According to video and a transcript of the debate posted to Iowa Public Television’s website, Zaun said that while he thinks the biodiesel industry needs to grow, he does not support reinstatement of the expired tax credit. In response, Boswell argued that Zaun has not connected success in the biofuels industry with a decreased dependence on foreign oil. “[Biodiesel] is a stand-up business that we’ve got to continue to support and be sure we can make it solid, and we definitely should be supporting those biodiesel plants that are sitting out there idle. We can do better,” Boswell said.

Zaun responded to Boswell’s remarks by saying he respectfully disagreed.

“When we as tax payers invest $100,000 to $600,000 for each new job created, that’s excessive,” he continued. “And, I want that industry to survive, and I want it to flourish.” However, during the debate Zaun offered no insight into possible alternative actions that could be taken in order to support biodiesel production in Iowa.

It is currently unclear how Zaun reached his $100,000 to $600,000 estimate of taxpayer support for each biodiesel job created. Biodiesel Magazine was unable to reach him for clarification. The Iowa Biodiesel Board has also been unable to verify where Zaun’s estimates have been sourced.

According to information posted to the IBB’s website, Iowa’s biodiesel industry supported 2,900 permanent jobs and contributed approximately $470 million to the state’s GDP in 2009.

“We are disappointed and concerned to hear that Brad Zaun does not support the federal tax incentive for biodiesel,” said IBB Executive Director Randy Olson. “The incentive expired last year, and the impact on Iowa’s industry has been devastating. Nearly half of the state’s 15 biodiesel plants have closed their doors or gone idle, and thousands of Iowans have lost jobs.

Iowa was once the leading biodiesel-producing state, but our position as a national and worldwide leader in renewable fuels is in jeopardy. Our sincere hope would be that anyone who represents Iowa in the U.S. Congress would continue to fight for the biodiesel industry, and energy independence.

Biodiesel is a bright spot in our state’s economy, supporting green jobs and generating economic activity on the farm and beyond. It’s also a vital component of our national energy security.”

The IBB has requested a meeting with Zaun’s office to discuss the impact of biodiesel in Iowa, and is hoping to shed some light on how vital the industry is to not only Iowa but the nation as a whole, said Olson. That meeting is currently scheduled for Oct. 25.By Erin Voegele.

SOURCE: BIODIESEL MAGAZINE

* Subsidizes 10,000 blender pumps and storage tanks

* Also helps pay to produce, store, ship new crops

* Vilsack to Congress: renew industry tax credits (Updates with quote, additional details.)

WASHINGTON, Oct 21 (Reuters) – The U.S. Agriculture Department will provide new subsidies to increase production, storage and distribution of biofuels Agriculture Secretary Tom Vilsack said on Thursday.

Vilsack said the USDA will help pay for five biorefineries and bioenergy plants, and 10,000 blender pumps and biofuel storage tanks in an effort to boost production and use of biodiesel and advanced biofuels.

He also urged Congress to reinstate the biodiesel tax credit and extend a tax credit for ethanol plants, set to expire on Dec 31, to support existing biofuel production.

The lapse of the biodiesel tax credit cut existing production in half, Vilsack said, warning Congress against withholding incentives for the industry.

“At the same time, we need to begin to think about reforms to the ethanol credit program to make it more efficient and effective at addressing the full range of challenges we face in meeting our goals for traditional and next generation biofuels,” he said in a speech.

The USDA also will subsidize the production, storage and shipping of new crops used to make biofuels, Vilsack said. (Reporting by Charles Abbott; Editing by Alden Bentley)

SOURCE:  Reuters

The investment will span over a seven-year period. Speaking about the investment, the minister of natural resources Christian Paradis said: ‘By investing in this project we are helping to create and sustain local jobs and economic opportunities while creating a healthier environment for all Canadians.’

