A major multinational oil company has terminated advanced negotiations with Western Australian biodiesel producer Australian Renewable Fuels Ltd to supply its WA retail service stations with blended biodiesel.
ARF chief executive John Lillywhite said the company was told that complexities with the logistics of blending biodiesel with bulk mineral diesel at the oil company's WA terminal was the reason behind the termination.
The former Verve Energy chief executive said ARF would be pursuing further explanation of the complexities that needed to be resolved.
Both parties had agreed on a selling and price and quality specifications, with ARF committing just under $2 million to fund the upgrade the terminal facilities.
Interestingly, the company remains in negotiations with the same oil company over a supply agreement from its Adelaide plant, with a that agreement dependent on terminalling logistics.
Mr Lillywhite said while there was plenty of demand for biodiesel in the WA market, particularly from major resources companies, the company has been met with uncooperative fuel suppliers.
He said changes to the fuel tax legislation, which reversed its previous policy of providing biodiesel users with a 38 cents per litre fuel tax credit, had forced producers to blend biodiesel with regular diesel at licensed blending sites either controlled by or tied to major oil companies.
"With one exception, you've got a hostile major fuel industry with an indifferent federal government," he told WA Business News.
"So far, the commitment to Australian biodiesel policy and strategy has been extremely poor."
ARF also announced it had secured an order of more than 500,000 litres of biodiesel from its Picton plant to a WA buyer, scheduled for delivery in September.
ARF, which listed on the ASX in 2005, now operates two biodiesel plants in WA, each with an annual capacity of 45 million litres.
The company has a supply agreement with Caltex Australia for up to five million litres of biodiesel per year each in WA and SA.
It also has a supply agreement with Wesfarmers Premier Coal for up to 1.5 million litres of blended biodiesel per year.
