The Neodiesel Revolution heads offshore: Benefuel, Felda expand in Malaysia

February 24, 2015 |

MalaysiaIt’s New, it’s Neo —  the neodiesel companies — brimming with technologies to create cleaner alternatives to a powerhouse fuel. They have the performance, half the carbon, and a range of low-cost feedstocks to choose from.

Now, neodiesel heads for Malaysia as a JV opens up ultra low-cost feedstocks with Benefuel’s ENSEL technology.

From Malaysia have come reports that the joint venture FGV Green Energy has acquired a 250,000 metric ton per year biodiesel plant in Kuantan Port, Malaysia and will retrofit the plant with Benefuel’s ENSEL technology. The JV partners include Benefuel International Holdings S.A.R.L., a subsidiary of Felda Global Ventures Sdn. Bhd., the world’s largest palm oil producer, and M2 Capital Sdn. Bhd., a subsidiary of Australia’s Mission NewEnergy. Retrofitting will begin immediately, and the plant is expected to be operational in 2016.

That deal was tipped last August when  Benefuel and Felda have formed the JV to acquire the Kuantan Port project — which years ago featured a more traditional plam oil biodiesel technology and was operated by Mission NewEnergy.

The important news to note is that, in addition to working together in FGV Green Energy, Benefuel and FGV have entered into a further agreement to develop and operate additional biodiesel projects in Southeast Asia. The joint venture will look to establish production facilities in strategic locations in Southeast Asia that have strong access to feedstock and finished product markets. The plants, which will employ Benefuel’s ENSEL technology, will be operated by FGV.

Bottom line, that means we can expect to see more lower-cost biodiesel out of Asia — as Benefuel’s technology is at the forefront of what we termed last year “The Neodiesel Revolution”, writing:  “Here comes Neo – the neodiesel companies — brimming with technologies to create cleaner alternatives to a powerhouse fuel. They have the performance, half the carbon, and a range of feedstocks to choose from.”

Benefuel’s ENSEL technology is unique because it allows the use of lower cost, high free fatty acid (FFA) feedstocks such as animal tallow, unrefined oils, used vegetable oils or distillers corn oil. This is accomplished through the use of a solid catalyst that combines esterification and transesterification into a single step, which has been a long-standing goal of the biodiesel industry. The process also ensures the final product meets or exceeds all domestic and European biodiesel standards

The technology has raised so much interest that Benefuel and Flint Hills Resources (yes, the giant fossil-energy refiner, owned by Koch Industries) formed a JV known as Duonix to deploy the technology.

To date, FHR has been the first and primary customer, retrofitting its Beatrice, Nebraska biodiesel plant for a planned commencement of operations this summer (2015). Once the Duonix Beatrice plant is operational, it will produce approximately 50 million gallons of biodiesel each year and employ about 45 people in the local community.

What Felda believes it holds is a defensible cost advantage — using an alterantive to traditional palm oil feedstocks.

After completing substantial technical and engineering work, we are excited to partner with Benefuel and Mission NewEnergy and take a major step toward our goal of tripling Felda’s biodiesel production by 2016,” said Dato’ Wira Adam, Head of Downstream Processing of the Palm Downstream Cluster for FGV. “Benefuel’s ENSEL technology will allow us to process palm fatty acid distillate, a by-product of palm oil refining and position us as a low-cost producer of biodiesel in Malaysia and Southeast Asia.”

The Cost advantage, by the numbers

For example, we reported in January that soybean oil was trading at 38 cents and has peaked as high as 50 cents — it’s trading at 32 cents right now. Choice white grease trades at around a 10 percent discount, and distillers corn oil at a 20-33 percent discount. Fatty acid distillates — by contrast — the FADs, trade at a 35-37 percent discount.

Which is why FADs are absolutely, ahem, not a fad.

Think of it this way. Palm oil is trading at around $639 per metric ton right now, or around 29 cents per pound — the trading price reached $1170 per metruc ton in 2012, before the dollar began its historic rise and global commodity prices slumped. It takes roughly 7.6 pounds of palm oil to make a gallon of biodiesel — so you start with inputs of $2.20 per gallon. That’s excluding the opex and capex of the biodiesel business. And you find yourself competing with $2.13 per gallon petroleum diesel.

Using FADs at a 35-37 percent discount, the price of the inputs would fall to around $1.41 per gallon for as much of that feedstock as can be sourced locally. So, it’s not hard to see right away what the attractions are for this technology, and why it has important ramifications for plam oil biodiesel in Southeast Asia.

We have pointed out previously, as well that “tapping the lower cost feedstocks also broadens and expands supply — providing stabilized price and economies of scale to companies that can tolerate higher FFA feedstocks. It’s an advantage REG has been pursuing for years. In February, the company did a $13M upgrade to its Newton, IA plant which has been online since 2007, and processes high and low free fatty acid feedstocks.”

So, it’s a catalyst for companies to roll-up capacity by deploying a cost-advantaged technology that adds value to every plant acquired.

So, you start to see the reason that companies like Felda and FHR are getting behind the Neodiesel Revolution.

Benefuels’s perspective

Rob Tripp, Chief Executive Officer of Benefuel commented, “We are thrilled to partner with FGV and Mission NewEnergy on this project. FGV brings world-class expertise and ready access to palm oil feedstocks, and as the original builder of the Kuantan Port plant, Mission New Energy brings an intimate knowledge of the facility. The combination of partners and location – with easy access to feedstocks and domestic and international markets – is unmatched.”

“FGV is yet another world-class company to recognize the value and disruptive nature of our ENSEL technology,” Tripp added. “Our pipeline of attractive projects – both retrofit and greenfield – continues to grow.”

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