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    A group of Spanish investors is building a new bioethanol plant in the western region of Extremadura that should be producing fuel from maize in 2009. Alcoholes Biocarburantes de Extremadura (Albiex) has already started work on the site near Badajoz and expects to spend €42/$59 million on the plant in the next two years. It will produce 110 million litres a year of bioethanol and 87 million kg of grain byproduct that can be used for animal feed. Europapress - September 28, 2007.

    Portuguese fuel company Prio SA and UK based FCL Biofuels have joined forces to launch the Portuguese consumer biodiesel brand, PrioBio, in the UK. PrioBio is scheduled to be available in the UK from 1st November. By the end of this year (2007), says FCL Biofuel, the partnership’s two biodiesel refineries will have a total capacity of 200,000 tonnes which will is set to grow to 400,000 tonnes by the end of 2010. Biofuel Review - September 27, 2007.

    According to Tarja Halonen, the Finnish president, one third of the value of all of Finland's exports consists of environmentally friendly technologies. Finland has invested in climate and energy technologies, particularly in combined heat and power production from biomass, bioenergy and wind power, the president said at the UN secretary-general's high-level event on climate change. Newroom Finland - September 25, 2007.

    Spanish engineering and energy company Abengoa says it had suspended bioethanol production at the biggest of its three Spanish plants because it was unprofitable. It cited high grain prices and uncertainty about the national market for ethanol. Earlier this year, the plant, located in Salamanca, ceased production for similar reasons. To Biopact this is yet another indication that biofuel production in the EU/US does not make sense and must be relocated to the Global South, where the biofuel can be produced competitively and sustainably, without relying on food crops. Reuters - September 24, 2007.

    The Midlands Consortium, comprised of the universities of Birmingham, Loughborough and Nottingham, is chosen to host Britain's new Energy Technologies Institute, a £1 billion national organisation which will aim to develop cleaner energies. University of Nottingham - September 21, 2007.

    The EGGER group, one of the leading European manufacturers of chipboard, MDF and OSB boards has begun work on installing a 50MW biomass boiler for its production site in Rion. The new furnace will recycle 60,000 tonnes of offcuts to be used in the new combined heat and power (CHP) station as an ecological fuel. The facility will reduce consumption of natural gas by 75%. IHB Network - September 21, 2007.

    Analysts fear that record oil prices will fuel general inflation in Kenya, particularly hitting the poorest hard. They call for the development of new policies and strategies to cope with sustained high oil prices. Such policies include alternative fuels like biofuels, conservation measures, and more investments in oil and gas exploration. The poor in Kenya are hit hardest by the sharp increase, because they spend most of their budget on fuel and transport. Furthermore, in oil intensive economies like Kenya, high oil prices push up prices for food and most other basic goods. All Africa - September 20, 2007.

    Finland's Metso Power has won an order to supply Kalmar Energi Värme AB with a biomass-fired power boiler for the company’s new combined heat and power plant in Kalmar on the east coast of Sweden. Start-up for the plant is scheduled for the end of 2009. The value of the order is approximately EUR 55 million. The power boiler (90 MWth) will utilize bubbling fluidized bed technology and will burn biomass replacing old district heating boilers and reducing the consumption of oil. The delivery will also include a flue gas condensing system to increase plant's district heat production. Metso Corporation - September 19, 2007.

    Jo-Carroll Energy announced today its plan to build an 80 megawatt, biomass-fueled, renewable energy center in Illinois. The US$ 140 million plant will be fueled by various types of renewable biomass, such as clean waste wood, corn stover and switchgrass. Jo-Carroll Energy - September 18, 2007.

    Beihai Gofar Marine Biological Industry Co Ltd, in China's southern region of Guangxi, plans to build a 100,000 tonne-per-year fuel ethanol plant using cassava as feedstock. The Shanghai-listed company plans to raise about 560 million yuan ($74.5 million) in a share placement to finance the project and boost its cash flow. Reuters - September 18, 2007.