 The Biocardel Quebec plant will use animal fat and waste cooking oil to manufacture around 40 million litres a year of biodiesel, which will then be sold to Quebec-based diesel producers, in addition to producers located in the US. ‘We are very pleased with the government of Canada’s support. It will help to secure the future of our biodiesel production,’ commented Biocardel Quebec’s president Rene Delarus.

‘Biocardel’s production of biodiesel and our R&D work in algal biofuels and recovery of by-products will help to reduce greenhouse has emissions while promoting a sustainable environment.’ This CA$18.79 million investment is part of a $1.5 billion investment by the Canadian government that will take place over a total of nine years.

SOURCE: BIOFUELS NEWS

The 100 Mgy Imperium Renewables  facility in Grays Harbor, Washington.

Back in 2008 the death watch began on Imperium Renewables.

Though its 100 Mgy multi-feedstock plant in Grays Harbor was, at the time, the largest and most modern biodiesel facility in the US, the company lost its CEO, withdrew a planned IPO, and was forced to cancel a potentially lucrative Hawaiian development project that would have supplied biodiesel to Hawaiian Electric (HECO).

By August 2008, Royal Caribbean had pulled out of an 18 million gallon annual contract and sold off its investment in the plant, and even the city of Seattle canceled a planned biodiesel contract, citing the rising cost of biodiesel fuel.

Company founder John Plaza, late of Seattle Biofuels, stepped back in as CEO as biodiesel plants began to shutter all across the country in the face of static fuel prices, rising feedstock prices (especially for soy), and ultimately the loss (or near-loss) of a precious $1.00 per gallons biodiesel tax credit that had helped subsidize the cost of biodiesel when it began to exceed the cost of diesel.

2008: How Low Could it Go?

As if the conditions for biodiesel weren’t bad enough across the country, the mood in Seattle was perhaps even more sour. Even downstream alternative fuels marketer Propel Biofuels re-established its corporate HQ in California as individual protesters began to surface outside of biodiesel stations, and local eco-publishers like Grist began to run increasingly negative articles about the bio side of the alternative energy movement.

The producers of the “Fields of Fuel” documentary, which won an Audience Award at the Sundance Film Festival, and a standing ovation from the alt-film crowd for its vision of a crop-based solution to global energy woes, hastily re-named itself “FUEL” and took on a more algae-centric view.

The resurrection of a biodiesel giant

“I’m not dead yet,” proclaims a decidedly uncooperative corpse in Monty Python and the Holy Grail, and as with Mark Twain, reports of Imperium’s impending demise were somewhat exaggerated.

Today, what was expected to become one of the first major casualties of the biodiesel crisis of 2008-10 has emerged as one of its leading survivors, and John Plaza, then as now, remains one of the biofuels industries most outspoken and astute observers.

“Relative to the industry this year, we have avoided layoffs, and we’re enjoying our niche market – serving the Canadian marketplace,” Plaza says. “There’s additional demand because of the Low Carbon Fuel Standard in BC. Our customers have come to recognize that we produce the lowest cost, highest carbon reduction fuel.”

As far as prospects in the US, Plaza is sanguine. “There’s been a lengthy delay in any impact from the launch of RFS2. We’re seen more RIN trading than demand for fuel from obligated parties, so far. They are buying RINs from a huge backlog available.”

Nevertheless, Imperium is looking up these days, rather than being hunkered down. “We’re pretty bullish for demand for Imperium’s, We’re not producing on a continuous basis, but we have been producing on monthly campaign basis within 24 hours of receiving oil. At many points we are at or near 100 percent capacity, and for the first quarter we were overall at near half our capacity.”

The tax credit – never say die

“The tax credit still has some legs,” Plaza contends. There’s a discourse this week around the extenders package, and we’ll have one more chance after Labor Day. I’m 55 percent optimistic, 45 pessimistic.”

“But we have to see changes. What the industry needs is a two-fold support, a mnadted floor, and incentives with tax policy to get the outcomes we’re trying for. That’s where a Low Carbon Fuel Standard comes in, with a focus on a reduction in carbon emissions, that would reward the best behavior.”

