China"s oil giants are currently vying for a leading position in the development of bio-fuels, which are considered the most viable alternative to fossil fuels, according to industry insiders who attended an industry forum over the weekend, state media reported today.

China National Offshore Oil Corp., the country"s third largest oil company, will strengthen its alternative energy development activities by establishing a bio-diesel refining facility in southern China"s island province of Hainan by the end of the year, according to an anonymous CNOOC official at the 2007 China-ASEAN Forum on Developing Petrochemicals and Biomass Energy Resource, state-backed Shanghai Securities Journal reported.

The new facility, located in Hainan"s Dongfang City, will produce 50,000 tons of bio-diesel annually in its first phase and will initially be fed with palm oil sourced from Southeast Asia.

The oil company is also planting over 6,666.67 hectares Jatropha curcas physic nuts in Hainan Province. Once large scale production of the nut is achieved, it is likely to replace palm oil as the raw material for CNOOC"s Hainan facility. Jatropha curcas is considered to be a favorable raw material for producing bio-fuel as its oil is non-edible, high-yielding and comparatively cheap.

In the meantime, China National Petroleum Corp., the country"s largest oil company, also plans to establish two sets of experimental bio-diesel production facilities. The company aims to construct one set of facilities in the city of Nanchong in Sichuan Province, and another set with a capacity of 100,000 tons in Shandong Province.

CNPC"s Nanchong project will be China"s first bio-fuel facility to begin operation when it comes online later this year. It will initially produce 10,000 tons of bio-diesel a year, with production expected to grow 10 fold to 100,000 tons annually by 2010, a company official with CNPC"s Nanchong subsidiary, surnamed He, told Interfax earlier.

The facility will source most of its raw material, physic nuts, from local sources at first, but will look to other regions in the province, such as Panzhihua, for raw material supplies once production picks up.

CNPC Southwest Oil and Gas Field Branch has already signed an agreement with the municipal government of Panzhihua to earmark RMB 2 billion ($262.5 million) for the plantation of 120,000 hectares of physic nut in the city by 2015.

Deals have also been inked between the oil giant and Shandong"s provincial government over the development of bio-energy raw materials for the Shandong facility.

China Petroleum & Chemical Corp. (Sinopec), the country"s second largest oil company, is not far behind in the race to secure a share of the bio-fuel market.

Sinopec plans to build a facility capable of producing 100,000 tons of diesel annually in Sichuan"s Panzhihua, supported by the plantation of between 26,700 to 33,300 hectares of forests intended for use as raw material. The company will also build a 2,000-ton-a-year bio-diesel plant in the northern Hebei Province at the cost of around RMB 18 million ($2.36 million).

At present, China has around 3 million tons of annual bio-diesel production capacity under construction or in various stages of planning, according to the report.

The country aims to have bio-fuels account for 15 percent of its total transportation fuel consumption by 2020. By comparison, the European Union has set itself a target of 20 percent for the same period.  

PIN/Esourcexinvestor.Com