16 May 2007 - 11:46
  • News Code: 104801

Japan’s biofuel drive, ignited by growing environmental and energy concerns, faces a bumpy road ahead. It remains to be seen whether the world’s second-largest economy will be able to reach the government-set goal of saving 500,000 kiloliters of crude oil per annum through the use of biofuel by 2010.

Major Japanese oil distributors have begun to sell bio-gasoline at a limited number of filling stations in the Tokyo metropolitan area on a trial basis. ETBE (ethyl tertiary butyl ether) is a gasoline additive made by combining bioethanol--grain alcohol derived from such plants as sugarcane and corn (maize)--with isobutylene, a petroleum product. The bio-gasoline now on sale in the Tokyo metropolitan area is 7 percent ETBE-blended and 3 percent bioethanol-blended.

The 10 Japanese wholesalers jointly imported 7,500kl of ETBE from France for the first time ahead of the start of the test sales. Bio-gasoline is already popular in Europe. The volume of ETBE imports may double in fiscal 2008-- which starts next April--when 100 filling stations will be selling bio-gasoline.

The bio-gasoline-promotion project is not free of problems, including a currently negligible volume of domestic bioethanol production and almost complete reliance on imports, slightly higher production costs of bio-gasoline than those of ordinary gasoline, and the dispute between the petroleum industry and the Environment Ministry over how bioethanol should be mixed with gasoline.

Global demand for bioethanol has been snowballing, resulting in a sharp rise in the price of corn and other crops. Last year, US auto makers unveiled plans to double production of vehicles using so-called flexible-fuel technology by 2010. Also, no country other than Brazil, the world’s largest producer, has any significant biofuel-export potential, and fears are rising around the globe over stable supplies. The United States and Brazil agreed in early March to promote the production and use of ethanol, when President George W. Bush visited the South American country and held talks with President Luiz Inacio Lula da Silva.

Japan is looking to Brazil as its major source of the alternative fuel. Last year, the governments of Japan and Brazil set up a study group on trading in the fuel. Japan could lock up a sizable chunk of future ethanol supplies from Brazil. Major Japanese trading house Mitsui & Co and Brazilian state oil company Petroleo Brasileiro SA, or Petrobras as it is better known, are said to be in advanced negotiations about how to supply Japan with as much as 3 million kiloliters of ethanol annually within four years. At the end of February, Mitsui signed a memorandum of understanding with Petrobras and Brazilian Construcoes e Comcio Camargo Correa SA to undertake technical and economic viability studies for the deployment of a pipeline infrastructure to transport ethanol produced in the midwestern and southeastern parts of Brazil.

Meanwhile, the Japanese Environment Ministry will ramp up production of ethanol fuel on the southern island of Miyako, where a plentiful supply of sugarcane will be converted into fuel for the island’s estimated 20,000 cars. The ultimate goal is to have all cars on the nation’s roads capable of running on bio-gasoline by 2030.

In fiscal 2010, bio-gasoline is projected to constitute 20 percent of all gasoline sold in Japan, while there are plans to produce ETBE domestically from fiscal 2009, according to the Petroleum Association of Japan (PAJ). Meanwhile, the Environment Ministry is scheduled to launch a series of demonstration tests in August on a new type of biofuel produced by directly mixing gasoline and bioethanol. The Osaka prefectural government will conduct the tests on commission.

Petroleum-industry people say customers generally welcomed bio-gasoline put on sale in the Tokyo metropolitan area. “Customers are in favor of the new fuel. People’s awareness of the need to protect the environment appears to be rapidly rising,“ said an official at PAJ.

But some analysts caution that the industry is too optimistic about sales. Production costs are said to be 1 to 2 yen (up to 1.6 US cents) higher per liter than those of ordinary gasoline. To fill the gap and thereby encourage the spread of the new fuel, the ruling coalition of Prime Minister Shinzo Abe plans to provide subsidies to the petroleum industry.

Meanwhile, the petroleum industry and the Environment Ministry are at odds over how bioethanol should be mixed with gasoline. The petroleum industry favors ETBE, while the ministry prefers the direct bioethanol-gasoline mixture. This disagreement could hamper the spread of bioethanol.

Environment Minister Masatoshi Wakabayashi said: “Many Japanese-made cars are used in such countries as Brazil, the United States and Canada, where the direct-mixing formula is employed. This means there’s no major technical problems in adopting the direct-mixing method.“ The ministry also argues that the ETBE formula makes it technically difficult to raise the concentration of bioethanol in bio-gasoline. The ministry plans to raise the legal limit on the percentage of bioethanol in the mix from the current 3 percent to 10 percent.

As reasons for opposing the direct-mixing formula, the petroleum industry cites higher costs, among other things. “The ETBE formula can be done through existing petroleum-refining facilities,“ PAJ president Watari said. The direct-mixture formula, by contrast, requires additional capital expenditures and cooperation from many companies to produce bio-gasoline, Watari said.

The petroleum industry plans to blend 360,000kl of ETBE with gasoline in fiscal 2010 to save consumption of 210,000kl of crude oil. But the figure will still be far less than the government’s target of saving 500,000kl of crude oil through the use of biofuel.

“The petroleum industry’s project can never be considered sufficient to realize the government-set goal,“ said Yoshio Tamura, administrative vice minister of the Environment Ministry.



News Code 104801

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