How To Make Biodiesel

China Clean Energy is on track to build a second biodiesel plant in China later this year, just months after doubling the capacity of its existing plant in Longtian, near the city of Fuqing. In a written response to emailed questions from Platts, CCE said it had already started work on a second plant at Jiangyin, 20 miles from the Longtian plant and also in Fuqing City. “In December 2006, China Clean Energy purchased land use rights in Jiangyin industrial park to build its new biodiesel production plant,” the company said. “This project is under construction and within schedule, and we expect it can be finished by the end of 2007 as planned.” Directors of the US-listed company said it had already tied up the $15 million in cash needed to build the new plant thanks to funds raised in US capital markets and retained earnings. The new Jiangyin biodiesel plant would start up in two phases, and by the second half of 2008 should be running at nameplate capacity of 100,000 mt/year (1,961 b/d). CCE, which is traded on the US’ OTC Bulletin Board, in March completed an expansion at its Longtian facility which took the plant’s operating capacity from 5,200 mt/year to 10,000 mt/year (196 b/d). In an unusual insight into China’s biodiesel industry, company executives said securing enough feedstock for biodiesel plants would be a challenge, and that Chinese producers would soon have to start looking beyond traditional feedstocks such as cottonseed and waste oils. “The company believes that shortage of feedstock could be a challenge for China’s biodiesel production in the future,” CEO Tai-ming Ou, Senior Vice President Yun He and COO Ri-wen Xue said in their emailed comments. The biofuels company is bidding to tie up large volumes of locally grown jatropha curcas, a hardy and otherwise useless scrub bush found in arid parts of the world. Jatropha oil burns with one-fifth of the carbon emissions of other fossil fuels. Even better for biodiesel producers, it is only useful as a feedstock for biofuels. “Since the beginning of 2006, the company has included jatropha in the strategic plan for ensuring stable feedstock supply…We hope after 2010, jatropha can be considered as one of the major feedstock recourses for the company’s biodiesel production,” the CCE executives said. The comment reflects a swing by emerging biodiesel producers across Asia toward jatropha instead of palm oil or other edible oils that require biodiesel plants to compete with food suppliers. Earlier this month, Peter Cheng, CEO of Van Der Horst Holdings in Singapore, said his company hoped to fuel a new 200,000 mt/year biodiesel plant in Singapore using jatropha. European biodiesel producers are also establishing jatropha plantations in Africa. For its part, CCE said it was planning a partnership with a Chinese jatropha farming company. “[From] 2008, China Clean Energy will acquire all the jatropha plantations from the farming company, and in the second half of the year the company will invest Yuan 120 million ($15 million) to rent 24,711 to 32.949 acres of mountain lands to massively plant,” the company said. The new plantation is expected to generate 80,000 mt/year of jatropha oil by 2010. CCE said it had the backing of the Chinese local and central governments for the plan, and could be given “considerable” cash allowances to fund the project since it would also support farming in China’s impoverished interiors and increase plant cover in otherwise barren areas. In the meantime, CCE has tied up a big new deal with a Malaysian palm oil exporter to ensure the Jiangyin plant gets off the ground on schedule. “At the end of 2006, China Clean Energy reached initial agreement with Celestial Ventures in Malaysia. The company will supply at least 50,000 mt of waste palm oil annually,” CCE said. “Such a supply agreement ensures enough feedstock for China Clean Energy’s first-phase biodiesel production of annual 50,000 mt. From 2009, China Clean Energy will increase waste palm oil imports from Malaysia, while taking advantage of the local jatropha plantations to produce jatropha oil as the supplemental feedstock to ensure the second-phase biodiesel production of 100,000 mt/year.” The expansions into new feedstocks represent a big step for CCE, which currently relies heavily on nine feedstock suppliers to provide it with around 92% of the acidic cottonseed oil, vegetable seed oil and “hogwash oil” it uses at its existing plant in Longtian. Hogwash oil is a kind of waste oil collected and reprocessed from hotels and restaurants. In a recent filing with the US’ Securities and Exchange Commission, CCE warned that reliance on the nine suppliers was a business risk. “Should any of these suppliers terminate their supply relationships with us, sell to other buyers, or enter into the biodiesel manufacturing business in competition with us, we may be unable to procure sufficient feedstock to satisfy demand for our end products,” the company said in the SEC filing early this year. “Moreover, there is presently a finite number of feedstock suppliers within the People’s Republic of China. Thus, as demand for biodiesel products continues to increase, feedstock supplies will likely decrease, causing the price of feedstock to increase proportionally,” CCE added in the filing. For now, CCE said it remained highly profitable. The company sells its biodiesel at a price pegged to regular diesel prices, and in 2006 recorded operating margins of about 29%. The company said it would remain profitable even if crude oil prices fell, shrugging off concerns that in general biodiesel producers could become less viable in a low oil price environment. “Recently, the global oil price has come down. As a result, waste oil, the raw material for biodiesel production, has also decreased,” said CCE. “Though the sale price of biodiesel decreased a little bit following that trend, we have seen a big decrease on the raw materials side. That’s why China Clean Energy expects to maintain its margins regardless of the international oil price.” The Center for Renewable Energy Development in Beijing forecast last year that China’s production of biodiesel would reach around 1 million mt/year by 2015, allowing for production of 10 million mt/year of diesel blended with 10% biodiesel.

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