In the United States, Independence Day that is upon us, but around the world if “Energy Independence Day” is your preferred flavor, look at India and China.
Because if you want it, here it is, come and get it, biofuels that is, and especially of the advanced type. If you like it from waste, even better. Out of the east, the dual and sometimes dueling engines of biofuels growth are changing the pace and scope of investment not only in their own land, but they’re shaking up the feedstock mix and the pace of development around the globe.
And even more broadly at Asia-Pac, where the coverage is usually about palm oil but the story on the ground is a broadening regional commitment to investment that you can see in Thailand, Vietnam, Australia and out of the financing engines of Japan. The technology might be coming out of the US and the EU, but deployment is headed east. Never mind, everyone benefits from cleaner skies.
Yet, the course of clean fuels never did run smooth, and the scourge of advancement has been policy in India and the US-China trade war. It’s looking brighter in India, and you don’t need a weatherman to know that it’s gloomier these days on the trade front and agri-energy is at the heart of it.
Who’s in the lead right now? Probably India, for all its starts and stops and soaring ambitions and shortfalls. The type and number of specific projects in development there is reasonably breathtaking, and leads our coverage on Energy Independence Day. Let’s look at the key developments.
The highlights? National policy approval and major investments announced by Indian Oil, Bharat Petroleum, Hindustan Petroleums and others. Lowlights? The never-ending saga of missed biofuels targets.
National Policy approval
In May, we reported that the Hindu Business Line reports that the Cabinet has approved the long-awaited biofuel policy that will deregulate the ethanol industry allowing it produce fuel from feedstocks other than molasses, including $738.3 million for second generation ethanol over the next six years, in an effort to reduce fossil fuel imports significantly. Waste-to-energy will also be a key area of promotion and investment in an effort to reduce MSW piling up in urban areas.
Mandate & regulatory activity
In June, we reported that the country is likely to miss its ethanol-blending mandate yet again after boosting to a 10% blend when it wasn’t even able to achieve a 5% blend. With 3.16 billion liters of demand this season, mills have only offered about 1.7 billion liters of supply, and that’s despite record sugar production of more than 31 million metric tons this year. Export taxes for intra-state ethanol movement lobbed on shipments by Uttar Pradesh is seen as a key reason for failure to achieve the blend. The state is expected to produce nearly 3 billion liters more than its demand and could supply to others nearby but the tax makes prices unviable.
This week, we reported that the new used cooking oil regulations that came into effect on July 1 are the first step in creating an ecosystem for eventually producing biodiesel from UCO at scale. The national biodiesel producers association is working with the Food Safety and Standards Authority of India on a 3E strategy that combines education with enforcement and building the ecosystem with the aim of eventually producing 3 million metric tons of UCO biodiesel annually at commercial scale.
Last month we reported that the government agreed to boost heavy molasses-based ethanol prices by 4 cents per liter in an effort to help shore up the poor finances of sugarcane mills suffering from high cane prices, also imposed by the government. Ethanol prices were also set for B molasses and cane juice-based ethanol at 68 cents per liter compared to 63 cents per liter for heavy molasses-based ethanol. It’s the first time the government has set prices for ethanol using feedstocks other than heavy molasses.
In June, we reported that as part of a wider package to bailout the flailing sugarcane industry, LiveMint reports that a whopping $655.25 million will be destined to helping sugarcane mills invest in ethanol production capacity that will allow them to reduce sugar production surpluses. The country has traditionally only allowed ethanol production from molasses but the long-awaited ethanol policy that was passed last month by the cabinet deregulates the industry allowing from production straight from cane juice or bagasse.
In June, we reported that the Business Standard newspaper reports that Indian Oil plans to invest $132.6 million in second-generation ethanol facility that will use crop waste, likely sugarcane, as feedstock in Uttar Pradesh. The project could end up being a joint venture between the oil company and the state’s sugar mills association. If the ethanol project doesn’t fly, however, a bio-CNG project using press mud from sugarcane processing could be put forward instead but that project wouldn’t be a JV.
