Singapore (Platts)--29May2008

The Australian Biodiesel Group plans to switch to products that are not
dependent on subsidies, do not compete with food and have clearly defined
routes to market in a bid to diversify into other areas of renewable energy,
the company said late-Wednesday.
Recent falls in tallow prices, combined with record high oil prices, are
making potential margins in biodiesel attractive again, although a lack of
assured volume continues to pose a major challenge, the company said in a
statement to the Australian stock exchange after its AGM Wednesday.
Its diversification plan includes securing long-term, low-cost feedstock
that does not compete with food resources, not relying on other parties to
market its biofuel and finding a party advanced in cutting-edge biofuels to
give it the competitive edge. It may even amend or change company name to
reflect the expanded scope, the company said.
"This vision will require tough business decisions, tight fiscal
management and deft action," chairman Wayne Rogers said in the statement.
Its strategy had long been to focus only on bulk biodiesel supply, but
this has become non-viable due to a failure to engage oil majors, tax changes,
oversupply to a small number of independents resulting in heavy discounting
and rising feedstock costs squeezing margins, it added.
While more incentives from the Australian government to decrease
greenhouse gas emissions are likely, the company noted that threats to the
biodiesel industry still remain. For example, even though tallow prices have
retreated in recent months, palm oil is showing high volatility and may rise
further.
Australian biodiesel producers have also had little success penetrating
the fuel market dominated by oil majors, while the ongoing food versus fuel
debate may unduly influence policy makers, it said.
ABG had chalked up losses of A$17 million ($16.3 million) by end-2007
after shutting down its Narangba biodiesel plant amid what it described as a
"meltdown" in Australia's biofuels industry.
--Weilyn Loo, weilyn_loo@platts.com