Friday Edition

05.09.08

GLOBAL

The World Bank president said response to high prices could bring food prices down in 2009 and 2010, but in general the Bank believes that price levels through 2015 will remain higher than the price levels of 2004. This is due to rising demand for food in the developing world and high energy prices.

Many oil and gas industry executives say they expect the price of crude oil to fall significantly by year's end, a new survey shows: 55% of 372 petroleum industry executives surveyed by KPMG LLP said they think the price of a barrel of crude will drop below $100 by the end of the year; 21% predicted a barrel of oil will end the year between $101 and $110, while 15% forecast the year-end price to be between $111 and $120 a barrel; 9% said they expect the price to close the year above $120 a barrel; 44% percent of the executives said their companies plan to increase capital spending on exploration and production by 10% during the next year.

Bargain hunting by physical buyers, especially in China and India, could push up global vegetable oil futures after the softening of prices in the last two weeks, Hamburg-based analysts Oilseeds said. China's vegetable oil import demand remains strong and is likely to turn to more attractively priced palm oil. Problems in Germany's biodiesel industry have resulted in a major weakening of its vegetable oil import demand with Germany importing only 418,000 mt of vegetable oils in January and February 2008, sharply down from the 707,000 mt in the same period in 2007.

Dow Jones reports that global vegetable oil prices are likely to hold steady around current levels in 2008 despite higher production in key regions over the remainder of the year, according to a senior official at the Food and Agriculture Organization of the UN. In the last two years, vegetable oil stocks were down to levels that require a considerable rise in production to boost supplies. Although there has been some replenishment of inventories, it is only partial, and prices may continue to be volatile.

Grain prices are likely to fall in the second half of the year on anticipated bumper harvests in the US, Australia, and Canada, Dow Jones reports. Analysts are betting on a rise in wheat and soybean acreage in the US to drive the drop in prices later this year, although few expect a complete retracing of prices to 2004 or 2005 levels.

NORTH AMERICA

The US Congress has reached agreement on a $285 billion Farm Bill. Among its provisions, the Farm Bill will provide $300 million in reauthorization of the Commodity Credit Corporation (CCC) Bioenergy program. The energy package also funds research on next generation cellulosic biofuels, increased oversight over manipulation of energy prices, revocation of $17 billion in tax breaks to oil companies, and imposition of a 25% windfall profits tax on firms that do not invest in new energy sources. It is unclear if the White House will sign the measure.

The state of California is cracking down on drivers who run their diesel engines on cooking grease or vegetable oil by making them obtain the proper licenses and insurance, and pay taxes on the fuel. According to state regulations, drivers will be taxed $0.18 per gallon for the fuel they use, and are required to get a diesel fuel supplier's license and report quarterly fuel amounts. They also must carry at least $1 million in liability insurance in case of spills, and they must obtain permission from the state air board to burn the fuel in the first place.

The New York State Senate has passed legislation to suspend the state's gasoline tax this summer. The measure does not have support in the State Assembly or a commitment from the governor. The bill, which would suspend the $0.32 tax from Memorial Day through Labor Day, passed the State Senate with a 46-15 vote.

Archer Daniels Midland Company has notified the Chicago Stock Exchange of its intention to delist all of its shares from that exchange. ADM says it will continue to list its shares on the New York Stock Exchange under the ticker symbol ADM. The withdrawal is expected to be effective in approximately three weeks.

The Minnesota Legislature has approved a state biodiesel mandate that Governor Tim Pawlenty is likely to sign it into law. Minnesota's 2% biodiesel mandate will increase first to 5% then 10%, and eventually to 20% for all diesel fuel sold in the state. The new law has provisions in case problems arise, easing the mandate during Minnesota's coldest months.

Chevron Corp. said it expects to invest about $2.5 billion in alternative and renewable energy technologies through 2009.

E-Fuel Corp. has unveiled the "MicroFueler" saying it is the world's first machine that allows homeowners to make their own ethanol and pump it directly into their cars. The portable unit sells for $10,000 and resembles a gasoline station pump, but plugs into home power and water supplies. It ferments fuel from sugar to make ethanol for as little as $1.00 a gallon.

First Reserve Corporation announced its $300 million equity investment in Osage Bio Energy to fund construction of four ethanol and protein feed production plants in the Southeast U.S. The ethanol plants will use regionally grown barley, which the company said should give them a differential cost advantage over corn-based facilities. It also plans to sell the protein meal barley by-product as a supplement to local livestock.

