China turns corn into ethanol as fuel supply wanes
Date: 19-Dec-01
Country: CHINA
Author: Kathleen Kearney
"We have to consider energy security...because China is short of petroleum," said Lu Tianxiong, director and senior engineer at Beijing Memsep Technologies Co Ltd.
Officials are acutely aware that China's known oil and gas reserves are running out. Domestic coal and hydropower are widely used for electricity generation. China produces about 163 million tonnes of crude oil a year, or 70 percent of its national needs, importing another 70 million tonnes, mainly from the Middle East.
Alternative sources are costly, sometimes cumbersome to transport and distribute and generally less efficient than oil.
But replacements must be found since China's oil and gas reserves could be exhausted in the next 30 years, Lu said.
Is ethanol, an environmentally friendly but expensive fuel made from farm products, China's alternative? Yes and no.
"For the time being, the cost of this kind of product is too high...but five years from now, production costs could be much lower and then the market prospects will be quite good," Lu said.
Memsep is technical adviser to China's first plant dedicated to the production of fuel ethanol, a 2.89 billion yuan (US$349 million) project called Fuel Ethanol Company Ltd.
Construction began last month on the 600,000 tonnes a year plant in Jilin in the northeast.
CORN FEEDSTOCK
The plant is being set up by Jilin Tianhe Co Ltd, a collaboration between China National Petroleum Corp (CNPC), Jilin Grain Group - the largest government-established corn trader in the province - and trading conglomerate China Resources Corp.
In the heart of China's corn growing region, the plant will consume 1.92 million tonnes of corn a year. Output will be used by CNPC or its subsidiary PetroChina Company Ltd and blended with gasoline or diesel fuel for vehicles.
Since 1998, China has been phasing out use of leaded petroleum products in vehicles, but it has no laws mandating the blending of "green" additives to reduce vehicle emissions.
But the government is encouraging use of fuel ethanol by including trial fuel ethanol production in the Tenth Five-Year Plan (2001-2005).
Jilin Grain's goals are similar to corn growers and processors in the United States, where - as in China - warehouses are bulging with stocks after several years of good corn crops and prices have plunged to 25-year lows as a result.
In the United States, ethanol producers, encouraged by direct and indirect government subsidies, produce about two billion gallons of fuel ethanol a year.
If new legislation promoting the use of renewable fuels is passed, supporters see U.S. consumption rising to five billion gallons annually by 2012.
QUESTIONS ON ECONOMICS
But China's foray into ethanol is still exploratory.
Feasibility studies for two other fuel ethanol plants, one near Hefei, the capital of Anhui province, and another in Nanning, the capital of Guangxi in southern China, are ongoing, Lu said.
The Guangxi plant, which is still in the planning stage, is currently considering producing fuel from cassava and is studying Thailand's experience with the feedstock.
But China is well aware that ethanol is not cheap.
Despite improvements, it takes 100 BTUs (British Thermal Units) of energy to produce one gallon of ethanol, which can produce 138 BTUs of energy. The net gain is not impressive, Chinese officials say.
While China has a surplus of corn and is on constant watch for ways to improve farmers' income, the price of corn in China is too high for its widespread use as ethanol feedstock, said Lu. "Corn currently costs about 1,000 yuan per tonne and it takes about three tonnes of corn to produce one tonne of ethanol," Lu said. "Ethanol's total production cost is thus about 4,000 yuan per tonne."
Costs could be lower in an integrated production system.
But even the cheapest established production costs, in a Canadian venture which used biomass, were US$0.30 a litre or 3,145 yuan per tonne, Lu said.
Meanwhil
