30/05/2006 - 22:00

Local pioneer reaps rewards

30/05/2006 - 22:00

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Australian Renewable Fuels Ltd is carrying the Western Australian biofuels banner into a rapidly expanding, multi-billion dollar international market.

Local pioneer reaps rewards

Australian Renewable Fuels Ltd is carrying the Western Australian biofuels banner into a rapidly expanding, multi-billion dollar international market.

The pioneering biodiesel producer, established in Perth in 2001, has become the yardstick for many seeking greenhouse-neutral energy solutions to rapidly declining, increasingly expensive and polluting fossil fuel resources.

ARF recently concluded $450 million worth of sales in Australia for the next four to five years.

Its production is expected to reach the 90 million litres/year level by mid 2007, rising to 220mL, either produced or under construction, before the end of that year.

Production in the US and Austria is expected to reach 650mL/year next year, underpinned by a five-year contract for up to 120,000 tonnes/year with Austrian fuel trader Godiver.

ARF’s production comes from its recently opened first plant in South Australia, with another in Bunbury being commissioned and three more in 2007.

“I think we surprised a few people,” ARF managing director and second largest shareholder Darryl Butcher told WA Business News of the company which was spun out of Amadeus Energy Ltd, still the major shareholder with 34 per cent.

He believes the Australian biofuels business could be worth up to $2 billion a year within the next five years.

And even though the industry is still in its infancy, particularly in Australia, that’s big business.

Australia consumes about 14 billion litres of diesel a year, about 10 per cent of that in WA.

Mr Butcher said the nation currently has the capacity to produce between five and 10 per cent of that within five years, worth between $1 billion and $2 billion dollars a year.

The federal government aims to get biodiesel levels up to 530mL/year by 2010.

But biofuels will not be the world’s energy saviour.

“As far as future liquid fuels needs are concerned, I don’t believe biofuels is the silver bullet. It might be a silver shotgun in that it supplies one of the many solutions. There is no single answer,” Mr Butcher said.

“We have really been spoilt by fossil fuels and we have damaged the environment to some degree in the process.”

A recent federal government report has actually quantified the average health costs savings of biodiesel to the budget at five cents a litre, compared with 0.9c/litre for ethanol. Also the greenhouse gas benefit from biodiesel was calculated at 2.4c/litre, compared with 0.9c/lire for ethanol.

A major problem for biodiesel is that it has been marketed as a replacement product and not as a separate fuel that produces much less pollution.

“It doesn’t need to be sold at a discount. It should be marketed as a premium product, just as superior quality petrol is,” Mr Butcher said.

If fossil fuels ran out tomorrow, he said, it was technically possible for Australia to grow enough cereal and oil seed crops to supply all the country’s fuel needs.

“Australia is quite unique in that regard,” he said.

It was also technically feasible that, if half the area now planted with wheat in WA was planted with canola, all Australia’s diesel needs could be met.

“But that’s not going to happen,” Mr Butcher said.

ARF recently concluded a $200 million, four-year, 45mL/year sale agreement with WA fuel distributor Westfuel, the entire production capacity of the company’s Picton plant nearby Bunbury, currently being commissioned.

This follows a similar $250 million deal over five years with SA fuel distributor Dermody Petroleum Ltd.

Earlier this year, ARF opened Australia’s largest biodiesel plant at Largs Bay, South Australia.

The 45mL/year plant will be followed by Picton, one in Brisbane and two others next year, generating 220mL/year, almost 70 per cent of the federal government’s 350mL biofuels target for 2010.

Each plant is expected to cost between $15 million and $25 million.

ARF will also establish a North American subsidiary this year, which will become both a producer and supplier of biodiesel and the technology.

The subsidiary’s initial focus will be feasibility studies for two large scale, probably 275mL/year plants.

In Europe, ARF has agreed to acquire 25 per cent of Carbon Cycle Management AG to establish a 105mL/year plant in Austria to be operational in 2007.

CCM has completed a feasibility study and a project debt package for 87 per cent of the expected $36 million capital cost has been secured.

ARF’s stake in CCM will come from its recently completed $27 million raising, which was 2.5 times oversubscribed.

A local newcomer that has hit the ground running is the Dario Amara-headed Mission Biofuels Ltd, which last month raised more than $42 million for its 100,000t/year biodiesel facility in Malaysia.

The plant, using palm oil as feedstock, is scheduled to go into production in October next year and the company has received approval to establish an additional 200,000t/year biodiesel facility nearby.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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