European project looks at nanotechnology to develop CO2 capturing membranes

A new European project called 'Nanomembranes against Global Warming' (NanoGLOWA) is attempting to find a new way of capturing CO2 emissions from power plants with the help of nanotechnology. Nanostructured membranes could reduce carbon capture's energy consumption and costs, making it more attractive than current technology (earlier post). The €12 million NanoGLOWA project receives the bulk of its funding from the European Commission, and unites 26 organisations from 14 EU member states.

Europe produces one gigaton of carbon dioxide annually and wafts it into the atmosphere. Around one-third of this stems from fossil-fuelled power plants. Carbon capture and storage (CCS) could reduce those emissions by up to 90%. The idea is to store the carbon thus captured underground in, for example, empty gas fields and aquifers.

Biopact follows developments in CCS technology because it allows for the creation of radically carbon-negative bioenergy and biofuels (more here, here and here, and references in these texts).

Existing carbon capture methods include absorption and non-selective cooling. During the absorption process, flue gasses - mainly consisting of nitrogen, water, dust particles and, of course, CO2 - flow through several baths in which the carbon dioxide is bound with amines. However, this 'scrubbing' technology is far from being energy- or cost-effective, as it can consume up to 25% of the energy actually produced, and large installations as well as chemicals are needed, says the NanoGLOWA team.

CO2 separation through membranes, on the other hand, would consume only up to 8% of the energy produced, and bring down installation costs. However, suitable membranes must first be developed (interesting flash presentation of current production methods).

The NanoGLOWA project is comprehensive in scope. It will develop, produce, and integrate nano-engineered membranes in power plants and test their carbon capturing effectiveness (project overview, schematic, click to enlarge).

Currently, the following five types of nanomembranes are simultaneously being designed in the framework of the project:
energy :: sustainability :: climate change :: carbon dioxide :: carbon capture and storage :: biofuels :: biomass :: bioenergy with carbon storage :: membranes :: nanotechnology ::

• polymer membranes: diffusion transport membranes, block copolymers; fixed-site carrier-type membranes, cellulose acetate or polyamides; ionomeric high voltage membranes, electrically modified materials;
• carbon membranes: carbon molecular sieve membranes;
• ceramic membranes

While polymeric membranes are cheap, they seem to dilate when brought into contact with CO2 at higher pressure, so that selectivity and hence efficacy may be significantly reduced. Carbon membranes, on the other hand, are well developed and have good selectivity, says the NanoGLOWA team, but they may be contaminated by the power station's flue gasses.

Finally, ceramic membranes are very stable and have great longevity as they respond well to extreme conditions such as high temperatures. After development in academic laboratories, the membranes will be tested in pilot power plants in the fifth and final year of the project (2011).

Membrane processes are characterized by the fact that a feed stream is divided into two streams, which are called the retentate stream and the permeate stream. Either of these streams can be the ‘product’ of the process. The membrane itself is the central part of every process and can be seen as a filter between two phases. The actual separation is achieved because transport of one component through the membrane is faster than the other component(s).

The actual performance of a membrane is determined by two different factors, namely its permeability and selectivity. The permeability is defined as the volume of gas flowing through the membrane per unit of area and time. The selectivity, also known as the separation factor, is determined by the difference in permeability of the components of interest. If, for instance, the permeability of component A is three times higher than component B, the permeate stream contains three times more of component A and the selectivity from A over B is 3.

The permeability of gases and therefore selectivity between different gasses depends strongly on the gas and type of material used for the membrane. Membranes can be constructed from different starting materials. The two main classes in membrane science are organic membranes (e.g. plastics, carbon) and inorganic membranes (ceramics). Both classes of material are subject of investigation in NanoGLOWA.


The NanoGLOWA project unites 26 organisations, including six universities and five power plant operators, as well as industry and small and medium-sized enterprises (SMEs) from 14 European countries. The project receives €7 million in funding from the European Commission under the Sixth Framework Programme. Total costs amount to €12.5 million.

References:
Cordis: Nanotechnology could help bring down costs of CO2 capture - September 25, 2007.

