Discussion at Tank Storage Asia on day two moved away from general oil and gas discussions and even storage to and extent and moved to Biofuels.
Global fuel ethanol demand
Overall, global fuel ethanol demand is expected to increase by 10% with continuous demand coming from North Asia. There will be noticeable growth in Asian demand also, but Asian supply growth is unlikely to a huge extent, a speaker said, due to the need for new capacity, which is not appearing. Brazil is going to be a big player around the world for ethanol supply due to an abundance of feedstock.
Asian market trends
Biofuels in Asia are priced according to arbitrage and many commodities including gasoline and many pricings of commodities, even sugar, determine the trade flow. When it comes to supply levels, there has been a deficit in the Philippines and regional problems in Thailand also. This is possibly because global traders and suppliers always move to the lowest cost and supply point, which is currently Brazil. Pakistan, Vietnam and Indonesia were listed however as the key Asian ethanol exporters and this brings big benefits to the region.
It was stated in one presentation that over the last five years Asia has developed its own mandates for the biofuels industry, and these can vary between Asian nations.
Australia, it was reported at Tank Storage Asia, doesn’t have much of a biofuel mandate. However, looking at the Philippines, there has been an E10 mandate in place since 2013. But as mentioned above, there are problems with biofuels levels in the Philippines and it has been reported that only 20% of the demand is met domestically, something the country will need to change to help curb import prices. Malaysia does have plans for a biofuel mandate however they are delayed across the country with only Johar actively seeking implementation. Exports of biofuels have also increased in the country in recent months with a large volume going to the EU. It is possible that if a biofuels mandate is implemented nation wide then the levels of biofuels available for export will drop and impact trade with the country. In Thailand, producers have a commitment to domestic supply so the levels of supply required have been dropped dramatically. Thailand, similarly to the Philippines works to an E10 mandate level.
Indonesia has adopted the Indonesian Biofuels Formula and this has been in place for biodiesel and ethanol since 2010. There is also a subsidy on biofuels in the country at a level of 3500 R/ltr of biofuel. At the moment the mandate for biodiesel stands at 7.5% production, however the Indonesian government is now looking to move this to a higher production level of 10%. Consumption of biodiesel is expected to grow in the country, hence the move. Also, the country is aiming to lower its current account deficit by saving half on diesel imports and replacing them with biodiesel. One stipulation of the government is that all biodiesel in the country being used to replace diesel, must be domestically produced. At the moment, Indonesia has a biodiesel capacity of 27 billion bpy.
South East Asia
It was said that biodiesel demand is anticipated to jump from January 2015 in South East Asia. Biodiesel is a prominent commodity in Malaysia, and to such an extent that prices have dropped by 18% in the country this year. Biofuel blend imports from the South East Asian region, and in particular Malaysia, have been rising to China. The blending level is between 3 and 5% on most occasions and one cargo a month is shipped on average this is because the gasoil/biodiesel spread is becoming very attractive, a speaker said.
Written by Claira Lloyd
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/17102014/tsa-global-biofuels-discussion/