Biofuels growth too optimistic - consultant

10 June 2008 21:03  [Source: ICIS news]

KUALA LUMPUR (ICIS news)--The consensus view on biofuels growth is overly optimistic, a consultant with Wood Mackenzie said on Tuesday.

“Biofuel consumption is set to rise dramatically with world usages of ethanol and biodiesel to hit about 100m tonnes and 25m tonnes respectively per annum by 2020”,  consultant David Morrison he said at the 13th Asia Oil and Gas Conference (AOGC) in Kuala Lumpur, Malaysia.

“However, Mackenzie’s bottom up analysis finds no significant land constraints to meeting its projected biofuel demands after taking into consideration the expansion of land use for agricultural purposes in traditional agricultural countries”, he added.

The biofuel boom began in 2002 on the back of legislative requirements as well as companies looking for alternative energy sources to soaring crude prices, which saw historic highs again last week.

The growth of biofuels is significant but it is not expected to pose a large threat to conventional oil products and will remain to be a small part of the global fuel markets, satisfying 10% and 3% of the gasoline and diesel demands, respectively, by 2020, Morrison said.

Morrison also noted with the exception to Brazilian ethanol, most biofuel production must rely on governments to be economical and is not ideal for long-term investment.

“Large oil firms have limited investments in biofuels to date and are unlikely to commit much capital as most forms of biofuels are still uneconomical and rely on fiscal help,” Morrison said. “Unless second-generation technologies can be found that is both economic without political involvement and non-labour intensive, biofuels will continue to have limited attractiveness”, Morrison said.

Second-generation biofuels are based on the use of non-starch based feedstock such as jatropha and algae instead of grains that are already experiencing record price levels due to tight supplies.

Such production methods are gaining ground as possible alternative feedstock for petrochemical firm amidst soaring naphtha prices trailing the surges in crude.

The AOGC is an industry-wide forum attended by participants of the oil and gas sector and runs through 10 June.

To discuss issues facing the chemical industry go to ICIS connect
Bookmark Simon Robinson’s Big Biofuels Blog for some independent thinking on biofuels

By: Bohan Loh
+65 6780 4359

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