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    Japan's Marubeni Corp. plans to begin importing a bioethanol compound from Brazil for use in biogasoline sold by petroleum wholesalers in Japan. The trading firm will import ETBE, which is synthesized from petroleum products and ethanol derived from sugar cane. The compound will be purchased from Brazilian petrochemical company Companhia Petroquimica do Sul and in February, Marubeni will supply 6,500 kilolitres of the ETBE, worth around US$7 million, to a biogasoline group made up of petroleum wholesalers. Wholesalers have been introducing biofuels since last April by mixing 7 per cent ETBE into gasoline. Plans call for 840 million liters of ETBE to be procured annually from domestic and foreign suppliers by 2010. Trading Markets - January 24, 2007.

    Toyota Tsusho Corp., Ohta Oil Mill Co. and Toyota Chemical Engineering Co., say it and two other firms have jointly developed a technology to produce biodiesel fuel at lower cost. Biodiesel is made by blending methanol into plant-derived oil. The new technology requires smaller amounts of methanol and alkali catalysts than conventional technologies. In addition, the new technology makes water removal facilities unnecessary. JCN Network - January 22, 2007.

    Finland's Metso Paper and SWISS COMBI - W. Kunz dryTec A.G. have entered a licence agreement for the SWISS COMBI belt dryer KUVO, which allows biomass to be dried in a low temperature environment and at high capacity, both for pulp & paper and bioenergy applications. Kauppalehti - January 22, 2007.

    Record warm summers cause extreme ice melt in Greenland: an international team of scientists, led by Dr Edward Hanna at the University of Sheffield, has found that recent warm summers have caused the most extreme Greenland ice melting in 50 years. The new research provides further evidence of a key impact of global warming and helps scientists place recent satellite observations of Greenland´s shrinking ice mass in a longer-term climatic context. Findings are published in the 15 January 2008 issue of Journal of Climate. University of Sheffield - January 15, 2007.

    Japan's Tsukishima Kikai Co. and Marubeni Corp. have together clinched an order from Oenon Holdings Inc. for a plant that will make bioethanol from rice. The Oenon group will invest around 4.4 billion yen (US$40.17 million) in the project, half of which will be covered by a subsidy from the Ministry of Agriculture, Forestry and Fisheries. The plant will initially produce bioethanol from imported rice, with plans to use Hokkaido-grown rice in the future. It will produce 5 million liters per year starting in 2009, increasing output to 15m liters in 2011. The facility will be able to produce as much as 50,000 liters of bioethanol from 125 tons of rice each day. Trading Markets - January 11, 2007.

    PetroSun, Inc. announced today that its subsidiary, PetroSun BioFuels Refining, has entered into a JV to construct and operate a biodiesel refinery near Coolidge, Arizona. The feedstock for the refinery will be algal oil produced by PetroSun BioFuels at algae farms to be located in Arizona. The refinery will have a capacity of thirty million gallons and will produce 100% renewable biodiesel. PetroSun BioFuels will process the residual algae biomass into ethanol. MarketWire - January 10, 2007.

    BlueFire Ethanol Fuels Inc, which develops and operates carbohydrate-based transportation fuel production facilities, has secured capital liquidity for corporate overhead and continued project development in the value of US$15 million with Quercus, an environmentally focused trust. BlueFire Ethanol Fuels - January 09, 2007.

    Some $170 billion in new technology development projects, infrastructure equipment and construction, and biofuel refineries will result from the ethanol production standards contained the new U.S. Energy Bill, says BIO, the global Biotechnology Industry Organization. According to Brent Erickson, BIO's executive vice president "Such a new energy infrastructure has not occurred in more than 100 years. We are at the point where we were in the 1850s when kerosene was first distilled and began to replace whale oil. This technology will be coming so fast that what we say today won't be true in two years." Chemical & Engineering News - January 07, 2007.

