Tokyo (Platts)--30Jul2009

Biomass Japan, a supplier of biodiesel, is set to start trial sales of
crude jatropha oil to local power companies for use as direct burning
feedstock from as early as August, a company source told Platts Thursday.

Biomass Japan is scheduled to start receiving some 700 mt/month of crude
jatropha oil in Okinawa from August, mainly from its pilot plants in
Indonesia, Malaysia, Thailand and India, the source said.

Japan's power industry has committed to increasing the use of
non-hydrocarbon sources of power and the company is currently in the final
stages of talks with a few local power companies to consider burning crude
jatropha oil, said the source declining to elaborate.

It would be the first time Japanese power companies have used the biofuel
as a direct feedstock, the source added.

Biomass Japan declines to officially disclose exact costs for its crude
jatropha oil, but according to the source production from the foreign pilot
projects will cost less than Yen 50-60/liter (53-63 cents/liter) on a CIF
basis, less than equivalent domestic production.

Biomass Japan is currently expanding its overseas jatropha production
capacities beyond Southeast Asia, with new operations in Africa due to come on
stream in the next few months, the source said.

From December it will be receiving a total of 5,000 mt/month of crude
jatropha oil from Africa, said the source, declining to give details of the
projects.

In 2010 Biomass Japan expects to receive 60,000 mt/year of crude jatropha
oil from its plants in Southeast Asia and Africa, and the company expects to
double its import and supply capacities to 120,000 mt/yr by 2016, the source
added.

Last month, Japan finalized a plan to consume 600,000 kiloliters/year
crude oil equivalent of biofuels by 2020 as a new target for the post-Kyoto
Protocol commitment.

Japan's new ethanol consumption plan is part of Tokyo's target announced
last month to cut its greenhouse gas emissions by 15% from 2005 levels, before
2020.

Japan had previously agreed to reduce its greenhouse gas emissions by 6%
from 1990 levels between 2008 and 2012 under the Kyoto Protocol. At an April
2005 cabinet meeting, Japan also committed to consuming 500,000 kl/year crude
equivalent in biofuels from fiscal 2010-2011 (April-March) to help meet its
Kyoto commitments.

The country's new target translates to an 8% reduction from 1990 levels,
the standard benchmark used in UN-led negotiations to decide on a post-Kyoto
Protocol framework in Copenhagen, Denmark in December.

Meanwhile, the Japanese power industry has a commitment to increase its
non-hydrocarbon sources of power to 50% by fiscal 2020-2021 (April-March) from
the current levels of around 34%, an official at the Federation of Electric
Power Companies of Japan said.

The majority of the increase in non-hydrocarbon sources of power is
expected to come from nuclear and other power sources, although a number of
local power utilities have begun experimental burning of biomass fuels such as
scrap wood, the official said.
--Takeo Kumagai, takeo_kumagai@platts.com