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IKAR in Mass Media

Prospects for biofuel production in Russia are foggy - expert

26 октября 2007 года

MOSCOW. Oct 26 (Interfax) - The prospects for producing biofuel in Russia are rather illusory, Dmitry Rylko, the head of the Institute for Agricultural Market Studeis (IKAR), said.

There are currently "many illusions" in Russia concerning the prospects for producing and exporting biofuel, and for it replacing traditional sources of energy, Rylko said.

At the current stage of development of biofuel technology, in Russia fossil fuels clearly win out economically, he said. "Under these conditions, should we really force the creation of another subsidized sector?"

According to IKAR calculations, about 120 million tons of wheat (barley) or 112 million tons of corn would be needed to completely replace Russia's gasoline needs with bioethanol. This is more than 50% more than the country's current grain output.

To fully cover existing diesel fuel needs, the country would need 3 million tons of methanol and 27 million tons of vegetable oil. "If this is going to be rapeseed oil, then we need tens of times more than Russia now produces," Rylko said.

"If we take a more realistic goal - replacing 5% of the country's fuel needs with biofuel - then about 5-6 million tons of grain and about 4 million tons of rapeseed will be needed to achieve it," he said.

"For grain, these figures don't look fantastic, but for rapeseed, this is many times more than the country currently grows," he said.

Rylko said the fight for biofuel tax breaks is also largely delusional. "Even if we hypothetically eliminate emission taxes, we still get a sector that will need high subsidies."

At the current stage of the technology, the production costs of biofuel make it virtually impossible to even achieve the goal of replacing 5% of fossil fuels, he said. "Based on current prices for rapeseed oil in Russia, plus the processor's margin, the approximate price of biodiesel at the pump will be 26-30 rubles per liter, and this is without the excise," Rylko said.

Bioethanol is not sufficiently competitive compared to domestic gasoline, he said. According to preliminary estimates, the net cost of producing a liter of bioethanol is 60-150 cents, depending on the price of wheat. There is also the excise on ethyl alcohol, which is currently 23.5 rubles per liter in Russia and is likely to increase in future, Rylko said, while adding that the excise on gasoline with octane over 80 goes as high as 3.6 rubles.

"Under this circumstance it is natural to ask - don't they know how to count in other countries? Why are bioethanol industry being expanded all over the world?" Rylko said.

Actual figures show that, at the current technological stage of development, bioethanol remains a very small segment of the grain industry, he said. The world will produce 1.65 billion tons of grain this year, of which only 107 million tons will be used to produce bioethanol, according to the International Grains Council. The United States accounts for 86 million tons, and all of this will be corn.

"Furthermore, according to the IGC, virtually the whole increase in the use of grain for bioethanol in this agricultural year, namely 32 million tonnes, will be in one country - the United States," Rylko said. "Growth in the use of grain for bioethanol in all other countries put together will total only about 4 million tons."

Therefore, all countries except the United States are pursuing quite a cautious strategy of gradually testing grain feedstock biofuel production technologies and sectors for its use, he said.

There are clearly major environmental advantages to bioethanol, but for Russian implication this subject is worth of special research work, he added.

For the time being it would be far more realistic and less risky to export raw material for biofuel production, Rylko said.

"Plus the profitable filling of the many holes in global food balances of grains and oil crops that will appear, including due to the development of the biofuel industry," he said, adding that substantial support should be given to research and development of "second-generation biofuel."

Source: Interfax  |  #grain   |  Comments: 0   Views: 55

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