NanoGLOWA: How membranes are made - flash animation.

Biopact: New plastic-based, nano-engineered CO2 capturing membrane developed - September 19, 2007

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Total Petrochemicals and Galactic to build new bioplastics plant in Belgium

France's Total Petrochemicals and Belgium's Galactic have announced the signature of an agreement for the creation of a joint venture to develop a production technology for polylactic acid (PLA) bioplastics made from renewable biomass.

The project entails the construction of a pilot plant capable of producing 1,500 tonnes per year of PLA using a clean, innovative and competitive technology, to be developed by both partners. Based on the Galactic Escanaffles site, near Tournai (in Belgium's 'Agrifood Valley'), the plant is scheduled to come on stream in 2009.

The research and development phase, which will start at the same time as its construction, should last 4 to 5 years. Called Futerro, the new company will benefit from the support of the Total Petrochemicals Research Centre in Feluy. The ambitious research project is made possible by the financial support of the Walloon Region within the framework of the competitive hubs of the Walloon Marshall Plan.

Lactic acid is obtained from the fermentation of carbohydrates: either sugar (beet or cane) or starch (corn, wheat, potato or cassava). PLA is an aliphatic polyester obtained by polymerising this lactic acid (schematic, click to enlarge). The polymer is fully compostable, reduces carbon dioxide emissions compared to petroleum based plastics, and has found ready applications in the food packaging and textiles industry:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: sugar :: starch :: bioplastic :: polylactic acid :: Belgium ::

Total Petrochemicals’ objective with this PLA development project is to fulfil a growing demand for biodegradable and renewable plastics.

For Galactic, this new development will mean new outlets for lactic acid by turning it into feedstock for a new green chemistry.

Galactic is a Belgian company created in 1994 part of the Finasucre group - one of the top ten sugar producers - owning sugar refineries in Australia (Bundaberg Sugar), Belgium (Frasnes & Moerbeek) and Africa (Compagnie Sucrière). The Finasucre group represents an annual sugar production of 1.3 million tons.

Established with an initial production capacity of 1,500 tons of lactic acid and lactates, Galactic rapidly expanded its production to more than 18,000 tons today.

References:
Total Petrochemicals: Total Petrochemicals and Galactic venture into bioplastics production [*.pdf] - September 25, 2007.

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Community biogas plants preferred waste management option amongst citizens of Kochi, India

Highlighting the need to decentralise solid waste management, a study conducted by the SCMS Group's Centre for Socio-Economic Research in Kochi, a city of 1.5 million in India's southern Kerala state, found that the majority of respondents in the city preferred setting up community biogas plants for waste treatment.

Waste management is a huge problem in most of the developing world's rapidly growing cities. A lack of waste treatment technologies and policies often results in a very tangible health risk to the population. Organising integrated waste management requires an insight into how people deal with household waste. Researchers from the SCMS therefor conducted their survey, with the objective to analyse the best financial support and intervention strategies, and to see how different social classes should be approached. Other developing world cities could benefit from similar social science approaches to discover how waste management should be organised most effectively (also have a look at the enormous waste problem in Africa's second largest city, Kinshasa, and its choice for biogas - earlier post).

The basic survey was conducted in 832 households in 15 wards. The areas included Elamakkara North, Thrikkanarvattom, Karukappilli, Kaloor South, Kathrikadavu, Elamkulam, Thammanam, Kadavanthra, Vaduthala East, Puthukkalavattom, Edapally, Devankulangara, Vennala, Chalikkavattom and Thevara (map, click to enlarge).

We should take into account the minute details of the waste management problem in order to solve it - A. P. M. Mohammed Hanish, Kochi District Collector

It was found that 488 households preferred biogas plants while 186 voted for vermi-compost units. Interestingly, 19 per cent of the respondents said that they did not want assistance for installation of biogas or vermi-compost units, said Radha Thevannoor, project co-ordinator and director of the SCMS School of Technology and Management.