The ethanol tax situation

“The frustrating part of the debate,” Plaza contends, “is that we’ve been subsidizing corn since I’ve been alive. Ethanol came about because of excess corn. The goals were right – rural development, price stabilization, but the policy drivers were wrong, and gave us this monoculture producing excess cheap food which was primarily used for cheap feed.”

Corn support going away? “Absolutely not, I don;t see them dismantling the whole system. And frankly, if ethanol policy [inadvertently] creates a few rich farmers in the Midwest, so what? I’d much rather have rich farmer than a rich Chavez.”

Sustainability

“The Low Carbon Fuel Standard is the biggest issue,”Plaza comments, “and we need sustainabiliuty criteria, and we need to understand what we are truly measuring against. Wd have to have a frame of reference that looks at the marginal production of fossil fuels, which we obtain from Canadian tar sands, and we need a fair standard based on fair data. The Roundtable on Sustainable Biofuels is developing some baseline assumptions, and will measure the inputs and have it audited. Their approach is to have an average for all of biodiesel, and then if you want to get an individual score for a facility, you can pursue that.”

“The California Air Resources Board (CARB) got it all wrong. It’s a complete and utter disaster, with utopian requirements to meet standards that will just kill off first generation fuels in California and you never get to the second generation.”

[Editor's note. No new commercial-scale or demonstration-scale advanced biofuels project has been announced in California since the completion of the California Low Carbon Fuel Standard.]

“RSB needs to be taken seriously, by the Europeans, the obligated parties, and needs needs to be valid organization. It does feel at times like middle school kids finding out how to get along, but when the European Biodiesel Board and eBIO pulled out of RSB, it was a petty and foolish move by some petty and foolish guys.”

Biodiesel consolidation

Biodiesel has been undergoing some consolidation in recent months, primarily with REG on the move, acquiring new capacity. Imperium has stayed away.

“There are very few facilities we like – with the large scale, high quality, and logistics similar to what we have. For us, consolidation is not best strategy for our shareholders. Our focus has always been on innovation and market opportunity, based on most efficient and highest value. We try to be differentiated enough to be biodiesel 1.5, with, for example, our emphasis on a multi-feedstock approach.”

Imperium’s own expansion plans

In the Digest, we have been extensively covering in recent months the opportunities for expansion based on existing first-generation capacity in the ethanol side of the market, with a special reports on biobutanol as well as covering cellulosic biofuels bolt-on capacity such as POET is building in Emmetsburg, IA with Project LIBERTY.

What’s opportunities are there for similar expansion, using the existing capacity of biodiesel facilities, their feedstocks acquisition logistics, rail lines, storage facilities, and industry knowledge?

“We like drop-in replacement fuels,” says Plaza, “that use our existing feedstock and agricultural waste. We see real opportunities with hydrocarbon replacement in the distillate markets, and we are focused on what we see as tremenodus opportunities with aviation and military markets. It’s so much about feedstock, and we feel that we have the existing ag wastes, and forest resources, and we have the knowledge in how to efficiently invest in technology.

“We’ve been doing more working than talking, but what we’re working on is a next generation, integrated biorefinery that makes 12 products, inclusive of jet fuel and high value chemicals. [At Grays Harbor], we’ve got the state of art biofuel facility, plenty of land around it. We’re focus on building right at home for now. We like that market.”

SOURCE: BIOFUELS DIGEST

Although biofuels currently supply just one percent of all energy to the domestic market, according to St. James, legislation will require them to provide eight percent by 2016. In addition, the government recently upped the blend of biodiesel with regular diesel from five percent to seven, an important move in a world increasingly reluctant to be fossil fuel-dependent.

The fifth-largest biofuel provider in the world after Germany, the US, France and Brazil, Argentina has two main sources: biodiesel and bioethanol. Sugarcane, grown in the north of Argentina, is the feedstock for the nine companies which produce ethanol in Argentina, while soy oil is the basis for the country’s 19 biodiesel-producing firms, excluding one which converts used cooking oil into the finished product.

