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    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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Tuesday, September 25, 2007

Sterling Biofuels signs MOU to develop Malaysian palm oil mill

Australia's Sterling Biofuels International Ltd announces that it has entered into a Memorandum of Understanding to develop a palm oil mill in the Lahad Datu region (Sabah) where its biodiesel plant is located (map, click to enlarge). The same company earlier acquired a stake in a Malaysian company with a licence to develop a new palm plantation which will allow it to obtain feedstock supplies at less than half the current market price.

The development of the mill will be undertaken jointly with a local partner who will provide access to minimum quantities of raw material (oil palm fruit bunches) for the mill. This is required for the purposes of obtaining a mill licence.

Sterling, which will own 70% of the joint venture, will manage the construction and subsequent operations of the mill. During the initial phase, the mill's capacity will be 45 tonnes per hour but this will increase to 90 tonnes per hour after the second phase. When completed, the mill will have the capacity to supply 100% crude palm oil (CPO) which can be refined for use in the biodiesel plant.
The development of the palm oil mill represents an extension of Sterling's participation in upstream activities within the palm oil/biodiesel value chain. This initiative, when fully operational, will contribute towards security of feedstock supply for the biodiesel plant as well as result in total potential savings of up to RM180 (A$62) a tonne compared to our current feedstock costs. - CRS Paragash, Group Managing Director
Due to Sterling's palm oil industry experience and the fact that the technology for a palm oil mill is well established, the company thinks the mill will be ready for operation by 1 January 2010 (within 24-30 months, time taken to construct and ready the new mill for commercial operation):
:: :: :: :: :: :: :: :: ::

The cost of developing the mill is expected to be funded through equity contributions from the joint venture partners as well as non-recourse debt. Sterling's 70% share of the equity contribution is estimated at $2.8 million. This is expected to be funded from Sterling's existing cash balances.

The time frames associated with the development of this palm oil mill have been designed to complement the development time frames associated with recently announced oil palm plantation development. The 24-30 month development timeframe for the mill fits in well with the 5-6 year development program for the oil palm plantation.

Earlier Sterling Biofuels announced the acquisition of a 70% stake in a Malaysian company that has development rights over 10,600 acres of land earmarked for an oil palm plantation in Malaysia. The acquisition was significant as it marked the start of Sterling’s participation in various upstream activities within the palm oil/biodiesel value chain. This upstream strategy will:
  • position Sterling to better manage its feedstock requirements and protect itself against future adverse spikes in the price of its palm based feedstock;
  • eventually enable Sterling to capture the best margins within the palm oil/biodiesel value chain wherever they may occur; and
  • provide Sterling with a greater degree of feedstock price stability when assessing whether to increase its biodiesel production capacity from its existing 100,000 metric tonnes per annum.
Through a newly incorporated wholly owned Malaysian subsidiary, Sterling acquired 70% of the issued capital of UTE Power Sdn Bhd (“UTE”) which is controlled by a company listed on the Malaysian MESDAQ market. UTE has been granted the right to develop 10,600 acres of fertile land owned by a state government body into an oil palm plantation. The development rights are for a period of 60 years with an option to renew for another 30 years.

Under the relevant agreement, UTE will pay to the state government body an agreed annual payment. In return, all proceeds from the plantation will belong to UTE. The first annual payment due on the date of execution of the agreement with the state government body has been paid.

The participation allowed Sterling Biofuels to enter the oil/biodiesel value chain without the high start up costs normally associated with an investment in an oil palm plantation. When the plantation matures, it will have the potential of providing the equivalent of 20% of its current feedstock requirements at under RM1,000 (A$346) a tonne compared to the current crude palm oil price of RM2,534 (A$877) a tonne.

While current Malaysian rules on foreign equity ownership restrict Sterling’s ownership of UTE to 70%, Sterling will apply for Malaysian regulatory approval for the ability, should it choose to do so, to acquire a further 15% of UTE from the initial promoters. This option to purchase additional equity in the plantation development is exercisable over the next 4 years at an agreed price.

Development of the plantation is subject to Malaysian environmental impact assessment and approval which the company is confident of obtaining in due course. Sterling has also applied for membership of the Roundtable on Sustainable Palm Oil and intends to comply with the principles for sustainable production and use of palm oil developed by the Roundtable.

Sterling Biofuels: Sterling Biofuels Extends Upstream Participation - Development of Palm Oil Mill [*.pdf] - September 25, 2007.

Sterling Biofuels: Sterling Biofuels kickstarts upstream strategy - Acquires rights to develop oil palm plantation - 13 Sept 2007

Roundtable on Sustainable Palm Oil.


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