Preference for biogas plant installation was found high among people in the income category of Rs 5,000 (€89/$126) and below and those in the category between Rs5,000 and Rs15,000.

The low income group seems to be more practical in the case of waste management. [...] Many of the people whom we approached were of the opinion that it is the government's responsibility to manage the segregation and disposal of waste. Some of them were not even ready to consider the segregation of waste at home - Poornima Narayan and N. Rajagopal, Centre for Socio-Economic Research

Pointing towards the public perception on the feasibility of various intervention strategies on waste disposal, Thevannoor said that the majority preferred financial aid rather than technical help from the part of the Government.

Moreover, it was found that 80.5 per cent of the total respondents preferred common facilities than individual ones. The responses in favor of communal biogas plants were high among all the income categories:
sustainability :: social sciences :: waste management :: biomass :: biogas :: anaerobic digestion :: energy :: India ::

N. Rajagopal and Poornima Narayan, research team members, said that 45.9 per cent respondents depended on organised groups for waste disposal while 27.6 per cent dumped the waste in Corporation bins.

The study found that waste generated from organic matter/ vegetables constituted 31 percent of the total waste followed by garden waste with 20 percent. Plastic and rubber constituted 12 per cent of the total waste.

The researchers observed that there was no system of separating organic, inorganic and recyclable waste at the household level.

Residents also supported Kudumbasree units engaged in waste collection. Lack of space for setting up bio-gas plants was found in apartments in the city.

Recommending that financial intervention strategies on waste management should be primarily targeted at middle and lower income categories, the team suggested setting up model community biogas plants in areas coming under the Kochi Corporation, which is responsible for waste treatment.

References:
Newindpress: Community biogas plants mooted - September 25, 2007

Newindpress: Project report on waste management submitted - September 25, 2007

The Hindu: Study finds preference for biogas plants - September 25, 2007.

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Senate committee approves funding for O2 Diesel's development and demonstration of novel biofuel blends

O2Diesel Corporation, a developer of clean burning renewable ethanol-diesel fuel blends, announced today that it has been included in the fiscal year 2008 Defense Appropriations bill to continue and expand existing O2Diesel O28 demonstration projects to develop clean, renewable alternative diesel fuels at Nellis AFB and Air National Guard Facilities in Nevada. The DOD Appropriations bill is pending consideration by the full Senate, and must then be reconciled with the House Defense Appropriations bill in conference.

O2Diesel has been under contract to develop a new fuel for the Department of Defense that will be composed of at least 20% renewable sources including the company's patented and proprietary biomass-derived stabilizing additive, and renewable ethanol. This fuel, when finalized, will help DOD facilities meet local air quality compliance requirements and strengthen its commitment to reducing the USA's dependency on foreign oil imports.

Rigorous testing of the new biofuel is currently underway at the Southwest Research Institute in San Antonio, Texas, a nationally recognized research facility. The research will be followed by an expanded in-use fleet demonstration at Nellis Air Force Base in Las Vegas where the company's O2Diesel(TM) fuel has been running successfully for the past 38 months.

O2Diesel(TM), is an extensively tested blend of 7.7vol% fuel grade ethanol treated with the company's patented and proprietary biomass-derived stabilizing additive with any available diesel fuel, which significantly reduces smoke, PM, CO, NOx emissions (table, click to enlarge) from a host of centrally-fueled diesel-powered equipment, including urban buses, and with no engine modifications. O28 is a renewable based biodiesel fuel consisting of O2Diesel(TM) and B20 Biofuel:
energy :: sustainability :: ethanol :: biodiesel ::bioenergy :: biofuels :: biomass :: emissions :: United States ::

Since 2002, the U.S. Congress earmarked almost $5 million in funds for a US Air Force comprehensive research project that evaluates O2Diesel as a fuel for non-tactical military vehicles and other diesel-powered equipment such as electric generators. Nellis Air Force Base and the Nevada Air National Guard became the first military users of O2Diesel in demonstrations with their fleets. In addition, O2Diesel is developing a new environmentally-friendly fuel for DoD that will contain at least 20% renewable content, including O2Diesel's proprietary additive.