The Knoxville-Oak Ridge Innovation Valley has been awarded a $26 million grant by the US Department of Energy for production of a cellulosic ethanol pilot facility. The award, which goes to a partnership between Mascoma Corporation, the University of Tennessee (UT), the Tennessee Research Foundation and Genera Energy, brings to more than $230 million recent federal and state investment in bioenergy sciences across the Innovation Valley.

Mexico is expected to start ethanol production in 2010 in the area of Guadalajara, state oil monopoly Petroleos Mexicanos (Pemex) said. The company will invest between $14 million and $30 million to adapt facilities to meet an annual ethanol demand of 53 million gallons in Guadalajara.

SOUTH AMERICA

Germany’s Environment Minister returned from a visit to Brazil saying his country should not stop importing Brazilian cane ethanol, as some German producers have demanded. A simple ban on the imports would be wrong, he said, as this would force producers of ethanol away from non-sustainable farming and would hinder dialogue with Brazil. He said he was concerned about Brazilian plans to expand palm oil production for biofuels, and the need for a long term approach to protect environmentally-sensitive regions from overuse. Germany’s Chancellor is expected to sign an agreement during a visit to Brazil next week that will establish a joint working group on sustainable biofuel production.

At the Amsterdam Conference on Sustainability and Transparency, Petrobras’ Executive Manager for Management System Development indicated that his company’s 2008-2012 business plan calls for production of 248 million gallons of biodiesel per year. A total of $133.8 million has been allotted to building biodiesel plants in the cities of Candeias (Bahia), Montes Claros (Minas Gerais), and Quixadá (Ceará), slated to begin production in 2008.

Canola production in Rio Grande do Sul is increasing as a result of biodiesel demand and 2008 agricultural zoning in the state, AE Brazil reports. Biodiesel producer BSBios is targeting 15,000 hectares for canola planting. If this year's harvest comes in as expected, canola should produce around 2.6 million gallons of biodiesel, or 10% of BSBio's needs, the company says.

Sugar cane and cane-based ethanol became a more important energy source than hydroelectric power plants in Brazil's overall energy complex last year, topped only by petroleum and oil products. The government's EPE energy planning agency said sugar cane had a 16% share in the country's energy mix (with hydroelctricity at 14%), which is attributed to rising demand for ethanol. Renewables, including hydroelectricity, ethanol and biodiesel, increased to 46.4% from 44.9%. The use of renewable energy sources in Brazil surpasses the world's average of around 13%, EPE said.

Petrobras is considering sale of self-branded ethanol at service stations acquired by Galp Energia from Exxon Mobil in Portugal, according to the Latin America News Digest. The plan is expected to move forward after Portuguese competition regulator AdC approves the acquisition of the service stations by Galp. Petrobras and Galp have recently set up a biofuel joint venture Brasgalp, which is expected to start functioning by 2010.

EUROPE

Next week’s meeting of the Transatlantic Economic Council, where European and American businesses can raise issues of common concern, will discuss biofuel standards with the aim of endorsing development of joint measurement standards. The US Administration has made it a priority with the EU to agree to biofuel standards that would facilitate trade between the two continents.

ABS Biodiesel is pushing ahead with its plans to build the UK's largest biodiesel production facility in the Avonmouth docks despite the recent controversy surrounding biofuels. According to the company’s managing director, the plant will initially produce 225,000 mt of biodiesel, increasing to 500,000 mt eventually, and has pre-sold its first and second year capacity.

A minister for the Northeast UK said home-grown biofuels are a vital wealth-generator for the local and national economy, and called for "major investment" in the industry, the Evening Gazette reports. He acknowledged that there is increasing political pressure on the European Commission and British government to address US imports.

AFX International Focus reports that the founder of D1 Oils confirmed he does not intend to make an offer for D1 Oils and that he continues to consider his options with regard to his stake in D1 Oils. In a separate statement, the company said it remains focused on delivering value through its jatropha plant science and planting business.

Germany's Agriculture Minister has rejected claims that biofuels are raising food prices and said Germany could not reach its climate change goals without biofuels, Deutsche Welle reports. He noted that there would still be world hunger without biofuels, and said Germany would be launching a plan for easing the world food crisis by July. Although he said the German parliament will decide in the near future whether to stay with a 2009 goal of having biofuel make up 6.25% of overall fuel consumption, he said that Germany will keep to its biofuel target for 2020, adding that the German Chancellor supports this target ‘without reservation.”