Indeed, one enterprising pig farm in Buenos Aires province lucratively converts pig manure into biogas in order to self-power.

Overfeeding. “At the moment, Argentina has more feedstock than it knows what to do with,” St. James told the Herald. “The Chinese aren’t buying our soy oil any more, and so we suddenly have a glut which isn’t finding its overseas market, plus (Planning Minister) De Vido is finding a good application for that extra soy oil. That also means we no longer have to import diesel fuel from Venezuela which is particularly toxic and high in sulphur — so we’re producing our own biodiesel fuel which is cleaner, biodegradable and keeps the money in the country. There’s a lot of upside and very little downside.”

Biodiesel has progressed more than ethanol in terms of quantity produced and margins made, converting 2.6 million tons a year into US$2.1 billion — although 65 percent is exported, mostly to Europe, which has a surplus of biofuel plants but not enough feedstock.

Up to seven. Following a resolution to Law 26,093 in March this year, oil companies now mix diesel fuel with five percent of biodiesel (B5), which obviously led to an increase in demand to the domestic market.

But on June 30, President Cristina Fernández de Kirchner instructed her Energy Secretary Daniel Cameron to hike that blend up to seven percent (B7) next month, with the intention of eventually reaching 10 percent (B10).

“Biodiesel really is Argentina’s shining star,” added St.James. “The aim is to reach B10 levels by year-end.

That really is a big deal and would make Argentina the country with the highest biodiesel mandate in the world by a long shot, if it isn’t already with the B7 resolution.”

Although Planning Minister Julio De Vido last week said: “The State’s objective is to up this to 10 percent by the end of 2010,” Claudio A. Molina, executive director of the Argentine Association of Biofuels and Hydrogen, didn’t think this is likely to happen. He told the Herald: “B7 will come into play this August but I’m not sure if B10 will commence by year-end. After all, the B5 mix was supposed to start in January but it didn’t begin until March.”

And following last week’s green light with regards to the construction of three renewable energy plants to bring the total to 22, which will provide a total of 895 megawatts (MW), 110.4MW will eventually come from biofuels — no mean feat for an industry which only came into existence in May 2006 thanks to the Argentine Biofuels Law 26,093.

However, 500MW will come from wind farms, which is set to become the country’s second-largest renewable energy source, said St. James. “One of the unexpected winners from that deal was thermal energy — good old-fashioned generators that will work on biofuel which have fewer greenhouse emissions instead of diesel fuel.”

Back in 2008, this fledgling market saw US$12 billion of investments in Latin America, according to the AREC, although US$10 billion — went to Brazil’s ethanol plants.

“The other four countries that rank above Argentina all have access to financing, venture capital and legislation,” said St. James. “Here in Argentina we have none of that, but we still rank fifth in the world in terms of production. Just imagine what we could do if we did have access to financing and banks!”

Bean plant. Argentina’s biofuels industry received a further boost last week when local biodiesel producer Renova confirmed it is to invest US$350 million in a new plant located in Timbúes, Santa Fe province, which will process soya beans.

To add icing on the cake, EADS, Airbus’ owner and Europe’s main plane builder, undertook a test flight using a 100 percent microalgae-based biofuel made by Argentina’s Biocombustibles del Chubut.

A first for biofuels, a Diamond DA42 took off from the Berlin ILA air show last month, and was a flight two years in the planning, according to Marcelo Machín, president of the Chubut-based producer.

An important development in an environment increasingly hostile towards fossil fuels, algae can be produced in sufficiently large quantities without competing with food production for fertile land or potable water. St. James said: “A global race is on to find the right strain of microalgae which produce a lot of oil. Biofuels need a vegetable oil to be produced and if you squish seaweed, plenty of algae oil comes out.