    The oil-dependent island state of Fiji has requested US company Avalor Capital, LLC, to invest in biodiesel and ethanol. The Fiji government has urged the company to move its $250million 'Fiji Biofuels Project' forward at the earliest possible date. Fiji Live - September 18, 2007.

    The Bowen Group, one of Ireland's biggest construction groups has announced a strategic move into the biomass energy sector. It is planning a €25 million investment over the next five years to fund up to 100 projects that will create electricity from biomass. Its ambition is to install up to 135 megawatts of biomass-fuelled heat from local forestry sources, which is equal to 50 million litres or about €25m worth of imported oil. Irish Examiner - September 16, 2007.

    According to Dr Niphon Poapongsakorn, dean of Economics at Thammasat University in Thailand, cassava-based ethanol is competitive when oil is above $40 per barrel. Thailand is the world's largest producer and exporter of cassava for industrial use. Bangkok Post - September 14, 2007.

    German biogas and biodiesel developer BKN BioKraftstoff Nord AG has generated gross proceeds totaling €5.5 million as part of its capital increase from authorized capital. Ad Hoc News - September 13, 2007.

    NewGen Technologies, Inc. announced that it and Titan Global Holdings, Inc. completed a definitive Biofuels Supply Agreement which will become effective upon Titan’s acquisition of Appalachian Oil Company. Given APPCO’s current distribution of over 225 million gallons of fuel products per year, the initial expected ethanol supply to APPCO should exceed 1 million gallons a month. Charlotte dBusinessNews - September 13, 2007.

    Oil prices reach record highs as the U.S. Energy Information Agency releases a report that showed crude oil inventories fell by more than seven million barrels last week. The rise comes despite a decision by the international oil cartel, OPEC, to raise its output quota by 500,000 barrels. Reuters - September 12, 2007.

    OPEC decided today to increase the volume of crude supplied to the market by Member Countries (excluding Angola and Iraq) by 500,000 b/d, effective 1 November 2007. The decision comes after oil reached near record-highs and after Saudi Aramco announced that last year's crude oil production declined by 1.7 percent, while exports declined by 3.1 percent. OPEC - September 11, 2007.

    GreenField Ethanol and Monsanto Canada launch the 'Gro-ethanol' program which invites Ontario's farmers to grow corn seed containing Monsanto traits, specifically for the ethanol market. The corn hybrids eligible for the program include Monsanto traits that produce higher yielding corn for ethanol production. MarketWire - September 11, 2007.

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Thursday, September 27, 2007

India: 'outrageous' oil price damages economy, as $80pb could be new floor price

High oil prices have negative impacts on a range of social and economic activities, especially in the developing world. The least developed countries are energy intensive and consequently spend much more on oil as a percentage of GDP than highly developed countries. According to the African Union, Sub-Saharan African countries poured between 10 and 15% of their GDP into oil imports in 2006, whereas OECD countries spent only 1.5-3%. In oil importing poor countries, each price increase can be felt immediately throughout the economy on both the macro- and micro-economic front, with poor classes suffering most (earlier post).

Palaniappan Chidambaram, Finance Minister of India, which is heavily dependent on oil imports, illustrated some of the effects today by calling the current price for crude oil 'outrageous' and damaging the economy's growth.
The price of crude oil is an enormous external risk. Since these outrageous prices cannot be fully passed through to the consumers in India, the burden falls largely on the domestic budget and constrains our capacity for investment. - Indian Finance Minister Palaniappan Chidambaram
India imports nearly three-fourth of its crude oil requirement and spent more than $57 billion in 2006-07 for the purpose - almost equal to the country's entire trade deficit. Government has not allowed state-run oil marketing firms to raise fuel prices in line with cost and India's three main oil companies are projected to suffer a revenue loss of about 13 billion dollars this year.

