Biofuels: Biobutanol fuel prepares for launch

06 September 2010 00:00  [Source: ICB]

Producers expect no big competition between ethanol and butanol in the biofuels space

Last month's initial public offering (IPO) announced by US-based Gevo signals the bio-butanol industry's growing favorable image within the biofuels and biochemicals space.

Butanol, which is largely produced via the propylene-based oxo synthesis process, is already a widely used industrial chemical but has yet to be applied commercially as a fuel. Several plants in China are also producing fermentation-based butanol for chemical use.

US developers Gevo, Cobalt Technologies and Butamax Advanced Biofuels - a joint venture (JV) between UK oil firm BP and US chemical major DuPont - are expecting bio-butanol to start entering both markets by 2012.

Gevo plans to produce biobased isobutanol by retrofitting existing ethanol facilities. The company announced in August its planned acquisition of a 22m gal/year (83m liter/year) ethanol production facility in Luverne, Minnesota, from US-based Agri-Energy. The facility is expected to produce 18m gal/year of corn-based isobutanol in the first half of 2012.

"We plan to expand our production capacity beyond this facility to produce and sell over 500m gal/year of isobutanol in 2014," Gevo reported in its S-1 registration statement for an IPO with the US Securities and Exchange Commission.

"We are currently in discussions with several ethanol plant owners that have expressed an interest in either selling their facilities to us or entering into [JVs] with us to retrofit their plants to produce isobutanol," Gevo said. The ethanol plant owners collectively represent over 1.8bn gal/year of ethanol capacity, the company added.

Gevo said its technology platform can theoretically convert 94% of plant sugars from grains, sugarcane, and cellulosic biomass to isobutanol. Its retrofit package is expected to cost around $40m (€31m) for a standard 100m gal/year ethanol plant.

"Isobutanol's greatest value is its potential as a building block to produce plastics, fibers, rubber, other polymers and hydrocarbon fuels. The global petrochemicals market represents a potential 67bn gal/year for isobutanol and 900bn gal/year in global hydrocarbon fuels market," Gevo reported.

Gevo demonstrated that it can also convert isobutanol into a renewable jet fuel blendstock, which represents a potential 94bn gal/year market for isobutanol.

In July, the company entered a supply deal with US-based United Airlines for an initial 10,000bbl/day of the isobutanol jet fuel to its Chicago hub airport, starting in the fourth quarter of 2012. This volume will require 205m gal/year of isobutanol.

The biojet fuel supply could ramp up to 30,000bbl/day by 2015 and 60,000 bbl/day by 2020. The jet fuel price will be indexed to the cost of corn, said Gevo.

Isobutanol can also be converted into gasoline blendstock iso-octane, representing a potential market of 349bn gal/year, and as diesel fuel with market potential of 484bn gal/year.

In February, Gevo entered a five-year biofuel supply deal with French oil company Total for isobutanol, with volumes ranging from 5-10m gal for the first year of the agreement.

In Gevo's IPO filing, the company cited Butamax and Switzerland-based development stage company Butalco as competitors in the development of renewable-based isobutanol.

Butamax is opening this September its biobutanol demonstration plant in Hull, UK. The company did not disclose the plant's capacity but noted that the biobutanol product will be for transportation fuel application.

"Butamax will enter the US market and be viable at commercial scale by early 2013," said Butamax CEO Tim Potter. "Butamax also anticipates entering Brazil on a commercially viable basis in 2013. From there, we plan to move to wheat-based production and will also be further exploring macroalgae as a potential feedstock."

The company also plans to retrofit existing ethanol plants in both the US and Brazil because of minimal downtime involved in an ethanol retrofit.

"Biobutanol is a complement to the existing work done by the ethanol industry. Still, there are several key advantages to biobutanol compared to ethanol, including higher energy density resulting in better miles per gallon, higher blendwall, and no modifications needed to automobiles or pipelines," said Potter.

Butamax said it is targeting its biobutanol to be marketed as price competitive with ethanol. "With low-cost retrofits of existing ethanol plants, and compatibility with existing vehicles and infrastructure, these propositions will enable rapid volume growth when the technology enters the commercial market," said Potter.

Butanol, a four-carbon alcohol, is said to have more similar properties with gasoline compared with the two-carbon ethanol.

According to producers, biobutanol has 30% more energy in a given volume; can be handled like regular gasoline; is approved for blending up to 16% in the US, compared with the 10% limit in ethanol blending; and biobutanol can be blended up to 20% in diesel fuel with no negative engine performance impact, while ethanol cannot be blended into diesel.

"The only disadvantage of biobutanol compared to ethanol is that there is already an established transportation fuels market for ethanol, while butanol is in very early stages," said Steve Shevick, chief financial officer at Cobalt Technologies.

Producers note that in the past, several issues, including toxicity in the fermentation process and resulting low yields, have hampered butanol production. Companies today claim that they have overcome the processing challenges.

"Still, in the long run, a great amount of biofuel demand will enable both biobutanol and ethanol to have strong and healthy markets," said Shevick. "In the US alone, the target for renewable fuels is 36bn gallons. We will need all contributions."

Shevick added that the two fuels can be complementary, since a blend of ethanol and butanol can permit higher concentrations of renewable fuels in unmodified engines without increasing evaporative emissions.

Cobalt Technologies expects to start commercial production of its n-butanol, a related compound to isobutanol, in mid to late 2012, through a 1.5m gal/year demonstration plant. The butanol product will be used first for chemicals application, and then in diesel and jet fuel markets when demand for the biobutanol has been established.

The company signed up US engineering firm Fluor last month to design its facility.

Shevick expects biobutanol to get a premium price in having higher energy content; having lower handling and blending costs; and eliminating the need for other fuel components required to offset the vapor pressure impact of blending ethanol.

"Biobutanol will be very competitive compared to ethanol once commercialization starts," Shevick added.

Producers were reluctant to estimate pricing for current biobutanol, since the market for fuel has not yet been established.

In chemical applications, August contract prices for US isobutanol were assessed by ICIS at $1.24-1.31/lb delivered, US Gulf, while the August contract price for n-butanol was at $1.29-1.34/lb, delivered, US Gulf.

ICIS assessed anhydrous ethanol fuel spot prices at $1.81-1.83/gal, free on board (FOB), US Gulf, Midwest plant, as of August 25.

By: Doris de Guzman
+1 713 525 2653

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