“But the challenge is how to grow it quickly. Seaweed needs carbon dioxide and sun so it would grow perfectly next to an old, contaminating cement plant. These little gunky critters double in size in 24 hours, which is why it has caused so much excitement — you have an instant and tremendous feedstock.”

And Dr. Jean Botti, chief technical officer at EADS, added: “This opens up the feasibility of carbon-neutral flights. Third-generation biofuels are more than just a replacement for fossil petroleum — they push the possibilities of future propulsion.”

The Puerto Madryn-based factory is set to receive a sister plant in Sao Paulo which would produce and refine microalgae oil and EADS is hoping to attract 20 million euros worth of investment for it.

While former vice-chancellor Fernando Petrella says Argentina is ripe for investing in terms of biofuels, he is uncertain as to why Sao Paulo is the location for the new plant.

“Given that we are one of the world’s largest suppliers of green energies, this could be an integration point for Argentina to regain its position in the world and the G20. But it’s surprising to me why Biocombustibles del Chubut has chosen Sao Paulo over Argentina. People want to know more about this,” he said to the Herald.

Despite his uncertainty, the former vice-chancellor pointed to the investment opportunities in Argentina.

“In spite of the problems this marvellous country has had — and there are three in my opinion, World War II, the Malvinas conflict and the 2001 crash  — it is still able to do biofuel business which was to the tune of US$2.1 billion last year.”

St. James added: “This really is a moving industry. Last year Argentina produced and exported 1.2 million tons of biodiesel at a cost of a little under US$1,000 per ton. That makes it a billion-dollar industry.

Argentina is always on the brink of an energy crisis. But now that the government is finally understanding the opportunities the biofuels industry is offering, those days may be over.”

SOURCE: BUENOS AIRES HERALD

Accelergy, USAF to evaluate Camelina, liquid coal jet fuel mix
Accelergy has begun production of biojet fuel using a mix of Camelina oil and liquefied coal for evaluation by the US Air Force (USAF). Separately, Accelergy signed a Camelina oil supply agreement with an Ohio company.

US Navy to test F/A-18 Super Hornet fighter jet with biofuels
In 2009, Accelergy entered into a cooperative research and development agreement with USAF for testing fully synthetic fuels that meet or exceed USAF JP-8 military jet fuel standards.

USAF currently uses JP-8 fuel in all of its aircraft and has been looking for a commercially viable 100% synthetic alternative to petroleum based fuels. To date, synthetic fuels have required blending with petroleum feedstocks on a 50% basis to be suitable in aviation applications.

As reported by Recharge, USAF has issued internal requirements that 50% of its fuel needs comes from domestic and cleaner sources by 2016.

Accelergy will use its coal-biomass-to-liquids technology at a pilot facility under construction at the Energy and Environmental Research Center (EERC) University of North Dakota.

Fuel deliveries to the Air Force Research Labs will begin in late 2010. The pilot facility will provide a valuable tool for evaluating new coal and biomass feeedstocks as the technology moves toward commercial deployment.

“Accelergy is the first to provide 100% synthetic jet fuel for the USAF with high thermal stability, increased energy density, lower environmental impact and competitive costs,” says tim Vail, company chief executive.

“The facility at EERC allows us to produce meaningful quantities of fuel, confirm our performance estimates and further refine our fuel product,” he adds. “With the test results in hand, the Air Force and defense contractors can then explore the full range of options for employment and advanced synthetic fuels in next-generation aircraft designs.”

Accelergy says its process technology maintains high overall thermal efficiency while significantly reducing greenhouse gas emissions associated with comparable refining methods. It can also produce Jet-A fuel along with military JP5 and JP9 military jet fuels.

Camelina is a plant native to Northern Europe and Central Asia that has been traditionally cultivated as an oilseed to produce vegetable oil and animal feed. It does not compete with food crops as it requires little water or nitrogen to thrive, and can be grown on marginal farm land.

