The entire available supply of biodiesel feedstocks could be used to meet
a relatively small 8% of total existing world demand for diesel, a leading
industry consultant said in Singapore this week. Current world demand for
diesel is around 14 million b/d.
"If all starch, sugar, fat and natural oils were used to make liquid
biofuels and none went to food, feed or other industrial uses (...) biodiesel
could meet 8% of diesel demand," Tony Regan, principal consultant with
Singapore energy consultancy Nexant, told a gathering held by the British
Chamber of Commerce in Singapore.
With the various pressures on biodiesel feedstocks, which in southeast
Asia include palm oil -- a critical food crop and a target for
environmentalists angry at rainforests being felled for fuel -- it is likely
that only a small fraction of the world's total potential biodiesel production
will ever be realized.
Regan estimated that biodiesel might realistically meet around 1% of
world diesel demand by 2010.

ANALYSIS ANOTHER BLOW FOR A CHALLENGED INDUSTRY
The analysis from Nexant will come as another blow, if not a major
surprise, to the Asian biodiesel community that has struggled to live up to
its billing in 2007.
Most of Asia's biodiesel producers have struggled to bring new projects
online this year. Biodiesel plants are relatively cheap to build -- even the
largest and most modern cost less than $150 million. But they are expensive to
run, meaning many projects are built, but are then left to idle.
Some projects actually start up and quickly shut down, like leading
Australian biofuel producer, Australian Renewable Fuels, which earlier this
week announced it had stopped production at its two plants in Western
Australia and South Australia on high feedstock costs.
It said tallow feedstock prices had surged from less than A$600
($553)/mt to more than A$900/mt in the past six months due to rising demand
from China, and announced it was considering relocating its entire business to
the US.

ALL KEY FEEDSTOCKS TOO EXPENSIVE AT $80 CRUDE OIL
Some biodiesel producers are reporting positive financial results, like
China-based China Clean Energy, which earlier this week reported falling
feedstock prices, rising biodiesel resale prices, and margins that look
reasonable. But CCE is running a wide variety of feedstocks that appear to
include a lot of waste oils such as yellow grease from restaurants.
Larger projects tend to be fuelled by raw vegetable oils.
All of the world's major primary vegetable oil sources of biodiesel were
simply too expensive, most of the time, to support biodiesel production, Regan
said. With crude oil at $80/barrel, soy-based biodiesel in the US and China,
rapeseed-based production in Europe and palm oil-based production in Asia are
loss-making propositions, he estimated, without government subsidies.
Of all primary vegetable oil sources, US-based soy is the cheapest, while
Asia-based palm is the least viable, his data showed.
Regan also said that serious challenges lay in store for any biodiesel
producer looking to jatropha as a source of fuel. The hardy bush can be grown
almost anywhere in the world, on the most challenging land, and it is
poisonous -- meaning it would never compete as a food source. To be viable as
a biodiesel source, jatropha would need to be cultivated on somewhat decent
land that would encroach on some food crops. "If you grow it on marginal land,
you get a marginal product -- useless," said Regan, leaning down to hold his
hand 12 inches from the floor.
--Dave Ernsberger, dave_ernsberger@platts.com