December 21, 2005

Asian Investments in Ethanol

Here are three (green) "tea leaves" from the Far East. In unrelated stories posted this week (12/14-21/2005) on the Green Car Congress website, large multi-national investments are being made to increase ethanol production and build Flexible Fuel Vehicles (FFV) in the region. Objective - to provide alternative fuels to meet growing demand for liquid fuel and to meet Kyoto reduced greenhouse gas emissions obligations.


Indonesian Oil and Gas Firm Building Country’s First Ethanol Plant

Medco Energi International, Indonesia’s largest upstream oil and gas exploration firm, plans to build a $34.13-million ethanol plant in Lampung province in 2006. This will be the first ethanol plant in the country.

The joint-venture facility between Medco and PT Trade Bioenergy Indonesia will have annual production capacity of 60,000 kiloliters (about 16 million gallons US) of ethanol targeted for export, with cassava-derived starch and sugarcane molasses as the feedstocks, Medco said in a statement.

Production will begin by the end of the third quarter of 2007, with the main markets to be Singapore and Japan.


Petrobras Forms Japanese Ethanol Joint Venture

Petrobras, the Brazilian state-owned oil and gas company, has formed a joint venture company with Nippon Alcohol Hanbai (NAH) of Japan to produce fuel ethanol for the Japanese market. The new venture—Nippaku Ethanol—will be a 50-50 partnership between the two firms and will aim at the Japanese market.

For Petrobras, the JV is a strategic mechanism for further internationalizing its business and entering an important fuel market, thereby opening up other opportunities for fuel distribution in Japan. Japan is looking to ethanol as one of the mechanisms for achieving its Kyoto obligations.

Earlier this year, Japanese Prime Minister Junichiro Koizumi and Brazilian President Luiz Inacio Lula da Silva agreed on the need for more non-governmental cooperation to promote ethanol use.

Japanese law allows three percent ethanol in gasoline, which would mean a market for 1.8 billion liters of the alcohol-based fuel each year. Increasing the blend cap to 10%—as is under discussion—would result in a 6 billion liter market.

Petrobras made its first export shipment of ethanol in July 2005, destined for Venezuela. Initial forecasts are for a monthly shipment of some 25,000 cubic meters (some 6.6 million gallons US). The company had announced earlier in the year that it intended to begin participating in the renewable fuels export market. Petrobras will invest US$330 million in the next five years to develop the requisite transport infrastructure.


Ford Plans New FlexFuel Engine Plant in Philippines

Ford Motor plans to invest P1.1 billion (US$20 million) to add a flexible fuel engine plant in the Philippines. The engine plant will be Ford’s first flexible fuel facility in the region. Flexible fuel engines run on gasoline or ethanol blends of up to 85% (E85). The facility will produce 100,000 engines over the next five years valued at about US$100 million. Start-up activities will be undertaken in the first quarter next year, with full production to begin before the end of 2006.

We expect that this new investment by Ford will take the Philippine automotive industry to its next level of development by establishing its leadership in the Flexible Fuel technology in the region. Flexible Fuel technology is part of Ford’s global vision on innovation, and with this investment Ford intends to build the Philippines as its ASEAN Center of Excellence in Flexible Fuel Technology.
—Peter Daniel, President of Ford Asia Pacific and Africa

The building of the first Flexible Fuel engine facility in the Philippines is aligned with the Philippine government’s alternative fuel program that seeks to reduce dependence on imported conventional fuel and promote a cleaner environment while potentially spurring agro-industrial investment in the rural areas through the production of ethanol.

The engines from the Philippine plant will be used in the production of Flexible Fuel vehicles (FFVs).

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