Among US states, Montana has been the most supportive of proposals to use Camelina as a raw material for biofuels and is also backing use of its abundant coal reserves for the same purpose..

Accelergy’s supply deal is with Great Plains Oil & Exploration – The Camelina Company , which is based in Cincinnati, Ohio. Financial and other details were not released.

A Great Plains official tells Recharge that the company is already growing Camelina in Montana and will extract its oil there after it obtains a crushing plant.

“This will be a great plus for Montana, and is another step on our way to energy independence,” says Governor Brian Schweitzer, who sees creation of jobs as Camelina use becomes more widespread.

Accelergy is based in Houston.

Richard A. Kessler

Source: Recharge news

Production increased from 959 million liters in 2001 to 15,760 million liters in 2009, at a CAGR of 41.9%. Supported by governments to increase energy independence and meet the rising energy demand the biodiesel market is expected to produce 45,291 million liters of biodiesel in 2020, representing a CAGR of 10.1% during 2009 to 2020. Europe is the leading biodiesel market with a production share of 49.8% followed by the Americas with a production share of 32.8% and Asia Pacific with a share of 4.4% in 2009.

European share in the biodiesel production has been declining since 2001 while the share of Americas and Asia Pacific increased. The top five biodiesel producers in the world are the Germany, The US, France, Argentina, and Brazil. All of these countries together produce 68.4% of the world’s total biodiesel. Australia is the largest producer of biodiesel in Asia Pacific followed by China and India. For further details, please click or add the below link to your browser:

http://www.globaldata.com/reportstore/Report.aspx?ID=Glo…

The US is the second largest producer of biodiesel in the world, producing 17.7% of the world’s biodiesel in 2009. The biodiesel market in the US is expected to reach 2,822 million liters in 2010 and 6,453 million liters in 2020. The US Government has been promoting the production and use of biodiesel through various incentives and policy measures. The Renewable Fuel Standard 2 (RFS) program has been formulated to meet the requirements of the Energy Independence and Security Act of 2007 (EISA).

The revised RFS requires the use of 11.1 billion gallons of renewable fuels in 2009 which will continue to increase thereafter to reach 36 billion gallons by 2022. According to RFS 2, biodiesel is categorized in the biomass based diesel category and minimum 1 billion gallons is to be produced by 2012 which is over 50% more than the present levels. The German biodiesel market is facing a bleak outlook due to the impostion of taxes which have made biofuels too expensive for its consumers. Though the country is the largest producer of biodiesel in Europe, the future for the market looks weak.

This is mainly due to the taxes the German government has imposed on green fuels. Another factor that has contributed to the negative outlook of the German biodiesel market is the generous export subsidies received by the US producers. The EU has now imposed an import tariff on US biodiesel imports to protect the European market. The country has reduced the blending target to 6.3% in 2010 from 6.8% as set out previously in the plan to cut carbon dioxide emissions, although the specific blending mandates for biodiesel will remained unchanged until 2014. For further details, please click or add the below link to your browser:

http://www.globaldata.com/reportstore/Report.aspx?ID=Glo…

China has become the world’s largest automotive market in terms of units sold, surpassing the US. This, coupled with the country’s concern for energy security, has led to increased interest from the government in developing the alternative fuel vehicle market in the country. In 2009, the government of China provided a 10 billion yuan ($1.5 billion) subsidy for three years to automakers who upgrade their technology and develop alternative fuel vehicles. This stimulus package will result in rising activity in the biofuels sector in the country. “Global Biodiesel Market Analysis and Forecasts to 2020” is the latest research from GlobalData. This report gives an in-depth analysis of the global biodiesel market and provides forecasts up to 2020.

The research analyzes key trends, major issues and growth opportunities in the global biodiesel market. Market share by production capacity, elaborate profiling of major industry participants and information on major present and upcoming production facilities provide insight into the competitive scenario in the global biodiesel industry. This coupled with information on important news and deals provide a comprehensive understanding of the market. Information on the regulatory framework and key policies governing the industry has also been dealt with in detail.