In order to gain acceptance in the marketplace, it is necessary for motor fuels to meet a consensus-based fuel specification through organizations such as the American Society for Testing & Materials (ASTM) and the Canadian General Standards Board (CGSB). O2Diesel is a leading participant in setting specifications ethanol diesel fuels.

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Analysts uncertain about palm oil price outlook

Three leading palm oil market analysts each offer a substantially different medium term outlook for the commodity. These differences are the result of uncertainties about biofuel subsidies in the US, demand in Asia, the development of other vegetable oil markets and the outlook for crude oil.

Vegetable oils are increasingly used in biofuels as crude oil prices have tripled to a record in five years. US farmers have planted more corn to meet demand for ethanol, pushing sowings of soybeans to a 12-year low. Malaysia and Indonesia account for about 90 percent of palm oil output, the most competitive vegetable oil. Palm oil on the Malaysian Derivatives Exchange, which trades the global benchmark, touched a record 2,764 ringgit on June 6 and has averaged 59 percent more since January than a year ago. The most active contract gained 1.4 percent to 2,606 ringgit on Friday. Soybean oil, palm oil's main competitor, reached a 23-year high of 40.49 cents on Tuesday.

Up on soaring demand
Dorab Mistry, a director at Godrej International, thinks palm oil futures in Malaysia may advance as much as 15 percent during the next year because of rising demand for biofuels and a shortfall in supplies of other vegetable oils. Prices might climb to up to 3,000 ringgit, or $870, a ton in the year ending Sept. 30, 2008, Mistry said during a conference in Goa. Earlier this year, he had predicted that prices would surpass 2,500 ringgit this year. Mistry has traded vegetable oils since 1976.

Demand for vegetable oils in the year to September 2008 may rise by 5 million tons, while supply may increase by 3.9 million tons, Mistry thinks. This incremental demand includes two million tons for biofuels and three million for food purposes.

Down, on US subsidy cut
For his part, James Fry, managing director of London-based LMC International and a leading gobal palm oil market analyst, told reporters at a conference in India that palm oil prices could ease from January if the United States cuts incentives it gives to biofuel producers.

Fry thinks palm oil prices are likely to reach 2,000 to 2,100 ringgit per tonne by March, down from the current levels of around 2,600 ringgit per tonne. The U.S. may cut subsidies to its biofuel units and if it does that by January global palmoil prices will start softening

The subsidy the US government gives is meant to encourage local soybean oil being converted into biofuel. But many people are importing palm diesel instead of using local soyoil to make biofuels. They import palm diesel, mix it with 1 percent local diesel, make the blend, that is biofuel, and collect the subsidy. Analysts have been expecting the US to stop this misuse of the subsidy for the last six months:
energy :: sustainability :: ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: palm oil :: crude oil ::

Steady growth, stable prices
Finally, according to Thomas Mielke, chief editor of Oil World, a trade publication, global palm oil production may rise to a record 41 million tons in the year to September 2008, from a probable 37.38 million tons this year, as crops recover from the dry season in Malaysia and Indonesia. He said he expected prices to trade between 2,300 and 2,600 ringgit in the next 12 months.

Mielke thinks palm oil can partly fill the gap created by insufficient production growth in soybeans, canola and sunflower.

References:
International Herald Tribune: Price of palm oil predicted to leap - September 24, 2007.

Reuters: Palm prices seen falling if U.S. cuts biofuel subsidy - September 23, 2007.

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NY Times finally understands the need for a 'Biopact'

At last, a mainstream publication has begun to understand the logic behind the Biopact. Writing for the New York Times, Jerry Garrett says what we have been saying all along: why should the US and the EU heavily subsidize and protect their own inefficient biofuels that are too costly to be competitive, that do not reduce greenhouse gas emissions and that rely on food crops, while down South there are huge countries in need for development with an abundance of resources making it possible to produce highly efficient biofuels that substantially recude emissions, that don't rely on food crops, that are competitive with oil (very much so at current prices) and that may bring jobs and rural development to the poorest?