In June, we reported that Numaligarh Refinery Limited has taken a giant step forward by establishing a joint venture, Assam Bio-Refinery Pvt. Limited (ABRPL) with equity participation of M/s Chempolis Oy of Finland and M/s Fortum 3 B.V. of Netherland to build and operate the first of its kind Bio Refinery in India which would generate renewable green fuel-bioethanol, other valuable chemicals and green power from bamboo biomass.
The joint venture agreement was signed in New Delhi recently by MD NRL S K Barua; Mr. Sanjay Aggarwal, authorized representative of Fortum 3 B.V. and CEO Chempolis Oy, Finland Mr. Tomi Honkala in the presence of officials from all the partner companies including Director (Tech) NRL Mr. B. J. Phukan and Head (Legal) Fortum India Pvt.Ltd. The joint venture company incorporated on June 4, 2018 has three partners with major equity holding of 50% by NRL, 28% by Fortum 3.B.V. Netherland and 22% by Chempolis Oy, Finland.
In May, we reported that BK Birla has decided to invest $11.8 million in an ethanol distillery to help boost supplies for regional blending after failing to sell of the sugarcane mill in Bihar altogether. Two years ago, the group decided to spin off the sugar unit from its tea business to facilitate the sale but has made no progress in the divestment. With construction set to begin later this year, it ethanol production should be ready to start in time for the 2019/2020 sugarcane crush.
In March, we reported that reports have surfaced in local media that the Indian Oil Corporation will acquire a 4% stake in LanzaTech for $20 million, in a transaction that values the #1 ranked company in the Hot 50 at $500 million. The investment will be made through the IOC Singapore Pte Ltd subsidiary.
Last July, we reported that IOC and LanzaTech signed a Statement of Intent to construct the world’s first refinery off gas-to-bioethanol production facility in India.
The basic engineering for the 40 million litres (35K MTA) per annum demonstration facility is underway for installation at IndianOil’s Panipat Refinery in Hayrana, India, at an estimated cost of 350 crore rupees (USD 55 million). It will be integrated into existing site infrastructure and will be LanzaTech’s first project capturing refinery off-gases. LanzaTech’s first commercial facility converting waste emissions from steel production to ethanol is in the process of coming online in China.
In March, we reported that Aemetis, Inc. announced that its Universal Biofuels subsidiary in India has completed the construction of an advanced biodiesel pre-treatment unit to process the low-cost feedstocks to be provided to the plant under the BP Singapore Pte Limited (BPS) supply agreement into low carbon high-quality distilled biodiesel. The new pre-treatment unit allows the use of high Free Fatty Acid waste feedstocks by Universal Biofuels while meeting the biodiesel quality standards set by international fuel standards. The advanced biodiesel pre-treatment unit was built to supply biodiesel to the EU and US under the three-year supply agreement signed with BPS in May of 2017.
In July 2017 we reported that India’s flagship national oil company Indian Oil Corporation and carbon recycler LanzaTech unveiled a Statement of Intent to construct the world’s first refinery off gas-to-bioethanol production facility in India. The basic engineering for the 40 million liter per year demonstration plant will begin by Q4 for installation at IndianOil’s Panipat Refinery in Haryana, India. It will be integrated into existing site infrastructure and will be LanzaTech’s first project capturing refinery off-gases.
In November 2016, we reported that Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) announced they will invest $586 million in developing seven second-generation ethanol plants to help the government achieve its 22.5% ethanol blending goals. Each facility is planned to produce between 100,000 and 150,000 liters of ethanol per day along with compressed-CNG for use in vehicles. Praj is among several technology providers with whom the state-run oil companies are discussing the projects, the sites for which are still being determined.
The highlights? Biofuels demand surging and a major waste-to-fuels investment focus. Lowlights? Trade wars, trade wars, trade wars.
