COFCO Hopeful for Breakthrough in Cellulose Ethanol
Date: 27-Mar-07
Country: CHINA
Author: Daisy Ku and Nao Nakanishi
Frank Ning, chairman of COFCO, told reporters the company expected to find a way to reduce production costs for the ethanol by 2008 as it worked together with Danish enzyme supplier Novozymes A/S on the second-generation biofuel.
"We think it's possible to convert cellulose into fuel ethanol in the next two to three years," Ning said. "By the year 2008, costs for the enzyme will be down to acceptable levels."
Ning was speaking to a small group of reporters last week after the market debut of China Agri-Industries Holdings Ltd., a spin-off of food processor COFCO International Ltd. in charge of biofuel and soyoil.
China Agri is investing 50 million yuan (US$6.5 million) to build a pilot plant to convert cellulose-based biomass into fuel ethanol. The plant in Zhaodong in the northeastern province of Heilongjiang will have an annual capacity of 5,000 tonnes.
With a boom in ethanol made from corn or sugar threatening food security in countries such as China and even the United States, many firms, including Du Pont Co., are racing to develop a commercially viable technology for cellulosic ethanol.
Ning said he would seek government support for the project.
China, the world's number-two oil importer, is expected to release a five-year plan for the biofuels sector in the near future, aimed at raising the country's fuel ethanol output to 5 million tonnes by 2010 and 10 million by 2020.
AGGRESSIVE INVESTMENT
Ning said China Agri was best placed to capture domestic demand for fuel ethanol, with aggressive investment plans to raise its annual capacity to 1.08 million tonnes by end-2008.
"We are in the best position to expand," the executive said, referring to the market that is strictly regulated by Beijing.
"We hope we will account for more than 50 percent of the government target of 5 million tonnes."
Fuelled by investor interest in the budding biofuel sector in energy-hungry China, shares of China Agri had gained 50 percent to HK$5.56 by Friday from their debut on Wednesday.
Ning said COFCO planned to raise its 20 percent stake in the 440,000 tonne-per-year plant in Anhui, one of the first four government-sponsored fuel ethanol plants in China. It is run by Anhui BBCA Biochemical Co. Ltd
Though Beijing has stopped approving new fuel ethanol projects since December, it is building a 200,000-tonne-per-year plant in Guangxi, a 300,000-tonne-per-year plant in Hebei, a 300,000-tonne-per-year plant in Liaoning and a 100,000-tonne-per-year plant in Hubei.
BOC International, which lead-managed China Agri's initial public offering, said Beijing would hand out unchanged subsidies of 1,373 yuan per tonne of fuel ethanol in 2007 and 2008 to four designated plants, including three in which COFCO owns a share.
The four plants are were entitled to a waiver of the 5 percent consumption tax on alcohol and the full refund of value added tax (VAT), it said.
Ning said he was confident of the future despite possible increases in prices for raw materials such as corn, as oil prices were unlikely to fall much.
(US$1=7.734 yuan)
