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    South Korea plans to invest 20 billion won (€14.8/$21.8 million) by 2010 on securing technologies to develop synthetic fuels from biomass, coal and natural gas, as well as biobutanol. 29 private companies, research institutes and universities will join this first stage of the "next-generation clean energy development project" led by South Korea's Ministry of Commerce, Industry and Energy. Korea Times - November 19, 2007.

    OPEC leaders began a summit today with Venezuelan President Hugo Chavez issuing a chilling warning that crude prices could double to US$200 from their already-record level if the United States attacked Iran or Venezuela. He urged assembled leaders from the OPEC, meeting for only the third time in the cartel's 47-year history, to club together for geopolitical reasons. But the cartel is split between an 'anti-US' block including Venezuela, Iran, and soon to return ex-member Ecuador, and a 'neutral' group comprising most Gulf States. France24 - November 17, 2007.

    The article "Biofuels: What a Biopact between North and South could achieve" published in the scientific journal Energy Policy (Volume 35, Issue 7, 1 July 2007, Pages 3550-3570) ranks number 1 in the 'Top 25 hottest articles'. The article was written by professor John A. Mathews, Macquarie University (Sydney, Autralia), and presents a case for a win-win bioenergy relationship between the industrialised and the developing world. Mathews holds the Chair of Strategic Management at the university, and is a leading expert in the analysis of the evolution and emergence of disruptive technologies and their global strategic management. ScienceDirect - November 16, 2007.

    Timber products company China Grand Forestry Resources Group announced that it would acquire Yunnan Shenyu New Energy, a biofuels research group, for €560/$822 million. Yunnan Shenyu New Energy has developed an entire industrial biofuel production chain, from a fully active energy crop seedling nursery to a biorefinery. Cleantech - November 16, 2007.

    Northern European countries launch the Nordic Bioenergy Project - "Opportunities and consequences of an expanding bio energy market in the Nordic countries" - with the aim to help coordinate bioenergy activities in the Nordic countries and improve the visibility of existing and future Nordic solutions in the complex field of bioenergy, energy security, competing uses of resources and land, regional development and environmental impacts. A wealth of data, analyses and cases will be presented on a new website - Nordic Energy - along with announcements of workshops during the duration of project. Nordic Energy - November 14, 2007.

    Global Partners has announced that it is planning to increase its refined products and biofuels storage capacity in Providence, Rhode Island by 474,000 barrels. The partnership has entered into agreements with New England Petroleum Terminal, at a deepwater marine terminal located at the Port of Providence. PRInside - November 14, 2007.

    The Intergovernmental Panel on Climate Change (IPCC) kicks off the meeting in Valencia, Spain, which will result in the production of the Synthesis Report on climate change. The report will summarize the core findings of the three volumes published earlier by the separate working groups. IPCC - November 12, 2007.

    Biopact's Laurens Rademakers is interviewed by Mongabay on the risks of large-scale bioenergy with carbon storage (BECS) proposals. Even though Biopact remains positive about BECS, because it offers one of the few safe systems to mitigate climate change in a drastic way, care must be take to avoid negative impacts on tropical forests. Mongabay - November 10, 2007.

    According to the latest annual ranking produced by The Scientist, Belgium is the world's best country for academic research, followed by the U.S. and Canada. Belgium's top position is especially relevant for plant, biology, biotechnology and bioenergy research, as these are amongst the science fields on which it scores best. The Scientist - November 8, 2007.

    Mascoma Corporation, a cellulosic ethanol company, today announced the acquisition of Celsys BioFuels, Inc. Celsys BioFuels was formed in 2006 to commercialize cellulosic ethanol production technology developed in the Laboratory of Renewable Resources Engineering at Purdue University. The Celsys technology is based on proprietary pretreatment processes for multiple biomass feedstocks, including corn fiber and distiller grains. The technology was developed by Dr. Michael Ladisch, an internationally known leader in the field of renewable fuels and cellulosic biofuels. He will be taking a two-year leave of absence from Purdue University to join Mascoma as the company’s Chief Technology Officer. Business Wire - November 7, 2007.

