May 1, 2006

CHINA: The Food vs. Energy Feedstock Conundrum

Asia's growing affluence virtually guarantees that the world's petroleum and natural gas markets will suffer rising prices for the foreseeable future. However, China does not enjoy rich reserves of fossil fuels other than coal so, as reported by Jeff McIntire-Strasburg at sustainablog, China and the rest of Asia is "Looking Hard at Biofuels".

In the 1950's China had a choice between using food for feeding its populace or using it to obtain weapons. Mao opted for power - resulting in the starvation of an estimated 12 million Chinese. It will not sacrifice its people for energy now but the writing is on the wall - it must secure its energy future. According to the following story, China is aggressively pursuing an ethanol production capability using a variety of feedstock. Excerpts are below:


Sky-High Oil Prices Fuel Ethanol Mania in China

HONG KONG/BEIJING - Record crude oil prices are fuelling ethanol fever in China, the world's second-largest oil consumer, despite Beijing's reservations in allowing more food grains to be used to run cars.

Beijing is reluctant to expand ethanol production from food grains as China will face a shortage of grains like corn or wheat possibly as early as next year, due to rising domestic demand brought on by higher affluence.

China began its ethanol projects in early 2000 in a bid to get rid of its surplus grain reserves and partially convert them into the biofuel.

China is the world's third-largest ethanol fuel producer after the United States and Brazil, which make the fuel from corn and sugar cane, respectively.

With crude oil prices skyrocketing to more than US$70 a barrel from about US$30 in 2003 when China's ethanol projects started operations, Beijing is likely to scrap subsidies for the four ethanol plants altogether.

But eager investors are unfazed by the prospect.

"Oil prices are so high that it's interesting to make ethanol from most raw materials at the moment," Simon Bentley, an analyst from LMC International Ltd. in Oxford told Reuters.

"With current technology, people start breaking even making ethanol at around US$40 a barrel of oil," said the head of LME's Starch & Sweetener Research, who was in China last week.

Earlier this month, the National Development and Reform Commission, the country's top planner, said on its Web site ( that biofuels should replace about 2 million tonnes of crude oil by 2010 and 10 million tonnes by 2020.

But it also said China would shift to non-grain raw materials -- such as sweet sorghum or cassava, also known as tapioca -- to make fuel ethanol. These alternatives can be used to churn out around 30 million tonnes of ethanol, the commission said.


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