Source: PRLOG

BA says the plant will reduce the amount of waste sent to landfill.

British Airways has struck a deal to build the first plant in Europe to produce jet fuel from waste matter.

Some 500,000 tonnes of waste will be used by the UK facility each year to produce 16 million gallons of fuel.

Construction of the plant in east London will start within two years. It is set to produce fuel from 2014, creating up to 1,200 jobs.

BA said the plant would produce twice the amount of fuel needed to power all its flights from London City Airport.

It would only account for about 2% of flights from Heathrow, however.

Greenhouse gas

BA argues the plant will cut the amount of waste that is sent to landfill, reducing the amount of methane that is produced.

Methane is thought to be a more potent greenhouse gas than carbon dioxide.

The plant will be built by a US company Solena Group, with BA committing to buy all of its output.

It will be another four years before it starts producing fuel, and it is unlikely to work at full capacity straight away.

The ideal source material for the plant is waste matter that has a high carbon content.

Biofuel creation

The waste is fed into a high temperature “gasifier” to produce BioSynGas.

A chemical process called Fischer Tropsch is then used to convert the gas into biofuel.

Waste products from the process can be used to power the plant as well as supply 20MW of electricity to the national grid.

A solid waste product can be used as an aggregate in construction.

The fuel produced by the plant is certified for use in other countries, but not currently in the UK.

BA says it is confident of getting the certification by the time the plant starts producing fuel, either for use in a blend with traditional kerosene or on its own.

By Richard Scott

Source: BBC

“Biodiesel will be incorporated into the energy matrix, initially accounting for 5 percent of domestic demand, that is 742 million liters (196 million gallons) per year, which is equivalent to the amount of conventional diesel fuel imported by Argentina in 2008,” Planning Minister Julio de Vido told a press conference.

The minister predicted that over the next four years biodiesel’s share of the conventional diesel-biofuel blend will rise to 20 percent.

The law mandating that diesel fuel contain a renewable component dates back to 2006 and stipulates that the measure must go into effect in 2010.

Separately, the minister said that in the face of “persistent record-high temperatures” in the current Southern Hemisphere summer, the electrical system has responded “perfectly within the normal parameters.”

He acknowledged that “there may have been some isolated” problems with the service, but nothing serious.

De Vido added that the government has already invested 18 billion pesos ($4.66 billion) to expand electricity generation and transport capacity in Argentina.

In that sense, he said investment projects totaling 29 billion pesos ($7.51 billion) are currently being carried out, in addition to planned future projects that will cost 31 billion pesos ($8.03 billion) EFE.

Source: Laht efe

SAO PAULO (Reuters) – Royal Dutch Shell plans to form an ethanol and fuel distribution joint venture worth up to $12 billion with Brazilian sugar and biofuel giant Cosan, becoming the latest global energy company to buy into one of Brazil’s fastest-growing industries.

The deal, announced on Monday, marks Shell’s first foray into ethanol production and follows moves by British oil company BP, which in 2008 took a stake in a big Brazilian biofuel project and unveiled $1 billion in investments.

Cosan shares jumped 12 percent in Sao Paulo, compared with a 1.1 percent gain by the benchmark Bovespa index. Shell shares rose 1.1 percent in London, outperforming a 0.3 percent rise in the Dow Jones European oil and gas index.

“It’s a vote of confidence from an oil major for the Brazilian ethanol industry,” said Jonathan Kingsman, managing director of the Lausanne-based Kingsman SA ethanol and sugar consultancy. “I expect more interest from the oil companies in Brazilian ethanol, both in production and distribution.”

The 50-50 joint venture will be the third-largest fuel distributor in Latin America’s largest country, with almost 4,500 filling stations nationwide. By joining forces, Cosan and Shell will be better positioned to compete with the two top players in the market, state oil giant Petrobras and Ipiranga, a unit of Brazil’s Grupo Ultra.

