Private, public sector drive towards biofuels

Western Australia is at the forefront of a burgeoning biodiesel business expected to be worth up to $2 billion in the next five years in Australia, about 10 per cent of which will be generated in WA.

And that does not include the export potential to increasingly biofuels hungry European countries, Asia and the Americas.

A range of multinational and small companies, either based in WA or with substantial operations here, are moving quickly to capitalise on a worldwide move into biofuels, and biodiesel in particular.

These include such majors as BP and locals Gull Petroleum, Australian Renewable Fuels Ltd, Natural Fuel Ltd, Mission Biofuels Ltd, and Australian Ethanol Ltd, along with prominent research facilities.

The new biofuels age, embraced by the WA government, will be one of renewable energy wrought from such diverse harvests as wheat, seeds and other vegetative and animal matter, most of which WA has, or can have, in abundance.

While providing source material, production and distribution facilities, biofuels is one of four major sectors the state government is targeting for growth and its increasing backing.

Science and Innovation Minister Francis Logan told WA Business News biofuels and renewable energy were among the next “big things”.

“The oil companies are moving that way and we should be on board,” he said.

WA’s key advantage was its ability to supply feed stocks for biodiesel and renewable fuels, such as hydrogen, which could be stripped out of gas.

Accelerated by rapidly rising oil prices and the ominous approach of peak oil in 2010, when the world finally begins consuming more petroleum-based products than it can produce, the dawning of the biofuels age is not simply about price. It is as much, or more, about the production of a bio-degradable, non-toxic, low sulphur, greenhouse gas neutral substitute fuels.

Earlier this year, Perth-based independent fuel discounter Gull Petroleum announced plans to build an $18 million biodiesel plant adjacent to its fuel import terminal at Kwinana, just south of Perth, with production of 38 million litres/year from early 2007.

The company was the country’s first retailer to offer biodiesel to WA motorists, at a price 4 cents/L less than its conventional diesel product at 13 of its 84 sites across the state, with more to come.

That fuel is from Gull’s partnership in a Brisbane biodiesel facility that is being expanded from 38mL/year to 75mL/year.

Gull CEO Wayne Ferrell said the expansion showed how viable the biofuels industry was in Australia.

“Since its launch, one in four motorists have made the switch from our conventional diesel to biodiesel,” he said.

On a larger scale is BP Australia’s recent deal with New South Wales company Primary Energy Pty Ltd to buy the entire output from a new $100 million ethanol (alcohol) plant to be built in Kwinana, Australia’s first wheat-fed ethanol plant. Expected to produce 80mL/year, to be sold across Australia as BP’s e10 blended product from 2008, this will be just part of the over 200mL/year of biofuels the company expects to be producing from WA and Queensland by then.

The e10 fuel blended in WA will use about 200,000 tonnes/year of wheat and deliver a similar engine performance to that of traditional petrol, but with lower emissions.

Perth-based biodiesel pioneer and producer Australian Renewable Fuels Ltd (ARF) recently opened Australia’s largest biodiesel plant in South Australia.

Since then the company, established in 2001, has announced future domestic sales agreements worth $450 million.

ARF’s 45mL/year biodiesel plant at Largs Bay will be followed by a similar one at Picton near Bunbury, which is currently being commissioned, another in Brisbane and two others by 2007 producing a total 220mL/year.

This production alone makes up almost 70 per cent of the federal government’s target of 350mL/year of biofuels use by 2010.

ARF is also moving to establish a North American subsidiary to build two large scale, probably 275mL/year, biodiesel plants.

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

An indication of the financial market’s acceptance of the biofuels age is that funding for such expansion has not been much of a problem.

ARF has picked $8 million in mostly federal grants, $8 million in seed capital and $27 million in capital raisings.

Perth-based biodiesel aspirant, Mission Biofuels Ltd, raised an initial $15.6 million then a further $27 million via a substantially over subscribed IPO for its $42 million plant in Malaysia.

The company plans to be producing from its 100,000t/year capacity facility at Kuantan Port in October next year and has already received approval to establish an additional 200,000t/year biodiesel facility nearby.

Mission’s strategy is to produce biodiesel from cheap crude palm oil, utilising lower labour, land and utility costs than its Australian and European counterparts, then sell into the expanding European market.

It is estimated that European biodiesel consumption of 2.8 million tonnes last year will rise to 14mt/year by the end of 2010 to meet European Union biodiesel usage targets in transport fuels by then of 5.75 per cent. Those figures are scheduled to rise to 20 per cent biodiesel content in 2020.

Mission has forecast group revenues of $73.41 million and a net profit of $27.67 million for 2007-08.

It has a five-year off take agreement for all its production into the German market with Austrian-based fuel trader Godiver. ARF has a five-year option for up to 120,000t/year with the same company.

Mission ended its first day on the stock exchange last month at an impressive 39 per cent premium on its $1 shares, which are currently trading around $1.50. ARF has posted steady share price increases since the beginning of this year from $1.30 to around $2.30.

Another local player is Natural Fuel Ltd, run by agribusinessman Dick Selwood and colleague Roger Stroud, which plans to build a $45 million biodiesel facility in Darwin, scheduled for completion by September to produce about 105,000t/year for Asian and domestic markets.

The company has plans for a 440mL/year plant in Singapore, followed by a 150mL/year plant in Houston, in the US, both to be completed by July 2007.

Natural Fuel is also planning a facility in Sydney, approval for which is expected in the last quarter of 2006.

On the ethanol front, West Perth-headquartered Australian Ethanol Ltd recently raised almost $13 million to fund its biofuels aspirations in Australia and the US.

The company’s 100mL/year Swan Hill ethanol facility in Victoria is scheduled to come on stream in late 2007, along with its 189mL/year Beatrice biodiesel plant in Nebraska, US.

Another local, Jupiter Energy Ltd, has announced plans to raise over $5.5 million for its aspirations in the Asia Pacific region, centred on Malaysia where it has applied for a licence to produce biodiesel from palm oil.

On the research front, Curtin University researchers are working on a project to produce biodiesel from Indian and Ethiopian mustard seeds in the state’s Wheatbelt.

Big WA wheat mover CBH Group has established a working group to investigate the future development and sustainability of a biofuels industry in WA.