    Scottish and Southern Energy plc, the UK's second largest power company, has completed the acquisition of Slough Heat and Power Ltd from SEGRO plc for a total cash consideration of £49.25m. The 101MW CHP plant is the UK’s largest dedicated biomass energy facility fueled by wood chips, biomass and waste paper. Part of the plant is contracted under the Non Fossil Fuel Obligation and part of it produces over 200GWH of output qualifying for Renewable Obligation Certificates (ROCs), which is equivalent to around 90MW of wind generation. Scottish & Southern Energy - January 2, 2007.

    PetroChina Co Ltd, the country's largest oil and gas producer, plans to invest 800 million yuan to build an ethanol plant in Nanchong, in the southwestern province of Sichuan, its parent China National Petroleum Corp said. The ethanol plant has a designed annual capacity of 100,000 tons. ABCMoneyNews - December 21, 2007.

    Mexico passed legislation to promote biofuels last week, offering unspecified support to farmers that grow crops for the production of any renewable fuel. Agriculture Minister Alberto Cardenas said Mexico could expand biodiesel faster than ethanol. More soon. Reuters - December 20, 2007.

    Oxford Catalysts has placed an order worth approximately €700,000 (US$1 million) with the German company Amtec for the purchase of two Spider16 high throughput screening reactors. The first will be used to speed up the development of catalysts for hydrodesulphurisation (HDS). The second will be used to further the development of catalysts for use in gas to liquid (GTL) and Fischer-Tropsch processes which can be applied to next generation biofuels. AlphaGalileo - December 18, 2007.

    According to the Instituto Brasileiro de Geografia e Estatística (IBGE), Brazil's production of sugarcane will increase from 514,1 million tonnes this season, to a record 561,8 million tonnes in the 2008/09 cyclus - an increase of 9.3%. New numbers are also out for the 2007 harvest in Brazil's main sugarcane growing region, the Central-South: a record 425 million tonnes compared to 372,7 million tonnes in 2006, or a 14% increase. The estimate was provided by Unica – the União da Indústria de Cana-de-Açúcar. Jornal Cana - December 16, 2007.

    The University of East Anglia and the UK Met Office's Hadley Centre have today released preliminary global temperature figures for 2007, which show the top 11 warmest years all occurring in the last 13 years. The provisional global figure for 2007 using data from January to November, currently places the year as the seventh warmest on records dating back to 1850. The announcement comes as the Secretary-General of the World Meteorological Organization (WMO), Michel Jarraud, speaks at the Conference of the Parties (COP) in Bali. Eurekalert - December 13, 2007.

    The Royal Society of Chemistry has announced it will launch a new journal in summer 2008, Energy & Environmental Science, which will distinctly address both energy and environmental issues. In recognition of the importance of research in this subject, and the need for knowledge transfer between scientists throughout the world, from launch the RSC will make issues of Energy & Environmental Science available free of charge to readers via its website, for the first 18 months of publication. This journal will highlight the important role that the chemical sciences have in solving the energy problems we are facing today. It will link all aspects of energy and the environment by publishing research relating to energy conversion and storage, alternative fuel technologies, and environmental science. AlphaGalileo - December 10, 2007.

    Dutch researcher Bas Bougie has developed a laser system to investigate soot development in diesel engines. Small soot particles are not retained by a soot filter but are, however, more harmful than larger soot particles. Therefore, soot development needs to be tackled at the source. Laser Induced Incandescence is a technique that reveals exactly where soot is generated and can be used by project partners to develop cleaner diesel engines. Terry Meyer, an Iowa State University assistant professor of mechanical engineering, is using similar laser technology to develop advanced sensors capable of screening the combustion behavior and soot characteristics specifically of biofuels. Eurekalert - December 7, 2007.

    Lithuania's first dedicated biofuel terminal has started operating in Klaipeda port. At the end of November 2007, the stevedoring company Vakaru krova (VK) started activities to manage transshipments. The infrastructure of the biodiesel complex allows for storage of up to 4000 cubic meters of products. During the first year, the terminal plans to transship about 70.000 tonnes of methyl ether, after that the capacities of the terminal would be increased. Investments to the project totaled €2.3 million. Agrimarket - December 5, 2007.