    Bemis Company, Inc. announced today that it will partner with Plantic Technologies Limited, an Australian company specializing in starch-based biopolymers, to develop and sell renewably resourced flexible films using patented Plantic technology. Bemis - November 7, 2007.

    Hungary's Kalocsa Hõerõmû Kft is to build a HUF 40 billion (€158.2 million) straw-fired biomass power plant with a maximum capacity of 49.9 megawatts near Kalocsa in southern Hungary. Portfolio Hungary - November 7, 2007.

    Canada's Gemini Corporation has received approval to proceed into the detailed engineering, fabrication and construction phases of a biogas cogeneration facility located in the Lethbridge, Alberta area, the first of its kind whereby biogas production is enhanced through the use of Thermal Hydrolysis technology, a high temperature, high pressure process for the safe destruction of SRM material from the beef industry. The technology enables a facility to redirect waste material, previously shipped to landfills, into a valuable feedstock for the generation of electricity and thermal energy. This eliminates the release of methane into the environment and the resultant solids are approved for use as a land amendment rather than re-entering the waste stream. In addition, it enhances the biogas production process by more than 25%. Market Wire - November 7, 2007.

    A new Agency to manage Britain's commitment to biofuels was established today by Transport Secretary Ruth Kelly. The Renewable Fuels Agency will be responsible for the day to day running of the Renewable Transport Fuels Obligation, coming into force in April next year. By 2010, the Obligation will mean that 5% of all the fuels sold in the UK should come from biofuels, which could save 2.6m to 3m tonnes of carbon dioxide a year. eGov Monitor - November 5, 2007.

    Prices for prompt loading South African coal cargoes reached a new record last week with a trade at $85.00 a tonne free-on-board (FOB) for a February cargo. Strong Indian demand and tight supply has pushed South African prices up to record levels from around $47.00 at the beginning of the year. European DES/CIF ARA coal prices have remained fairly stable over the past few days, having traded up to a record $130.00 a tonne DES ARA late last week. Fair value is probably just below $130.00 a tonne, traders said. At this price, some forms of biomass become directly competitive with coal. Reuters Africa - November 4, 2007.

    The government of India's Harayana state has decided to promote biomass power projects based on gasification in a move to help rural communities replace costly diesel and furnace oil. The news was announced during a meeting of the Haryana Renewable Energy Development Agency (HAREDA). Six pilot plants have demonstrated the efficiency and practicability of small-scale biomass gasification. Capital subsidies will now be made available to similar projects at the rate of Rs 2.5 lakh (€4400) per 100 KW for electrical applications and Rs 2 lakh (€3500) per 300 KW for thermal applications. New Kerala - November 1, 2007.

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Friday, November 16, 2007

Zimbabwe opens first biodiesel plant to ease catastrophic fuel shortages in farm sector

High oil prices are disastrous for poor, oil importing agrarian countries, because they limit the production and marketing of food and drive up prices of all other products and services. Zimbabwe's president Robert Mugabe therefor commissioned the first biodiesel production plant in the oil-starved country, vowing that because of biofuels, Zimbabwe would "never collapse." The biodiesel plant's output is primarily intended to ease dramatic fuel shortages in the farming sector. Agriculture is an energy intensive economic sector and thus the project makes sense. In a country like Zimbabwe, biofuel production boosts food production instead of limiting it.

The country's dependency on imported fuels is a major constraint to virtually all economic activities, particularly the agrarian reform programme as the Zimbabwean government drives a rural modernisation programme whose success hinges on fuel availability. The biodiesel project is a culmination of years of research. In 2004, the Reserve Bank of Zimbabwe commissioned a biodiesel project at the Harare Polytechnic under which it procured a test vehicle, bio-reactor chemicals and other logistical support facilities, culminating in the "convincing" certification that biodiesel was a feasible option for Zimbabwe (previous post). The project will not just benefit the fuel sector, but is expected to have a positive impact on the rest of the economy as well through the creation of synergies.

