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    U.S. oil prices and Brent crude rocketed to all-time highs again on a record-low dollar, tensions in the Middle East and worries over energy supply shortages ahead of the northern hemisphere's winter. Now even wealthy countries like South Korea are warning that the record prices will damage economic growth. In the developing world, the situation is outright catastrophic. Korea Times - October 26, 2007.

    Ethablog's Henrique Oliveira, a young Brazilian biofuels business expert, is back online. From April to September 2007, he traveled around Brazil comparing the Brazilian and American biofuels markets. In August he was joined by Tom MacDonald, senior alcohol fuels specialist with the California Energy Commission. Henrique reports about his trip with a series of photo essays. EthaBlog - October 24, 2007.

    Italy's Enel is to invest around €400 mln in carbon capture and storage and is looking now for a suitable site to store CO2 underground. Enel's vision of coal's future is one in which coal is used to produce power, to produce ash and gypsum as a by-product for cement, hydrogen as a by-product of coal gasification and CO2 which is stored underground. Carbon capture and storage techniques can be applied to biomass and biofuels, resulting in carbon-negative energy. Reuters - October 22, 2007.

    Gate Petroleum Co. is planning to build a 55 million-gallon liquid biofuels terminal in Jacksonville, Florida. The terminal is expected to cost $90 million and will be the first in the state designed primarily for biofuels. It will receive and ship ethanol and biodiesel via rail, ship and truck and provide storage for Gate and for third parties. The biofuels terminal is set to open in 2010. Florida Times-Union - October 19, 2007.

    China Holdings Inc., through its controlled subsidiary China Power Inc., signed a development contract with the HeBei Province local government for the rights to develop and construct 50 MW of biomass renewable energy projects utilizing straw. The projects have a total expected annual power generating capacity of 400 million kWh and expected annual revenues of approximately US$33.3 million. Total investment in the projects is approximately US$77.2 million, 35 percent in cash and 65 percent from China-based bank loans with preferred interest rates with government policy protection for the biomass renewable energy projects. Full production is expected in about two years. China Holdings - October 18, 2007.

    Canadian Bionenergy Corporation, supplier of biodiesel in Canada, has announced an agreement with Renewable Energy Group, Inc. to partner in the construction of a biodiesel production facility near Edmonton, Alberta. The company broke ground yesterday on the construction of the facility with an expected capacity of 225 million litres (60 million gallons) per year of biodiesel. Together, the companies also intend to forge a strategic marketing alliance to better serve the North American marketplace by supplying biodiesel blends and industrial methyl esters. Canadian Bioenergy - October 17, 2007.

    Leading experts in organic solar cells say the field is being damaged by questionable reports about ever bigger efficiency claims, leading the community into an endless and dangerous tendency to outbid the last report. In reality these solar cells still show low efficiencies that will need to improve significantly before they become a success. To counter the hype, scientists call on the community to press for independent verification of claimed efficiencies. Biopact sees a similar trend in the field of biofuels from algae, in which press releases containing unrealistic yield projections and 'breakthroughs' are released almost monthly. Eurekalert - October 16, 2007.

    The Colorado Wood Utilization and Marketing Program at Colorado State University received a $65,000 grant from the U.S. Forest Service to expand the use of woody biomass throughout Colorado. The purpose of the U.S. Department of Agriculture grant program is to provide financial assistance to state foresters to accelerate the adoption of woody biomass as an alternative energy source. Colorado State University - October 12, 2007.

    Indian company Naturol Bioenergy Limited announced that it will soon start production from its biodiesel facility at Kakinada, in the state of Andhra Pradesh. The facility has an annual production capacity of 100,000 tons of biodiesel and 10,000 tons of pharmaceutical grade glycerin. The primary feedstock is crude palm oil, but the facility was designed to accomodate a variety of vegetable oil feedstocks. Biofuel Review - October 11, 2007.

    Brazil's state energy company Petrobras says it will ship 9 million liters of ethanol to European clients next month in its first shipment via the northeastern port of Suape. Petrobras buys the biofuel from a pool of sugar cane processing plants in the state of Pernambuco, where the port is also located. Reuters - October 11, 2007.

    Dynamotive Energy Systems Corporation, a leader in biomass-to-biofuel technology, announces that it has completed a $10.5 million equity financing with Quercus Trust, an environmentally oriented fund, and several other private investors. Ardour Capital Inc. of New York served as financial advisor in the transaction. Business Wire - October 10, 2007.

    Cuban livestock farmers are buying distillers dried grains (DDG), the main byproduct of corn based ethanol, from biofuel producers in the U.S. During a trade mission of Iowan officials to Cuba, trade officials there said the communist state will double its purchases of the dried grains this year. DesMoines Register - October 9, 2007.

    Brasil Ecodiesel, the leading Brazilian biodiesel producer company, recorded an increase of 57.7% in sales in the third quarter of the current year, in comparison with the previous three months. Sales volume stood at 53,000 cubic metres from August until September, against 34,000 cubic metres of the biofuel between April and June. The company is also concluding negotiations to export between 1,000 to 2,000 tonnes of glycerine per month to the Asian market. ANBA - October 4, 2007.

    PolyOne Corporation, the US supplier of specialised polymer materials, has opened a new colour concentrates manufacturing plant in Kutno, Poland. Located in central Poland, the new plant will produce colour products in the first instance, although the company says the facility can be expanded to handle other products. In March, the Ohio-based firm launched a range of of liquid colourants for use in bioplastics in biodegradable applications. The concentrates are European food contact compliant and can be used in polylactic acid (PLA) or starch-based blends. Plastics & Rubber Weekly - October 2, 2007.