    New Holland supports the use of B100 biodiesel in all equipment with New Holland-manufactured diesel engines, including electronic injection engines with common rail technology. Overall, nearly 80 percent of the tractor and equipment manufacturer's New Holland-branded products with diesel engines are now available to operate on B100 biodiesel. Tractor and equipment maker John Deere meanwhile clarified its position for customers that want to use biodiesel blends up to B20. Grainnet - December 5, 2007.

    According to Wetlands International, an NGO, the Kyoto Protocol as it currently stands does not take into account possible emissions from palm oil grown on a particular type of land found in Indonesia and Malaysia, namely peatlands. Mongabay - December 5, 2007.

    Malaysia's oil & gas giant Petronas considers entering the biofuels sector. Zamri Jusoh, senior manager of Petronas' petroleum development management unit told reporters "of course our focus is on oil and gas, but I think as we move into the future we cannot ignore the importance of biofuels." AFP - December 5, 2007.

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Friday, January 25, 2008

Coal's deep trouble makes biomass highly attractive

Coal is not well. Serious supply constraints in Australia, a major power crisis in South Africa shutting down big mines, and shortages in China on record domestic demand, prompting the country to halt all exports, have pushed up prices to records. Analysts are very bullish on coal not just for the immediate future, but for the coming years. This automatically makes biomass an attractive alternative. The green fuel is no longer merely interesting for its capacity to reduce carbon emissions, it has become a feasible alternative to coal on purely commercial grounds. Those who can tap into the niche market could be doing a good deal.

Let's do the math, but take into account that data for biomass price estimates are rudimentary and freight rates for the bulky fuel would be difficult to assess. We compare South African coal - more than a quarter of Europe's energy coal is shipped from Richards Bay - with prices for palm kernel shells, a biomass fuel that is being co-fired routinely by several European power producers. Palm kernel shells (PKS) are a waste residue from palm fruit processing; they are easy to ship, don't need to be densified and can be readily co-fired with coal (for PKS fuel properties, see the IEA Bioenergy Task 32 - Biomass Combustion and Co-firing and its databases on biomass fuels).

  • European contracts for South African coal from Richards Bay for delivery to Amsterdam-Rotterdam-Antwerp with settlement next year rose to $112.25 per metric ton today. Spot prices for FOB deals have been consistently hovering around $100/ton for months, and have been higher than that for most contracts since the beginning of this year.
  • Coal at Richards Bay has an average heating value of 25.1 Gj/ton. So today's price comes down to $4.427/Gj, which is high by any means, but still cheaper than continental natural gas.
  • Palm kernel shells from Nigeria, Africa's largest producer, fetch farmgate prices of $6.45/ton. Biopact has an FOB quote for 20,000 tons at $40 per ton, for dry PKS, shipped out from Port Harcourt. It would seem that $40 per ton is high, compared to such a low farmgate price, but we take it as an indicator of inefficient logistics in Nigeria - we can imagine it isn't easy to collect PKS from plantations inland and to transport it over bad roads to port. So we take the FOB price as such (negotiations would certainly push it down a bit).
  • Dry palm kernel shells have a heating value of around 21 Gj/ton. So the $40/ton price would be equivalent to $1.904/Gj. A major competitive edge over South African thermal coal.
  • However, freight rates would be considerably higher for PKS because of the much lower bulk density of the biomass fuel (750kg/m³) compared with Richards Bay coal (around 1300kg/m³).
  • Freight rates for dry bulk goods have seen records over the past year, but have crashed recently on fears of a global recession (see chart of the Baltic Dry Index, the most often quoted index for commodity freight rates; click to enlarge). So it's a bit tricky to estimate prices. We would however guesstimate, given the fact that the difference in the FOB price between coal and PKS is so big, even much higher freight rates would not close the price gap between the two fuels anywhere soon. We averaged shipping prices for grains with a similar bulk density (around 750kg/m³), and find PKS would still be considerably cheaper at their destination: Amsterdam-Rotterdam-Antwerp.
  • Add that the distance between Port Hartcourt and Antwerp (4419 nautical miles) is considerably shorter than that between Richards Bay and Antwerp (7,033 nautical miles). So this would largely offset higher freight rates for PKS. On the other hand, handling procedures and other supply chain steps for such a new fuel like PKS are probably untested and inefficient at the moment. This would add some to the price.
  • Finally, it is important to note that co-firing renewable biomass yields added value for power producers, because the fuel reduces carbon emissions - this added value can be expressed in many forms: green electricity certificates, carbon credits, etc...
In short, it seems like palm kernel shells from Nigeria could beat several contracts for coal from South Africa. If coal's problems persist over the coming years, similar forms of biomass could begin to find a niche as a commercially viable alternative fuel source. Supply chains and logistical infrastructures are virtually non-existent (some current biomass trade routes pictured in the map) which means a dedicated investment in these chains in places where a secure biomass supply is available, could lower prices still further.

