State University - June 16, 2007.

    Biofuel producer D1 Oils Plc, known for establishing large jatropha plantations on (degraded land) in Africa and Asia, said it was in advanced talks with an unnamed party regarding a strategic collaboration, sending its shares up 7 percent, after press reports linking it with BP. Firms like BP and other large petroleum companies are keen to secure a supply of biofuel to meet UK government regulations that 5 percent of automotive fuel must be made up of biofuels by 2010. Reuters UK - June 15, 2007.

    Jean Ziegler, a U.N. special rapporteur on the right to food, told a news briefing held on the sidelines of the U.N. Human Rights Council that "there is a great danger for the right to food by the development of biofuels". His comments contradict a report published earlier by a consortium of UN agencies, which said biofuels could boost the food security of the poor. Reuters - June 15, 2007.

    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, June 18, 2007

U.S. push for biofuels causes oil industry to scale back refinery expansion

A few days ago, OPEC threatened consumers and governments that green fuels will push prices for oil products even higher, because the global rise of biofuels may make OPEC countries decide to slow down their oil production expansion. The announcement was seen as scare-mongering by many and condemned by the chief of the International Energy Organisation, who said biofuels do not have that large an impact as OPEC thinks. He urged OPEC countries, who have been making gigantic profits, to do their duty and to invest in increased production (earlier post).

Now, a similar tone is being used by the oil industry in the US, equally enjoying windfall profits. Oil executives warn that America's very ambitious proposed legislation on biofuels - currently being debated in Congress - might make oil refiners decide to scale back their expansion plans. This could keep gasoline and diesel prices high for years to come.

The irony of these statements is that communities and governments have been investing in biofuels precisely because oil prices and refined products have been at record highs. Oil companies have been making monster profits, and should be using this money to invest in expanding production and refining capacity. But they don't, and now they blame biofuels instead. Oil companies already have scaled expansion plans back by nearly 40 percent. They threaten with more cancelations if Congress passes the legislation now before the Senate.
All the talk about biofuels threatening gasoline production is the latest attempt to blame ethanol on Big Oil's failure to meet our energy needs. The ethanol industry continues to grow while oil refiners continue to make excuses for maintaining their profitable status quo. - Ron Lamberty of the American Coalition for Ethanol
The U.S. Senate is currently debating the major new Energy Bill, which contains proposals for huge increases in ethanol production. The latest (of over 100) amendments include a call for an expansion of the renewable fuels standard (RFS) to 44 billion gallons by 2022, with 30 billion of that coming from advanced biofuels. The current language in the bill proposes a 36 billion gallon RFS by 2022, with 21 billion of that coming from renewable fuels. A three-part list of these ongoing discussions and amendments can be found here (part1, part 2 and part 3).

Given this radical effort to promote biofuels in the U.S., oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones. Oil industry executives no longer believe there will be the demand for gasoline over the next decade to warrant the billions of dollars in refinery expansions - as much as 10 percent increase in new refining capacity - they anticipated as recently as a year ago:
:: :: :: :: :: :: :: :: :: :: :: ::

This shortage of refineries frequently has been blamed by politicians for the sharp price spikes in gasoline, as was the case last week by Republican Sen. James Inhofe during the debate on the senate Energy Bill: "The fact is that Americans are paying more at the pump because we do not have the domestic capacity to refine the fuels consumers demand", Inhofe complained as he tried unsuccessfully to get into the bill a proposal to ease permitting and environmental rules for refineries.

This spring, refiners, hampered by outages, could not keep up with demand and imports were down because of greater fuel demand in Europe and elsewhere. Despite stable - even sometimes declining - oil prices, gasoline prices soared to record levels and remain well above $3 a gallon.

Consumer advocates maintain the oil industry likes it that way: "By creating a situation of extremely tight supply, the oil companies gain control over price at the wholesale level," said Mark Cooper of the Consumer Federation of America. He argued that a wave of mergers in recent years created a refining industry that "has no interest in creating spare (refining) capacity."

Only last year, the Energy Department was told that refiners, reaping big profits and anticipating growing demand, were looking at boosting their refining capacity by more than 1.6 million barrels a day, a roughly 10 percent increase. That would be enough to produce an additional 37 million gallons of gasoline daily. But now the expansion has come to a halt, and the oil industry says it may cancel even more expansion plans if Congress approves the Energy Bill's ambitious targets for biofuels.

"These (expansion) decisions are being revisited in boardrooms across the refining sector," said Charlie Drevna, executive vice president of the National Petrochemical and Refiners Association.
With the anticipated growth in biofuels, "your getting down to needing little or no additional gasoline production" above what is being made today, said Joanne Shore, an analyst for the government's Energy Information Administration. In 2006, motorists used 143 billion gallons (541 billion liters) of gasoline, of which 136 billion was produced by U.S. refineries, and the rest imported.

Drevna, the industry lobbyist, said annual demand had been expected to grow to about 161 billion gallons (609 billion liters) by 2017. But Bush's call to cut gasoline demand by 20 percent - through a combination of fuel efficiency improvements and ethanol - would reduce that demand below what U.S. refineries make today, he said.

"We will end up exporting gasoline," said Drevna. Asked recently whether Chevron Corp. might build a new refinery, vice chairman Peter Robertson replied, "Why would I invest in a refinery when you're trying to make 20 percent of the gasoline supply ethanol".

Valero Corp., the largest U.S. refiner producing 3.3 million barrels a day of petroleum product, recently boosted production capacity at its Port Arthur, Texas, refinery by 325,000 barrels a day. But company spokesman Bill Day said some additional expansions have been postponed.
"That's not to say we've changed our plans," Day said in an interview. "But it's fair to say we're taking a closer look at what the president is saying and what Congress is saying" about biofuels. He said there's a "mixed message" coming out of Washington, calling for more production but also for reducing gasoline demand. "It's something that we have to study pretty carefully," said Day.

Democratic Sen. Byron Dorgan said consolidation of the oil industry into fewer companies has left them with no incentive to expand refineries. "It's a perverted system that does not act as a free market system would act," said Dorgan. "If you narrow the neck of refining, you actually provide a greater boost to prices which is a greater boost to profitability. Richard Blumenthal, the attorney general of Connecticut, wants Congress to require refiners to maintain a supply cushion in case of unexpected outages.

In the 1980s, Blumenthal said at a recent hearing, refiners were producing at 77.6 percent of their capacity, "which allowed for easy increases in production to address shortages. In the 1990s, as the industry closed refineries, ... (that figure) rose to 91.4 percent, leaving little room for expansion to cover supply shortfalls."

More information:
Forbes (AP): Gasoline Refinery Expansions Scaled Back - June 18, 2007.

GreenCarCongress: Update on the US Senate Energy Bill, part 1, part 2, part 3.

Reuters: U.S. law to spur new oil refineries a bust so far - June 15, 2007.

1 Comments:

biofuelsimon said...

There might be some merit in the refiners position, but only if the marginal increase in capacity of biofuels was going to be sufficiently large to destabilise the price of gasoline. Refineries working at 91% capacity are probably a whole lot more profitable than refineries working at 77%. At the lower level they may not make enough money to merit further investment in capacity. But the refiner's position is interesting in another way. It assumes that there will be no increase in demand for automotive fuels in the medium to longer term. Will the US drivng public switch to cars with more efficient engines or cut the number of miles they travel enough to make that happen?

11:11 AM  

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