Refiner Neste Oil launched its green diesel on Tuesday in Finland, calling it the world's first renewable fuel suitable for all diesel engines. Neste's European standard EN-590 diesel contains at least 10% renewable fuel and is one of the strategic cornerstones for Neste, who say the technology outperforms both existing biodiesel (FAME) products and crude oil-derived diesel products available.

Ireland’s Department of Energy confirmed this week that it is on track to reach its biofuel quota of 2% of all transport fuels by the end of this year, and 5.75% by the end of 2010. New details of the Government's Biofuels Obligations will soon be published.

The first biofuel station, Energy Strategies and Biotechnologies of Ukraine and Eastern Europe, has opened in Ukraine, Ukrainian National News Agency reports. The number of biofuel stations is expected to reach 10 by the end of May 2008.

Russian vegetable oils producer Russkiye Masla says it is about to start construction of a biodiesel plant outside of the Estonian capital of Tallinn after rising construction prices in Estonia caused the company to question the viability of the project.

Romania's cereal crops have not been affected by an increase in the land used for the cultivation of rapeseed, the Agriculture Minister said. He added that most of the land used for cultivating rapeseed for biodiesel had previously been used for genetically-modified soybeans, which became a forbidden crop in 2007 following Romania's accession to the European Union.

ASIA / PACIFIC

Late yesterday, commodity markets regulator, Forward Market Commission, banned Indian futures trade in soyoil, rubber, potato and chana for at least four months to curb speculative trade, which has pushed up prices and is feeding inflationary pressure. Kirit Parekh, a member of India’s top economic think tank said, "The move signals the regulator's attempt to negate the impact of unjustified, speculative prices. The impact of the ban will be felt within a month. Since the ban is now for four months, we think it would be ample time for prices to cool off."

India's Naturol Bioenergy Ltd. is planning palm plantations and acquisitions in Indonesia and will set up crushing units in east Africa within a year, a company official said. The company will invest about $130 million over the next 30 months, and is considering a $100 million initial public offer in 2009 to fund its Indonesian ventures. Naturol will export its first consignment of about 5,500 tons by mid-May to Europe. The company has no plans to enter the domestic market and will focus wholly on exports for the time being.

China Clean Energy says it has halted production of biodiesel after rising feedstock prices and price controls on diesel have eliminated profit margins, a company executive said. The company, which makes biodiesel from waste cooking oil, shut its 10,000 ton per year biodiesel plant in March after waste grease, cottonseed, and rapeseed oil prices jumped more than 40% from last year. The government, concerned that inflation might lead to social unrest ahead of the 2008 Olympics Games in August, has capped domestic diesel prices which . It has not raised fuel prices since November, even though international oil prices have climbed.

Indonesia says it plans to take firm measures aimed at ensuring palm oil companies meet stringent standards before labeling their products as eco-friendly. The industry-led Round Table on Sustainable Palm Oil (RSPO) has launched a green labeling certification process that includes commitments to preserve rainforests and wildlife and avoiding conflicts with indigenous people. Indonesia is estimated to have produced more than 17 million mt of CPO in 2007, of which 11.9 million mt were exported to China, India and European countries. Unilever, one of Indonesia's top palm oil buyers, said it will start buying palm oil from certified sustainable sources this year and aims to have all its palm oil certified by 2015.

Malaysia is expecting CPO prices to stay firm on expectations that demand for the vegetable oil will remain strong due to a tight supply situation in the global edible oil market, the Bernama news agency reported. Short-term CPO prices are likely to stay around $1,100 per mt, while in the longer run prices may increase. Malaysia is planning to allocate 6 million mt of the country's expected palm oil production of 16 million mt for the biodiesel industry, according to the report.

AFRICA


Manufacturers Association of Nigeria (MAN) has asked the federal government to check the indiscriminate importation of E-10 ethanol into the country by channeling it through local ethanol manufacturers instead of direct importation from Brazil. MAN emphasized the need for ethanol production that addressed issues of security, energy, infrastructure, poverty reduction, and employment, noting that ethanol is emerging as an important motor fuel in view of the Kyoto Protocol Agreement (KPA) to which Nigeria is a signatory.

AUSTRALIA

During the commissioning phase of Australia’s Mission Biofuels’ jatropha plant in Malaysia, approximately 3,500 mt of biodiesel was produced; of this, approximately 2,500 mt has been sold. The plant also produced almost 350 mt of crude glycerin, all of which has been refined and sold as pharmaceutical grade glycerin.

Australia’s Federal Agriculture Minister says a decision has not been made on whether to continue funding for an ethanol subsidy program. He says he can confirm a $15 million research project into biofuels will proceed.

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