Ethanol production around the world is booming

May 12, 2003 02:00 AM

The US ethanol industry has been rapidly expanding over the past couple years in order to meet the demand required to replace MTBE, or by a renewables mandate that is likely to be passed in Congress this year. Currently, the US is producing 2.8 bn gallon per year of ethanol, according to the Renewable Fuels Association.
At a recent biofuels conference, a German-based analyst touted progress in other countries trying to achieve similar results. Brazil is clearly the international market leader in ethanol production, said Dr Christoph Berg, deputy director and senior commodity analyst for F.O. Licht, which jointly held the biofuels conference with the Clean Fuels Development Coalition. Brazil accounts for 59 % of the world's ethanol production, with the US coming in second, at 38% and 3% accounting for other countries, he explained.

The Brazilian government launched its National Fuel Alcohol Program in the mid-1970s, which aimed at increasing the share of domestically-produced fuels in the country's gasoline pool and the "program proved to be spectacularly successful," he said. Brazil currently requires 22-24% ethanol blends in all of its gasoline.
By 1988, ethanol had a larger market share in the transportation sector than gasoline, Berg said. The lead ethanol once had has been lost, but the additive has kept "a significant market share," and with the high gasoline prices in the last two years, ethanol's market share has increased further.

From 1975-2002, fuel ethanol use helped to replace 55 bn gallons of gasoline, saving the country around $ 52 bn, he said. However, it has been reported that periodically, ethanol has caused a net loss in the country due to its tax incentives.
In terms of price, the average cost of fuel ethanol production in the country is around 50 cents per gallon, making the product highly competitive against gasoline, Berg said. That attractive price is the reason the country was the largest exporter of ethanol last year, at just over 700 mm litres. Last year'sexport figure was the second largest in the country's history and the figure is likely to hit 1 bn litres this year, he touted.

Brazil's current import situation was the impetus behind another conference speaker, Sergio Trindade, president of SE2T International, suggesting the creation of a duty-free, international market for ethanol. Currently, the only duty-free program for import to the US is the Caribbean Basin Initiative, but the ethanol from that program is capped at 7 % of the total amount of US ethanol.
Ethanol production hasn't really taken off in the European Union, Berg outlined, but it may in the next couple of years, as there are several projects in the works. Both France and Spain already have fuel ethanol industries established and there are plans to build large-scale plants in both Germany and the United Kingdom, he said. But most bets are in Germany to be home to several plants, since the country has fully exempted ethanol from its tax on mineral oils. Sources peg 2005 for when these plants would begin production and say they would, on average, have the production capacity of 70-80 mm gallon per year.

As for Southeast Asia:
-- India: Beginning this year, the country has mandated that gasoline sold in nine states and four Union Territories will contain at least 5 % ethanol, which is equivalent to the demand of 100-150 mm gallons per year, Berg said.
-- Thailand: The government has opted for tax reductions for distilleries, as well as lower taxes on ethanol, Berg said, although he didn't elaborate. Several sugar companies have already begun to build up ethanol capacity, he said, noting the country's ethanol lobby is pushing for a mandate. He estimated the country is on target to produce roughly 2 mm day/day, starting in 2005.
-- China: Ethanol production in the country is concentrated in the corn-growing provinces of Hainan and Jilin and the government began requiring 10 % ethanol blends in those two regions earlier this year. Berg also outlined plans for Australia and Canada.
Overall global ethanol production amounted to a bit less than 20 bn litres several years ago, but that figure could top 50 bn litres by 2010, "if the high riding goals in many countries become reality," Berg concluded.

Source: Oxy-Fuel News/PBI Media
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