In June, we reported that Archer Daniels Midland expects China will need to import 11.4 billion liters of ethanol annually from 2020 in order to meet its 10% ethanol-blending mandate because it can only double to its current production to around 7.6 billion liters. Demand for the mandate is estimated at 19 billion liters. The US is a likely origin for those imports as China seeks to reduce its US trade deficit. Canada also sees increased demand as an opportunity for its industry to export.
In March, we reported that ethanol production could increase by half a million metric tons this year as part of the country’s ramp up to an E10 blending mandate in 2020 with an eye on 5 million tons of production within the next five years. Higher margins are helping to boost interest in ethanol production and corn processing, with 12% crushing margins seen in 2017, up 3% on the year. An additional 10% of corn processing capacity helped increase corn processing 17% to 62.5 million tons last year.
In May, we reported that Platts reports that with the ethanol arbitrage window tightly shut against the US after imposition of an additional 15% import tariff, importers are instead looking towards origins in Central and South America to source needed supplies. Shipments heard include a likely one-off duty-free shipment of up to 17,000 metric tons from Costa Rica to a Chinese oil refiner for prompt loading. Other Central American origins who would traditionally ship to Europe but have hit a weak market there are courting China instead.
In May, we reported that Reuters reports that the ethanol industry got good news from China who is seeking to reduce its trade imbalance with the US and is looking to ethanol as well as LNG to offset the disparity. With the country set to implement a 10% ethanol blending mandate from 2020 and refiners already ramping up blending ahead of that date, demand was assumed to soar until Beijing slapped an additional 15% import duty on ethanol imports earlier this year. Ethanol exports to China could eventually reach $7 billion as part of the trade imbalance drawdown.
In May, we reported that China’s premier said his country is open to increasing the quota on imports of palm oil by 500,000 metric tons. Of the total 5 million tons of palm oil China consumed last year, 3.73 million tons came from Indonesia. With the EU looking to potentially ban palm oil for biodiesel post-2021, increased exports to China could help to offset the expected drop off in European demand. Indonesia is a preferred origin for China’s tropical products imports.
In April, we reported that U.S. Secretary of Agriculture Sonny Perdue expressed extreme disappointment regarding China’s announcement of duties of almost 179 percent on U.S. sorghum imports. “The international grain market is about the freest market there is, and it is ludicrous to even mention ‘dumping,’ because China can buy product from anywhere they choose. This is clearly a political decision by the Chinese and we reject their premise. Our sorghum producers are the most competitive in the world and we do not believe there is any basis in fact for these actions. As we explore options, we are in communication with the American sorghum industry and stand united with them. The fact remains that China has engaged in unfair trade practices over decades and President Trump is correct in holding them accountable. We remain committed to protecting American agricultural producers in the face of retaliatory measures by the Chinese.”
In April, we reported that China has proposed a 25 percent tariff on US soybeans in response to a list of 1300 Chinese products that may be subject to a 25 percent tariff. China purchases 61 percent of total U.S. soybean exports, and more than 30 percent of overall U.S. soybean production. The background: The U.S. Trade Representative here determined that the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce. USTR now is seeking public comment and will hold a public hearing regarding a proposed determination on appropriate action in response to these acts, policies, and practices. The US Soybean association response? “It should surprise no one that China immediately retaliated against our most important exports, including soybeans.”, said ASA President and Iowa farmer John Heisdorffer. “We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised. That unfortunately doesn’t lend any comfort to the hundreds of thousands of soybean farmers who will be affected by these tariffs. A 25 percent tariff on U.S. soybeans into China will have a devastating effect on every soybean farmer in America. Soybean futures are already down nearly 40 cents a bushel as of this morning. At a projected 2018 crop of 4.3 billion bushels, soybean farmers lost $1.72 billion in value for our crop this morning alone. That’s real money lost for farmers, and it is entirely preventable.
In April, we reported that that the additional 15% tax added on to ethanol on Sunday, bringing the total import tariff to 45%, as part of retaliation for the US increasing import tariffs on steel will have immediate impacts on ethanol imports but analysts expect the country to have to return to foreign ethanol consumption at some point in the near future in order to achieve its blending mandate. Although domestic production is ramping up, meaning less foreign competition will be good for crush margins, even with additional capacity online it won’t be enough to achieve 10% in 2020.