At last. We replicate and augment the piece here in full, because it is quite significant to see a major opinion maker supporting our case:

Here’s an interesting bit of scientific research, writes Garrett, courtesy of a recent report from the Organization for Economic Co-operation and Development, a Paris-based global economic think tank [note, the report was not by the OECD, but that's a detail], on the difference in greenhouse gas emissions from cars burning gasoline-only fuel and fuels made from various forms of ethanol:

• Corn ethanol: 0-3 percent greenhouse gas emission reduction.
• Sugar cane ethanol: 50-70 percent reduction.
• Cellulosic ethanol: 90-plus percent.

But wait, there’s more:

Which form of ethanol production is the United States government (and its taxpayers) subsidizing? Corn, of course.

Which form of ethanol production does the United States government levy a 53-cents-a-gallon import tariff on? Sugar cane, naturally.

And which form of ethanol production is under-funded, under-researched, and furthest from commercial production? The cleanest choice, obviously.

Do you see a pattern here?

Corn ethanol is also the culprit that raises costs of corn-based food crops, because food production is being diverted to ethanol production. Corn ethanol production also affects the price of other food crops such as wheat, barley and soybeans because it is economically more attractive for farmers to switch from those crops to subsidized corn-raising. Corn ethanol is also only marginally less costly (some critics think it may even cost more) to manufacture than a gallon of gasoline.

The cheapest, easiest to obtain and most readily available form of ethanol available is sugar cane ethanol from Brazil. In fact, Stratfor, a strategic planning newsletter, pointed out that Brazil “has developed a fuel that reduces greenhouse gas emissions and comes from a place that is politically stable and friendly to both the European Union and United States.” And Brazil has a surplus of it, ready to export (more here):
energy :: sustainability :: ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: subsidies :: tariffs :: trade :: Brazil :: US ::

Why not do something right now to alleviate our fossil fuel energy addiction? Or should we wait until, say, 2022 when domestic ethanol production is projected to be ramped up, as a Bush administration target suggests? Until 2022, should we continue to meet our nation’s energy needs via our many friends in the Middle East? (This is working so well for us, so far.)

Elsewhere in the OECD’s scathing indictment of the corn ethanol industry, it called for an end to government subsidies to those growing corn for ethanol. It suggested the European Union act immediately to end “set-asides,” wherein part of the available farm land is left fallow for a year or two, to let the soil rest, and to keep grain prices artificially high by keeping it in shorter supply. The set-asides make especially little sense this year, in view of a widespread drought, lower yield grain harvests, and a significant diversion of acreage planted for corn-as-food to ethanol production instead. The OECD said import tariffs on fuels, such as sugar cane ethanol, ought to be removed.

The report also suggested a ban on using food crops for ethanol production.

Ethanol isn’t fussy; it can be made any number of ways. And should meaningful cellulosic ethanol production ever get off the ground, it could easily be made from inedible crops like switchgrass or even garbage.

So why is America, in particular, insisting on making ethanol from the worst possible choice? It seems that our government’s only true interest in ethanol production lies in placating its agricultural lobby, which in turn is seeking to cash in on forced legislative mandates for domestic ethanol production.

References:
New York Times: Corn Ethanol: Biofuel or Biofraud? - September 24, 2007.

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Senegal in possible $2 billion biofuel & oil refinery deal with Energy Allied International

Senegal has been one of the leading forces in West-Africa calling for the development of a biofuels industry aimed at improving the energy security of the region and at boosting its agricultural sector.

Last year president Abdoulaye Wade initiated a 'Green OPEC' of sorts, the PANPP (Pays Africains Non-Producteurs de Pétrole), a coalition of African countries aiming to implement a biofuels strategy in order to overcome the catastrophic reliance on ever more expensive oil. He explained the urgency of the need for a switch to biofuels for non-oil producing African countries. Wade has also established a wider network of allies, amongst them Brazil and India, who are interested in prodiving technological, policy and financial support for the fledgling biofuels industry.

