Asia Special Biofuels Report

December 25, 2012 |

There’s only one complete region for biofuels where abundant feedstock, lack of oil & gas production, rising energy demand and supportive government policy come together — and that is Asia.

We’re never quite sure which factor is the most important in Asia’s rising focus on biofuels: Interventionist governments, concentration of capital, strong traditional focus on agriculture, carbon concerns or the lack of equivalent opportunities in fossil fuels. We suspect it might simply be the long-term outlook for energy demand — to power fast-growing economies, domestic energy is going to have to come from somewhere.

But without a doubt, biofuels are on the rise throughout Asia. Here’s our special report as of the end of 2012.

Macro-Trends

1. Faster energy demand growth than any other region.

2. Less likely to have large fossil energy discoveries – those that are, will be focused on a handful of countries, not well-aligned with industrial growth.

3. Less affected than other regions by large discoveries of natural gas in North America, unless a pipeline is constructed.

4. Increasingly focused on triple bottom line including social, economic and environmental measures.

Mandates

China


Overall, the country seeks to move to a 10 percent biofuels mandate by 2020, and currently has a 15 percent overall target for 2020. Nine Chinese provinces have required 10% ethanol blends to date, including – Heilongjian, Jilin, Liaoning, Anhui, and Henan.

India

The country has an E5 ethanol mandate,  scheduled to move to E10 as soon as production is in place, and ultimately has set a goal of 20 percent for all biofuels content by 2017 – it is highly doubtful that they will reach the target.

Indonesia

An on-and-off 2.5 percent biodiesel mandate, and an E3 ethanol mandate.

Malaysia

The country’s B5 blending mandate  kicked off in June 2011. The program begins in Putrajaya and will be phased in over time throughout the rest of the country. Biodiesel will be price controlled while the government has recently removed the subsidy on fossil diesel.

The Philippines

Has an E10 ethanol and B2 biodiesel mandate, supporters are asking the biodiesel mandate to be increased to B5.

South Korea


Currently has a B2 biodiesel mandate in place. This year’s introduction of a B2.5 biodiesel mandate is expected to boost demand for imported Malaysian palm oil for use as fuel. Malaysian palm oil imports accounted for 32.2% of South Korea’s oil imports during 2010. Palm oil is beginning to make in-roads in the Korean market for cooking as well.

Taiwan

Has a B1 biodiesel mandate in place since 2008; considering an E3 ethanol mandate.

Thailand

Has a B5 biodiesel mandate in place.

Vietnam

Has an E5 ethanol blending mandate.

Malaysia

The skinny: Palm waste and palm oil — that’s been the story to date in Malaysia, but it’s been focused of late also on jatropha development as well as the Petronas/LanzaTech project aimed at utilizing waste CO2. The country is incredibly well-focused in terms of an industrial biotechnology policy and sovereign investments through the Malaysian Life Sciences Fund have been impressive and focused.

The latest: Earlier this month, the Forest Research Institute of Malaysia (FRIM) has completed a 6000 Jarak Pagar (Jatropa Curcas) tree pilot project, dating back to 2009, and the agency said it is ready to proceed to commercial scale. FRIM said it will grow jatropha on land obtained from the Terengganu state government — the state, official told The Star, have as much as 71,000 hectares of idle coastline. FROM said that the goal of the project is biodiesel production.

Indonesia

The skinny: Palm oil has been the driver and, as with Malaysia, palm waste, too. A signature investment by the Selim Group in Heliae has lately focused thinking around the prospects for algae, too.

The latest: Earlier this month, palm oil output is expected to climb 7 percent next year to 27 million tonnes, reports Fadhil Hasan, executive director at the Indonesian Palm Oil Association. Three years ago, expansion efforts planted approximately 200,000 new hectares which are expected to fruit for the first time this year. Hasan projected that growth of 200,000 hectares per year can be expected for the next decade as demand for palm oil skyrockets.

Thailand

The skinny: Cassava ethanol has been a major focus — but there is sugar cane as well and, more recently, a series of investments by PTT Chemical in Myriant — aimed at giving Thailand a big seat at the table in biosuccinic acid.

The latest: Earlier this week, the Thailand Board of Investment has announced support for alternative energy investment in anticipation of a 39% increase in demand within the next 9 years. The government is pushing the use of alternative and renewable energy to reach 25% of total energy consumption in that time period. The board has implemented tax incentives for imported machines and materials, and foreign investors may own 100% of shares in the companies.

In October, Chevron’s local arm said it was undecided as whether it will introduce E20 when 91 octane fuel is phased out the end of 2012. Currently 91 octane represents about 40% of fuel demand while the rest is supplied by E5. The government this week raised the subsidy on ethanol by 1 baht per liter, which would make E20 nearly 10 cents cheaper per liter than 91 octane gasoline.