    A turbo-charged, spray-guided direct-injection engine running on pure ethanol (E100) can achieve very high specific output, and shows “significant potential for aggressive engine downsizing for a dedicated or dual-fuel solution”, according to engineers at Orbital Corporation. GreenCarCongress - October 2, 2007.

    UK-based NiTech Solutions receives £800,000 in private funding to commercialize a cost-saving industrial mixing system, dubbed the Continuous Oscillatory Baffled Reactor (COBR), which can lower costs by 50 per cent and reduce process time by as much as 90 per cent during the manufacture of a range of commodities including chemicals, drugs and biofuels. Scotsman - October 2, 2007.

    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.


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Monday, October 29, 2007

Malaysian palm oil surges as crude approaches $100 - will the sector expand overseas?

Crude palm oil futures contracts traded on the Malaysian derivatives exchange extended their record run after crude oil prices hit new highs in Asian trading today. According to Ben Santoso, DBS Vickers' plantation analyst in Indonesia, palm oil demand will outpace supply as rising oil prices will further spark interest in biofuels. Palm oil can be transesterified into biodiesel or used as a feedstock for next generation 'green diesel' (see NExBTL and palm oil). Over the longer term, its vaste waste biomass streams can be converted into cellulosic biofuels.

At midday, the benchmark contract for January delivery was up 70 ringgit at 2,870 ringgit (€597/$859) per metric ton. New York's main futures contract, light sweet crude for December delivery surged past $93 per barrel on mounting tensions in the Middle East.

The record prices are good news for the millions of small holders who grow the crop in South East Asia. But palm oil is also a basic foodstuff for the poor across the world, who spend most of their small budgets on food, including a large fraction on vegetable oils necessary to a healthy diet. For them, the surge is disastrous. However, a long term solution might be to expand the sector into regions where most of these poor live - that is rural Africa - and to have them actively participate in this booming market as small holders. This is more sensible than keeping them dependent on food hand outs from the World Food Program. However, it is only a long term ideal and doesn't tackle the current crisis. A temporary moratorium on palm oil's use for biofuels might be in order.

But there is more to the high price than the potential for biofuels alone. "Adverse weather, limitation of cultivated land as well as persistently high crude oil prices are issues which will be reflected in stronger prices", Santoso added. Malaysia and Indonesia together account for more than 85 percent of global palm oil production but both countries are expected to lower palm oil output this year after major palm oil-producing areas were hit by severe flooding early this year.

Besides these factors, demand for palm oil, especially from booming economies like China and India, is surging. The combination of all these factors - limited land in SE Asia, continuing high demand from rapidly developing economies, and the potential for biofuels - makes that the most effective long term strategy to reduce the price and to limit the damage to the poor, could be an expansion of the sector into Africa and Latin America, especially in zones where most of the world's 854 food insecure people live (that is in rural Africa). This would bring social and economic development and jobs to these rural poor, provided a small holder model is implemented. Their participation in a sustainable new market might be a more attractive solution to poverty alleviation, than keeping them dependent on food hand outs by the World Food Program.

Both Africa and Latin America have a very large unexplored potential for the cultivation of the crop (map, click to enlarge):
:: :: :: :: :: :: :: :: :: ::

The combination of a healthy long term demand outlook and the double use of palm oil as food and fuel, makes the world's most productive first generation biofuel crop virtually irresistible for investors. However, persistent high prices may initiate a 'gold-rush' type of investment into the sector, which could damage the sustainability of the crop.

Earlier, a Chinese company announced it is studying an investment of not less than $1 billion into a 3 million hectare palm oil and rubber plantation in the Democratic Republic of Congo - a highly problematic announcement given Congo's pristine rainforests which have been spared most of the palm oil driven destruction seen in Indonesia and Malaysia. Besides half a million barrels of oil equivalent energy, the Chinese project would bring 'a hundred thousand jobs' (previous post).

Soon after, Beijing officially announced a $5 billion investment into Congo's natural resource sector and into its infrastructures, to the surprise of institutions like the World Bank (earlier post).

New palm oil varieties, amongst them a cold-tolerant cultivar that has been trialed with success in the highlands of Kenya, offer major opportunities for social and economic development elsewhere in Africa than in the typical high potential zones. The crop requires relatively low inputs and upfront investments, and is highly suitable for a small holder model. As it is harvested manually and a perennial crop, there is no need for expensive farm equipment - which is often a major bottleneck in attempts to have small farmers participate in other crop markets.

The average price of crude palm oil for 2007 is estimated at 2,450 ringgit (€510/$734) before it accelerates to 2,650 ringgit (€551/$794) next year, added a market analyst.

References:
Forbes: Malaysia's palm oil prices surge as crude crosses 93 dollars - October 29, 2007.

Biopact: DR Congo: Chinese company to invest $1 billion in 3 million hectare oil palm plantation - July 28, 2007

Biopact: China 'opening up' Congo for minerals, bioenergy with massive $5 billion loan - September 20, 2007

Biopact: UN Special Rapporteur on the Right to Food to call for a 5-year moratorium on first generation liquid biofuels - October 25, 2007

Biopact: Neste Oil supports sustainable palm oil for next-generation biodiesel - October 19, 2007



posted by Biopact team at 2:44 PM  

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