References on which we based our guesstimation can be found below:
:: :: :: :: :: :: :: ::

Coal in trouble:
Bloomberg: Coal Rises the Most in Three Weeks as South African Mines Shut - January 25, 2008.

Reuters: S.Africa export coal to be kept for domestic - January 24, 2008.

AP: China Halts Coal Exports Amid Shortage - January 26, 2008.

Times Online: Coal, and not gold, should be the real concern - January 26, 2008.

Mining Weekly: More coal price increases on the way, says senior analyst - January 25, 2008.

Fairfield (Australia): Spot the boom as coal price soars - January 25, 2008.

Reuters: China may delay coal exports on power shortages - January 24, 2008.

News about spot prices, discussion of several contracts:

Reuters: Richards Bay, DES ARA coal prices rise - January 8, 2008.

Reuters: RPT-PREVIEW-Japan-Australia '08 thermal coal price record-bound - January 24, 2008.

Freight costs:
Coal Portal: Freight rates [subscription req'd].

The Baltic Dry Index, which measures shipping costs for commodities.

Example list of concrete freight rates for grains, per ton, over the past months and years - one company; we compared prices over at different charterers.

Co-firing PKS and biomass in general:

Essent Energy's Amer power plant in the Netherlands is one of the facilities in Europe co-firing PKS and coal.

Two interesting case studies about this practise can be found here:

IEA Bioenergy Task 38: "Greenhouse Gas Balances of Biomass Import Chains for “Green” Electricity Production in The Netherlands" [*.pdf], IEA Bioenergy Task 38, Greenhouse Gas Balances of Biomass and Bioenergy Systems.

IEA Bioenergy Task 40: "Sustainable International Bioenergy Trade: securing an international supply and demand", IEA Bioenergy Task 40: international bioenergy trade, 2006.

On co-firing biomass in general, see the IEA's Bioenergy Task 32, entirely devoted to the topic. See especially its co-firing database of 150 major power producers who burn biomass alongside coal. Data about fuel properties for different types of biomass can be found in these databases.

Farmgate price estimates for crop residues in Nigeria can be found here:

S.O. Jekayinfa, and V. Scholz, "Assessment of Availability and Cost of Energetically Usable Crop Residues in Nigeria", Tropentag 2007, University of Kassel-Witzenhausen and University of Göttingen, October 9-11, 2007, Conference on International Agricultural Research for Development.

The quote we received for the 20,000 tons of PKS comes from a Nigerian agribusiness company based in Owerri in Imo State. Contact us for details.


Blogger David B. Benson said...

Of course the biomass could be dconverted in Nigeria to biocoal, via hydrothermal carbonization. This provides some local process heat (for electric power generation, for example) and increases the density to that of coal.

Can you find a way to encourage this?

11:59 PM  

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