Besides reducing fuel costs for farmers, Zimbabwe's peasants are set to benefit in a second way as a new and ready market for oil seeds emerges. Industry in general and the motoring public are also expected to operate better after the launch. The plant is being commissioned just in time for the festive season and the beginning of the summer cropping season, periods during which demand for fuel is very high.
As a nation we have once again demonstrated that the ill-fated sanctions against the innocent people of Zimbabwe can never subdue our resilience and inner propulsion to succeed and remain on our feet as a nation. Soon, our economy will be paying us back the dividends of the seedlings of progression we are planting across different productive sectors. - Robert Mugabe
The Transload biodiesel plant, located 15 kilometres (10 miles) northwest of Harare, is a joint venture between a Zimbabwean and South Korean firm. The plant has a capacity of 100 million litres of biodiesel annually. The main feedstocks are cotton seed, soya beans, jatropha and sunflower seed.

Zimbabwe imports some 4.7 million barrels of oil per year. Of this, the biodiesel plant would replace more than 630,000 barrels, roughly 13 percent, and save the country 80 million US dollars per year directly. Indirect savings due to smoother food production and lowered inflation have not been disclosed.
As a people, we have demonstrated that the dark clouds of our hard times, particularly those sown by Western destructive forces, have their silver lining by way of not just strengthening our resilience, but also of deepening our scientific research and stimulating our innovativeness. - Robert Mugabe
Zimbabwe is in the throes of an unprecedented economic crisis characterised by high inflation perched at nearly 8,000 percent, mass unemployment and chronic shortages of fuel. Fuel stations often go for months without deliveries while long queues form at the few that do receive supplies.

Mugabe's fusion of a discourse on energy security and political independence is not that far fetched: high oil prices and fuel dependence can literally destroy the economies of energy intensive, poor, oil importing countries like Zimbabwe. These developments are "exogenous" factors to which only biofuels offer an "endogenous" antidote. This is why the green fuels are often put in the ideological and geopolitical framework of economic independence and energy security.

The effect of high oil prices
More fundamentally, in least developed countries, record oil prices affect all sectors of the economy, but in particular the argricultural sector. In Zimbabwe, more than 65 percent of all people are employed in this sector. For the wealthiest countries (non-oil producing OECD), oil imports make up less than 2% of GDP, whereas for African oil importing nations this was more than 10% of GDP in 2006 (more here *.doc). In poor oil importing countries, oil price rises of the current magnitude imply a significant reduction of economic growth rates, an erosion of trade balances, rising unemployment, the destruction of the effects of debt relief efforts, and a hike in inflation rates. Of the 47 poorest countries, 38 are net importers of oil, and 25 are fully dependent on imports (more here). Zimbabwe belongs to the latter group. But there is more:
:: :: :: :: :: :: :: :: :: :: :: :: ::

If coupled with low foreign reserves some of the effects of current high oil prices are: decreased import capacity, lower consumption and investment, lower production and employment. And as always, the poor are hit hardest as they face lower employment prospects, higher inflation (fuel, transportation, basic goods), and cuts in government spending on social services (in a recent report, when oil stood at around US$ 60 per barrel, the UN found that some of the poorest countries are already forced to spend six times as much on imported oil as on such fundamental social services as health care and education (earlier post). According to an African Development Bank document on the effects of high oil prices on African societies:
Lower employment prospects and the higher inflation rate will lower the purchasing power of the poor who have fewer (if any) instruments to hedge against the oil price increase. The biggest impact will be through higher price of kerosene which is used for cooking and lighting. The poor will also be affected by higher transportation costs. Clearly, higher petroleum costs will increase commuting costs and, especially in the case of agricultural economies, the cost of getting the crops to the markets.
Given the limited availability of foreign exchange, these poor oil-importing countries face a number of options. Consumers and firms could decide to reduce their oil consumption but since the demand for oil is highly inelastic in the short-term, they may be compelled to reduce their consumption of other imported goods. Doing so could undermine economic growth especially if capital goods imports are affected.