Chidambaram also warned the depreciation of the dollar vis-a-vis the rupee has thrown up an unexpected downside risk. The Indian currency has strengthened more than 11 per cent in 2007, hurting exporters.

Forecasts: record price guaranteed
Meanwhile, the oil industry says the price is justified because the money is needed to invest in new exploration and refining capacity (earlier post). Recently, Iranian government spokesman Gholamhossein Elham even went so far as to state:
We, the oil exporting countries, believe the oil price is low and is not the real value of this important material of the world’s energy [mix].
Reuters published a poll on Wednesday asking petroleum (establishment) analysts to predict the average price for US crude oil in 2008. The result: $67 per barrel. However, Goldman Sachs, the most bullish in the poll, predicted WTI crude to average $85 next year with prices climbing as high as $95 by the end of 2008.

Peak Oil analysts are being taken more and more seriously, because they have been more accurate in their predictions. So what do they say? The Association for Peak Oil & Gas (ASPO) concluded at its latest annual conference that the new floor price of crude oil is $80 per barrel. The projection was shared by Ray Leonard, Vice-President of Kuwait Energy Company, James Buckee, CEO Talisman Energy, Jeff Rubin, chief economist of the Canadian Imperial Bank of Commerce and James Schlesinger, former U.S. energy secretary. Today, the ASPO's 1 year forecast stands at $107 pb.

Obviously, a price bracket of $67 to $80 makes biofuels a must for developing countries. Many first-generation fuels can be made at costs well below these prices, and we see a continued push into 'tropical' and 'subtropical' biofuels next year dominated by ethanol made from sugarcane (average production cost in Brazil: $37 per barrel of oil equivalent), sweet sorghum and cassava (projected production cost in Thailand: $38pboe), and by biodiesel made from palm oil (projected cost in Malaysia: $55pboe), jatropha and soy oil. But at $80-100, some second-generation biofuels too become competitive with crude. Amongst these, fast-pyrolysis based fuels and synthetic biofuels based on the Fischer-Tropsch process would be commercially viable (earlier post). Cellulosic ethanol based on enzymatic hydrolysis would require higher prices still. With the current state of technology, algae-based biofuels would need an oil price bracket of $120-150 to be competitive.

Catastrophy for poor countries
In energy intensive countries, the macro-economic effects of high oil can include higher inflation (including increased food prices), less economic growth, higher unemployment, and a weakened capacity to ease the debt burden:
:: :: :: :: :: :: :: :: ::

Such countries do not have the technical and financial instruments to deal with oil shocks, such as reserves and finetuned monetary policies. Most importantly, governments are often forced to cut spending on social services, with the UN finding that some of the poorest countries are already spending twice as much on importing oil than on such basics as health care. Of course, the poor suffer under all these factors most.

On the micro-economic front the consequences depend on government policies. In countries where fuels are not subsidized, the effects for the poor can be truly catastrophic: higher costs for food, for heating and cooking, and less mobility. Energy can take up to 30% of the household budget of families in the least developed countries. Farmers have a reduced capacity to bring their produce to market - a major problem in the Global South, where the majority of people live in rural areas and is employed in agriculture.

When petroleum fuels are subsidised, as is the case in India, the costs are transferred to the government, which then has a reduced capacity to invest in state and social services (education, health, security, etc...). Ultimately, the costs arrive at the population at large.

A more extensive overview of the effects of high oil prices on the least developed countries can be found here.


The Economic Times: FM warns against crude oil prices hurting GDP growth - September 27, 2007.

Reuters: Oil prices seen surging to record level next year - September 26, 2007.

Peakoil Netherlands: Iran: oil at $80 per barrel is cheap - September 24, 2007.

Biopact: High oil prices disastrous for developing countries - September 12, 2007

Biopact: Report: synthetic biofuels (BtL) and bioenergy efficient, competitive and sustainable in Germany - September 22, 2007


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