Philippines

The skinny: Sugarcane ethanol has generally been the story here — though production has grown in fits and starts due to internal wrangling over mandates.

The latest: Earlier this week, the Energy Department has received a proposal from the Agriculture Department recommending the increase in the mandatory biodiesel blend from 2% to 5%, and is in the process of considering the increase. The country’s primary concern would be an increase in the price of fuel at the pump, but the increase in blending would create a local market for 350m liters of coconut oil each year.

In October, biofuels blending was expected to reach 20% by 2020 for ethanol, and 20% for CME in diesel(coco methyl ester) by 2025. The biofuels industry is advocating for an earlier blending requirement for biodiesel, at least 5% by 2013, as production is already enough to meet that target. Said Chemrez Technologies managing director, Dean Lao Jr., “the best timing to increase the blend will be early part of next year, giving prevailing conditions that the price of CME is cheaper than diesel.”

China

The skinny: Non-food feedstocks and big targets are the story in China — whether it is crop waste, industrial (gas) waste, or animal residue, you’ll find China at the forefront these days. Combined feedstock projects like the focus at Accelergy on coal and biomass mix, that’s proven popular too.

The latest: Earlier this month, LanzaTech and Baosteel reported their jointly-owned 100,000 gallon per year (300 tons) demonstration plant, located at a Baosteel steel mills outside Shanghai, China has met and exceeded milestones – the companies are reporting that the plant achieved higher productivity than design.

The National Development and Reform Commission (NDRC), who regulate technology in China, sent a review panel to the facility in early November 2012 to review the site and report on the process in detail. They reported that the waste-gas-to-ethanol project clearly met international standards regarding gas conversion rates and other technical milestones and that the project can now officially enter the commercialization phase, scaling the process further to make steel mill waste gas-biofuel a commercial reality in China.

A full scale commercial facility with Baosteel is planned for 2013 – and LanzaTech is currently commissioning a second pre-commercial facility, also in China, based on a JV with China’s Shougang Group, aimed also to follow with a commercial production facility in 2013.

Taiwan

The skinny: Like mainland China, Taiwan has been highly focused on late with opportunities in using off gases from steel production.

The latest: Last month, China Steel and LCY Chemical Corp formed a joint venture, White Biotech, to utilize LanzaTech’s technology in Taiwan to begin production of ethanol and potentially other molecules using steel mill waste gases.

The companies made an initial $5.14 million investment in the JV and formed the Green Energy Alliance with LanzaTech, around the new venture. The venture is the first formed between a steel company and a chemicals company to utilize waste gases from steel production to produce fuels and chemicals — and is a first of its type in the advanced biofuels sphere. The two venture partners will proceed to construct a demonstration plant, they said in their initial venture statement.

India

The skinny: It’s been all about sugarcane ethanol, lately — or rather, whether to really have a strong ethanol component in the sugarcane industry, at all. A lot of investment in jatropha has yet to pay off — jatropha 1.0 trials had disappointing results, but jatropha 2.0 looks highly promising.

The latest: Earlier this month, the sugar mills association isn’t worried about the expected 16% drop in ethanol production during 2012/13 because national demand under the E5 calls for 2.2 billion liters whereas production is seen at 2.59 billion liters. In addition, oil marketing companies are expected to open an international tender for up to 1.1 billion liters for import.

South Korea

The skinny: Lots of seaweed-oriented research – both to make ethanol and biobutanol.

The latest: In October, researchers at Korea Advanced Institute of Science and Technology along with private sector partners have boosted the efficiency of Clostridium acetobutylicum bacteria to increase production of butanol using systems metabolic engineering.

Japan

The skinny: Not a significant feedstock or production player – more content to work through technology investing and proving deployment capital. But there’s been work on rice straw and other residues.

The latest: Earlier this month, the National Innovation Agency has teamed with the New Energy and Industrial Technology Development Organization of Japan to launch a pilot project that will use cassava pulp as a feedstock for ethanol, thanks to a $9 million R&D grant, and will focus on hydrolysis of starch and cellulose for industrial production of ethanol.

Vietnam

The skinny: Like Thailand, this is largely cassava country when it comes to biofuels although cane is a factor.

The latest: Last month, cassava-based ethanol factories have cut production as demand falls, leaving farmers in a tight spot with no market to sell their crops into. Even though E5, which was introduced in August 2010, is cheaper than 92 octane gasoline at the pump, demand has been so low that 90% of E5 produced is exported. The huge increase in cassava planting without the ethanol market to support it has led local market prices for cassava to crash to only half its previous value.

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