Alternatively, countries could try to access foreign currencies to fill the gap and finance the energy bill. However, obtaining funds from private markets, bilateral and multilateral sources must be consistent with medium-term sustainability and sound debt management. In highly indebted poor countries, the only solution to fill the financing gap, and not to weaken growth, is to obtain grants or highly concessional loans. More importantly, governments will have to consider sustainable financing plans as all evidence points to oil remaining at high prices.

High oil prices will also exert a heavy toll on the budget both on the revenue and expenditure sides. On the revenue side, the tax base will be eroded if the profitability of oil-consuming companies is adversely affected and if unemployment increases. Expenditure could increase wherever governments subsidize oil products, or programs, which make intensive use of petroleum products. In that regard, an important question is if there should be complete pass-through of the oil price increase.

Governments are under heavy pressure to intervene to cushion the effect of the oil price increase. If the price of oil is not mean-reverting, price controls will lead to ever increasing losses which will ultimately be borne by current or future tax payers.

Subsidies to public utilities can also worsen the consolidated government budget deficit. In many countries electricity is produced using oil and is sold by law below its cost of production. In this case, the government will have to bear the additional expenditure from a higher oil bill. If the government does not have the resources to do so (for instance, if foreign reserves are too low), it may have to resort to rolling blackouts which have very adverse effects. Moreover, governments will themselves face higher energy bills through their own activities and that of state-owned companies.

Central banks may be tempted to tighten their monetary policy in reaction to the increase in inflation. Previous oil price shocks have produced significant increases in real interest rates which undermined domestic investment, pushed countries deeper into recession and produced stagflation. Furthermore, a rising fiscal deficit, combined with increasing public expenditures due to petrol consumption by public entities, can prompt the authorities to use monetary creation to finance the additional expenditures. As the increase in the price of oil is akin to a supply shock, an accommodating monetary policy would contribute to inflation. Non-inflationary policies are needed to avoid hyperinflation and to maintain monetary credibility.

Zimbabwe hopes that by relying on locally produced biofuels, which are expected to be less costly than imported refined petroleum products, some of the potentially disastrous effects of these many problems can be averted.

Mugabe blames the economic collapse of his country on targeted sanctions imposed on him and members of his ruling elite by the European Union and the United States following presidential polls in 2002 which the main opposition and Western observers say were rigged.

: soldiers guard the Transload biodiesel plant on the outskirts of Harare. Credit: AFP.

Agence France Press: Mugabe commissions Zimbabwe's first biodiesel plant - November 15, 2007.

The Herald (via AllAfrica): Zimbabwe: Government to Launch Biodiesel Plant Today - November 15, 2007.

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

Ralf Krüger: Impact of high oil prices on oil-importing countries in Africa [*.pdf], UNECA Project LINK meeting, Fall 2006, Geneva.

African Development Bank Group: Can Struggling African Economies Survive Escalating Oil Prices?

African Development Bank Group: High Oil Prices and the African Economy [*.doc] - Concept paper prepared for the 2006 African Development Bank Annual Meetings Ouagadougou, Burkina Faso.

Biopact: Zimbabwe's jatropha project receives US$11.6 million - May 18, 2007


Digivu in South Africa said...

Interesting - I wouldn't have lent credence to President Mugabe's rambling but.....

Interesting, that there are food shortages and major food security problems in Zimbabwe and now they process vegetable oil - at least its better than ethanol from maize and crude is at unthought of highs.

Jatropha is fine as it and its by products are not edible but sunflower and soya are important components of the food system. Cotton seed also has its limits and currently brings foreign exchange into the country through sales to South Africa.

The most important issue is whether the crippled economy will be able to use the value that sits in the vast quantities of press cake that will enter the market.

12:56 PM  
Jonas said...

The food problems are due to a lack of income, a lack of fuels, a lack of sound economic policies, etc. Not because of a lack of land, labor or natural resources.

Fuel shortages are a major problem for farmers. Why produce food when you can't bring it to a market? Why buy an efficient harvesting machine when you have no fuel to power it?

Without fuel, efficient food production is impossible. Hence, biofuels made from a select range of crops, can actually boost food production in many, many African countries who experience the same catastrophic fuel shortages and/or high prices.

11:19 PM  

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