For Senegal, a long list of reasons makes biofuels a major opportunity. Some of the more important ones, as stressed by Wade in several opinion pieces:

• its agricultural sector, which suffers under false competition from EU/US subsidised farming (e.g. the cotton scandal) can be revived through biofuel crop production
  
• green fuels would strengthen energy security and reduce economic losses due to high import bills (poor countries in Africa spend up to between 10 and 15% of their GDP on oil imports; rising prices are truly disastrous for development - more here)
• a biofuels industry can reduce the push and pull factors that lead to the highly problematic rural exodus and further to (illegal) emigration to Europe (more here about the 'Return to Agriculture' program); Spain, the main recipient of illegal immigrants from Senegal, recently started cooperating with the African country on a concrete project in this context (here)
  
• biofuels can reduce poverty and food insecurity, as they promise to bring income and agricultural security to farmers (lack of income is the key driver of food insecurity; crop portfolio diversification strengthens the livelihoods of farmers); around 80% of Senegal's population is employed in agriculture (map)
  

Besides a strong set of policies and the need for access to biofuel technologies, attracting concrete investments is obviously the biggest requirement to kickstart a biofuel industry in the country. But Senegal has quite a few advantages making it an attractive destination for bioenergy investments: an abundance of natural resources (e.g. it only utilizes 18% of its potential arable land), relatively strong infrastructures, a large workforce, a stable investment climate and government, and a favorable geographical position (close to the EU and the US).

For these reasons, Texas-based consultancy Energy Allied International is helping Senegal draw up plans for a US$2 billion investment in a new oil refinery and biofuel power plant. Speaking to Reuters, CEO Mike Nassar said 'We are at a point where we have enough information right now to demonstrate that a new refinery in Senegal is viable, to produce 60,000 barrels a day of high-end quality products':
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: poverty alleviation :: rural development :: energy security :: Senegal ::

Jet fuel, diesel, butane and gasoline could be sold locally in sub-Saharan Africa and be exported to Europe and the United States, Nassar said in an interview after meeting Senegalese President Abdoulaye Wade.

'The president wants to see more and more investments to Senegal. He believes in the refinery and biofuel,' Nassar said. Senegal has no crude oil production of its own, so the new refinery would import heavy crude from sub-Saharan Africa's top producers Nigeria and Angola, Nassar said.

Senegal's energy ministry announced plans last month for Iran's national oil company to sell Senegal one year's supply of Iranian crude on preferential terms, take a stake in Senegalese state oil refiner SAR and increase SAR's capacity to 3 million tonnes a year from 1.2 million tonnes.

Nassar said the project his consultancy was investigating would not conflict with the Iranian plans. 'This particular (Iranian) project is taking the old refinery and modernising it to be able to produce some different products,' he said. He said there would be limited overlap as the bulk of output from the new refinery would be for export, while SAR produces primarily for the local market.

Nassar said the total cost of the oil refinery and biofuels plant would be nearly $2 billion, but he did not say who would be funding it. Senegal produces ground nuts, sugar cane and jatropha, which have both been suggested as possible sources of biofuel.

Image: Eighty percent of Senegal's population makes a living in agriculture; major crops grown are cotton and groundnuts. Both offer potential for biofuels and bioenergy.

References:
Reuters: US consultancy plans Senegal refinery, biofuel unit - September 25, 2007.

Biopact: Senegal's president explains the urgency of biofuels development in the South - November 02, 2006

Biopact: A closer look at Africa's 'Green Opec' - August 02, 2006

Biopact: Spain and Senegal to cooperate on biofuels as way to curb illegal migration - August 24, 2007

Biopact: Senegal in the spotlight: cooperation with Brazil, EU on bioenergy and migration - October 27, 2006

Biopact: Global South-South exchanges on biofuels growing rapidly - August 28, 2006

Biopact: Senegal and Brazil sign biofuel agreement to make Africa a major supplier - May 17, 2007

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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):
energy :: sustainability :: biomass :: bioenergy :: biofuels :: palm oil :: biodiesel :: Sabah :: Malaysia ::

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.

References:
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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