Cosan first branched out into the fuel distribution business in 2008 when it acquired U.S.-based Exxon Mobil Corp’s Esso chain of service stations for nearly $1 billion. Cosan also agreed in December to buy a local chain of filling stations called Petrosul for an undisclosed sum.

While the deal will not immediately add to Cosan’s existing cane crushing capacity of about 60 million tonnes a year, it will give it a deep-pocketed partner at a time when some of its smaller rivals are vulnerable to takeovers.

The companies hope to more than double ethanol output to up to 5 billion liters a year from about 2 billion now, Shell’s downstream director, Mark Williams, said in London, without giving a time frame. The increase would come from takeovers and organic growth, he added.

The deal is another feather in the cap of Cosan Chairman Rubens Ometto, whose family has been in the sugar business since 1936. On Ometto’s watch, Cosan went on an acquisition spree and expanded into fuel distribution and port terminals.

Ometto hopes to capitalize on Shell’s global clout to make ethanol a widely traded commodity.

“Brazil’s aim is to become an ethanol exporter. Shell has distribution facilities throughout the world that we could use in a much more integrated way,” Ometto said in Sao Paulo.

“This step will be very important to consolidate ethanol as a clean and renewable fuel … and help it become a global commodity.”

Oil companies and major global investors have been searching for partnerships in Brazil’s promising ethanol sector, which is still largely dominated by family companies with complex ownership structures.

Shell has been looking for opportunities in Brazil’s ethanol industry for years. About 90 percent of all new cars in Brazil are flex-fuel, running on any mix of ethanol and gasoline, making the country a huge market for biofuels.

Other foreign companies have also been delving into Brazil. U.S. agribusiness giant Bunge Ltd struck a deal in December to buy sugar and ethanol producer Moema for $452 million, while French commodities company Louis Dreyfus said in October it would take over the Santelisa Vale mill for an undisclosed sum.

COSAN EYES OVERSEAS MARKETS, TECHNOLOGY

The combined entity will have about 40 billion reais ($21.4 billion) in annual sales, Cosan Chief Financial Officer Marcelo Martins said on a conference call with analysts and investors.

For Cosan, the world’s largest sugar and ethanol producer, teaming up with Shell could give it access to a vast overseas distribution network and new technologies in ethanol production, an area where Shell has been investing. Shell’s network may help Cosan export more ethanol as output grows.

“We’ll have a partner with an absolutely huge international presence in fuels sales,” Martins said.

The so-called second-generation in ethanol production has yet to reach commercial scale, but some companies are betting on the use of cellulosic material such as bagasse or cane stalks and grasses to make biofuels, in part to move away from making fuel from foodstuffs.

Cosan, which recently obtained a court injunction to remove its name from a government black list of companies with workers in slave-like conditions, said it had 180 days to discuss the nonbinding memorandum of understanding exclusively with Shell International Petroleum Co Ltd.

As part of the transaction, Cosan will transfer its sugar, ethanol, fuel distribution and energy generation business to the merged entity, with assets valued at $4.93 billion and debt of $2.52 billion.

Shell will contribute its retail fuel and aviation distribution business, valued at up to $3 billion, and inject $1.63 billion into the merged company in up to two years.

Brazilian investment bank BTG Pactual advised Cosan on the transaction, while JPMorgan Chase advised Shell.

Cosan and Shell will have the option of buying each other’s stake in the venture after 10 years, with the price to be determined at the time of purchase.

Earlier on Monday, Cosan released its quarterly earnings for the three months ended December 31. It posted net income of 167.1 million reais, up sharply from 5.2 million reais a year earlier. ($1=1.87 reais)

Reporting by Elzio Barreto and Inae Riveras; additional reporting by Reese Ewing in Sao Paulo and David Brough, Nigel Hunt and Tom Bergin in London; editing by Todd Benson, Dave Zimmerman and John Wallace.

Source:  Reuters