2 out of 3 operational plants here have stopped production, but some firms remain optimistic
Jessica Cheam, Straits Times 15 Mar 08;
LESS than three years since Singapore identified biofuels as one of the new growth areas and opened its first biodiesel plant to much fanfare, the fledgling industry has fallen victim to soaring palm oil prices.
Of the three operational plants here, two have stopped production and one is cutting production to a minimum.
Palm oil, used as the main raw material for biodiesel, has shot past US$1,000 (S$1,382) a tonne and recently hit a record of US$1,418, making it impossible for biofuel makers to continue business. Three years ago, palm oil cost only US$450 a tonne.
The first plant here, built by Singapore-based Continental BioEnergy, began production in August 2006. It has an annual capacity of 150,000 tonnes.
Its spokesman told The Straits Times: 'We've cut back production to a minimum that just meets our previous commitments. We're desperately looking for other feedstocks now.'
Some alternative raw materials used in biofuels include soya bean or rapeseed, but these produce less oil per hectare than oil palm.
Singapore's second US$20 million plant with an annual capacity of 100,000 tonnes is by Nexsol, a joint venture between Germany's Peter Cremer, a global trader of commodities, and Malaysia's Kulim Berhad, which runs oil palm plantations. The third is a US$130 million plant of 600,000 tonnes capacity by Australia's Natural Fuel (NFL).
Nexsol's chief executive John Hall said that its Singapore plant, now running at 75 per cent of its total capacity, will shut down next month. It has also shut down its Malaysia plant.
'The biofuels industry here today is almost non-existent. The cost of palm is too high,' said Mr Hall, adding that more incentives are needed to grow a local market.
NFL's spokesman said it has also stopped production at its local plant, which is currently refining only crude glycerine, used in food, cosmetics and pharmaceuticals. However, NFL said it has secured a contract for a supply of jatropha as feedstock for its Singapore plant early next year.
The jatropha plant, grown in countries such as India and China, is regarded to have great potential for biofuels. It is a leafy shrub that can grow to 5m, is non-edible and grows on semi-arid land unsuitable for food crops.
This could address environmental issues of clearing land for such crops and rising food prices when food crops are used as biofuels instead. Critics say this is the downside of such fossil fuel alternatives. Nexsol and Continental are also currently sourcing jatropha as an alternative feedstock.
Singapore's biofuels industry is not the only one that is flagging. Across the Causeway, only two or three plants - out of 90 licences issued - are in production, said an industry source.
The news is not all bleak: Finnish firm Neste Oil recently said it will build the world's largest biodiesel facility on Singapore's shores for $1.2 billion. It will start operations in 2010.
Although market watchers have questioned Neste's recent move at a time where palm oil prices are volatile, Neste's spokesman said it believed biofuel targets and mandates in the pipeline will boost the market. In the European Union, for example, leaders have committed to setting a binding minimum target of 10 per cent of biofuel usage in transportation by 2020.
Besides palm oil, Neste is sourcing other raw materials too. Long-term contracts will help the company ride out short-term price fluctuation, it said, adding that its patented 'NExBTL' technology allowed it to use any vegetable oil or animal fat, yielding quality fuel that greatly reduces emissions.
This 'second generation' technology - with biofuels developed from non-edible or discarded plant parts - is an area the Economic Development Board (EDB) is throwing its weight behind. Its head of energy, chemical and engineering services, Mr Law Tat Win, said EDB still 'believes that the bio-fuels industry is here to stay.'
Biofuels will be 'an important source of fuel to meet the global energy demand... Technology will be key.
'Hence, the focus is on working with industry, research institutes and universities to develop a strong base of biofuels expertise here,' said Mr Law.
Some Singapore-listed firms also remain positive: biodiesel firm Van Der Horst Energy, and electronics maker Europtronic have announced big plans to grow their biodiesel business, using jatropha as feedstock.
Meanwhile, debate rages on about how green alternative fuels really are.
The Singapore Environment Council's executive director Howard Shaw said although the use of biofuels is touted as a solution to energy security issues, 'even the greenest of the green have been divided on its merits.'
'More research and studies have to be done before a clearer picture can emerge,' he said.
jcheam@sph.com.sg
FAST FACTS
WORLDWIDE, biofuels still make up less than 1 per cent of transportation fuel.
Current technologies can push this to 3 per cent, but increasing capacity beyond that would require significant technology breakthroughs.
Biofuels are meant to reduce carbon emissions as the plants grown for fuel absorb carbon during their lifetime before they are burnt as fuel. Critics, however, say the total emissions created in the production of biofuels, by clearing forest land for example, amount to more than the emissions it saves.
Demand is expected to expand almost 20 per cent per year through 2011, to 92 million tonnes, despite recent concerns over their impact on the environment and world food supplies.
There are two main types of biofuels: bioethanol, from crops like sugar cane and corn; and biodiesel, from vegetable oils.
Biodiesel may be used in its pure form in newer engines without engine damage.
The industry is also researching alternative crops, to move away from using food crops. Biomass such as plant waste, algae and wood chips are some examples.