In April, we reported that China Beidahuang Industry Group announced it would invest $153.04 million in an ethanol plant in Inner Mongolia that would use 924,000 metric tons of corn and around 350,000 tons of straw and sweet sorghum each year in an effort to achieve the 10% ethanol-blending mandate recently set for 2020. The facility is set to produce 350,000 tons of ethanol annually. China Beidahuang Industry Group is a grain trader and processor. China is suffering under the weight of significant stocks of old corn that is not suitable for human consumption.
In January, we reported that Enerkem announced it has signed an agreement with Sinobioway Group worth over C$125 million in the form of equity investment in Enerkem Inc., future licenses, equipment manufacturing and sales, as well as for the creation of a major joint venture that will lead the construction of over 100 Enerkem state-of-the-art facilities in China by 2035. The announcement was made in the presence of the Premier of Quebec, Philippe Couillard, during his China trade mission.
Elsewhere in Asia-Pac: Thailand, Vietnam, Australia and Japan on the move
Thailand: In January 2017 we reported from Thailand: “The government launched its 10-year plan to build a bioeconomy hub for the region with private and public sector investment expected to reach $11.3 billion as it focuses on sugarcane and cassava to feed modern biorefineries that will produce biofuels and biochemical as well as biopharmaceuticals, “future” food and “future” feed. The first $1.44 billion phase of investment is set for 2017/18, first in the eastern province of Rayong and later into Khon Kaen.”
Vietnam: Last month, we reported that the Ministry of Science & Technology along with other local partners will invest $100 million in a carbolosic biomass treatment plant that will produce aviation biofuels and other bioproducts from waste. The technology was developed by the University of Central Florida and incorporates cellulose hydrolysis into low cost modules that allow flexibility in producing various bioproducts, jet fuel being only one of the options by combining cellulose to sugars with fermentation and oligomerization.
Australia: In March we reported that the Federal Government announced that it is establishing a $1 billion Clean Energy Innovation Fund to support emerging technologies make the leap from demonstration to commercial deployment. The Clean Energy Innovation Fund will target projects such as large-scale solar with storage, off-shore energy, biofuels and smart grids. Prime Minister Malcolm Turnbull said that “the strong suite of climate change policies will work to achieve our commitment to reduce emissions by 26 to 28 per cent by 2030. This target is ambitious but achievable.” The $1 billion Clean Energy Innovation Fund will be jointly managed by the Clean Energy Finance Corporation and the Australian Renewable Energy Agency, drawing on their complementary experience and expertise. It will provide both debt and equity for clean energy projects. http://www.biofuelsdigest.com/bdigest/2016/03/24/australia-to-invest-a-billion-bucks-into-clean-energy-and-fuels/ And we reported last November that the Australian Renewable Energy Agency has made its single largest direct investment in second-generation biofuels via $11.9M in funding support for Ethtec to complete the development and demonstration of its advanced biofuel production technology.
The total project cost is $30M, and the ARENA funding of $11.9 million is being matched by Jiangsu Jintongling Fluid Machinery Technology Company Limited. In addition, Ethtec has partnered with Apace Research Limited, the University of Newcastle’s Institute for Energy and Resources and School of Environmental and Life Sciences as well as with Muswellbrook Shire Council to complete the project. Additional funds and in-kind support from the project partners make up the funding for the new $30 million Hunter Pilot Biorefinery.
Japan: In May, we reported that the Russian Direct Investment Fund (RDIF) and JBICIG Partners (JBICIG, a subsidiary of the Japan Bank for International Cooperation (JBIC)) as part of the Russia-Japan Investment Fund (RJIF, launched by RDIF and JBIC), together with RFP Group and Japan’s Prospect Co., Ltd. have agreed to collaborate and consider potential investments in Russia’s biofuel industry. A corresponding agreement was announced on the sidelines of the Prime Minister of Japan Shinzo Abe’s visit to Russia.