Biofuels players go with market flow

Rising fuel prices have failed to re-ignite the state's fledgling biofuels sector, with producers looking to side businesses, such as glycerine production and feedstock, to generate revenue.

Local listed companies Australian Renewable Fuels Ltd, Mission Biofuels Ltd and Sterling Biofuels International Ltd have either put commercial production of biodiesel on hold, or modified their production plans, due to rising costs.

And in another blow to the industry, the future of Primary Energy's proposed Kwinana bio-ethanol plant was last week thrown into doubt after BP reversed its decision to buy the entire 160 million-litres-a-year output.

Last month, Australian Renewable Fuels Ltd announced it had secured agreement with a WA resources company for up to 7 million litres of biodiesel, almost five months after it put both its Picton and South Australian plants on care and maintenance.

Chief executive Max Ger told WA Business News the high oil price had helped to absorb some of the rising feedstock price as offtake prices increased dramatically.

He said he hoped commercial production at Picton would re-commence within the year.

"The high oil price hasn't been good for everyone else, but it's done wonders for us," Mr Ger said.

Also adapting its strategy is Mission Biofuels Ltd, which announced it would only produce and sell biodiesel from its Malaysian plant on a contract basis after a spike in the crude palm oil price.

However, the company will continue to purify crude glycerine to 99.5 per cent pharmaceutical grade glycerine for sale to make the facility profitable and ready for biodiesel production as and when required.

Its renewable power business is also expected to generate additional revenue, with the commissioning of two 1.65-megawatt windmills in February.

Also maintaining glycerine production is Natural Fuel Ltd, whose Darwin biodiesel plant has encountered technical problems with commissioning.

The company will continue to produce glycerine from both its Darwin and Singapore plants, which is expected to make a substantial contribution to fixed costs.

But while uncertainty surrounds the timing of a possible recovery in the biofuels market, some in the industry are looking to expand into upstream feedstock supply.

Mission Biofuels has developed an upstream jatropha curcas feedstock business in India, which has so far grossed $3 million in six months to December 31 2007.

With more than 40,000 hectares planted, the company will look to increase planted area to 265,000ha this calendar year, with the aim of reaching more than 1mha by the end of 2010.

West Perth-based Sterling Biofuels International Ltd has also diversified into upstream activities, namely oil palm plantations and palm oil milling through its wholly owned Malaysian subsidiary, SPC Biodiesel Sdn Bhd.

While the company is yet to commence production at its Malaysian biodiesel plant, its plantation arm, Sterling Plantations Sdn Bhd, hopes to develop and manage jatropha plantations, while a subsidiary constructs and operates a palm oil mill.

But amidst the gloom, one emerging WA biodiesel producer is preparing to launch production at a new facility in the state's Wheatbelt.

BioWorks Australia Pty Ltd, which currently manufactures biodiesel at its O'Connor facility from waste oil, is preparing to open a second WA facility in Pingelly.

The Pingelly plant will use a combination of locally sourced feedstocks, from grains, tallow and waste oil to Indian mustard.

BioWorks has operated in conjunction with local farmers to research the viability of Indian mustard as a biodiesel feedstock, with plantings now totalling 600ha.

Indian mustard is a drought-tolerant crop which returns high yields in low rainfaill areas.

BioWorks managing director Craig Lovelady said construction of the facility was almost complete, with production due to start this month.

Production will start at between 1 and 2 million litres, with capacity expected to double by September.

The project was undertaken in a joint venture with local farmers, who will soon have access to locally produced biodiesel that is cheaper than regular diesel.

"The intention is to supply cheaper fuels to the farmers in the vicinity," Mr Lovelady said.

Mr Lovelady believes the company has thrived because of its focus on localised supply of feedstock and producing smaller volumes.

"We're never going to affect food the market. We sit outside of that," he said.

"We work with what's available locally and what's good for the area."

Undeterred by Primary Energy's problems at Kwinana, WA-based bio-ethanol hopeful Grainol Ltd is progressing with its proposed 190ML/year East Rockingham plant.

Managing director Collette Menegola said the company was close to finalising development funding for the project.

The company's plans for a second bioethanol plant in Picton have been put on hold.