Biofuel

Published on 1/11/2010

The future of Biofuel Long-neglected jatropha ready for a starring role and a rival to palm oil as investors prepare to open large-scale plants in Thailand.

With the world running out of cheap fossil fuel and the government supporting palm oil, cassava and even research on algae as alternative energy materials, who would have thought that jatropha would finally make it into mainstream agriculture as a biodiesel ingredient?

While it takes 4-5 kg of seeds to make one litre of palm oil, it takes only 3-4 kg of seeds to make the same amount of jatropha oil.

Jatropha seed, known as sabudam in Thai, has long been known for low yields per rai and high labour costs in harvesting, which have reduced its commercial viability.

But despite those challenges, an Australian and Belgian joint venture is hoping to market the new energy plant to the aviation and biodiesel industries.

"Our aim is to make Thailand the leading exporter of jatropha in the next decade.

Thailand is already one of the leading exporters of rice and cassava, so why not jatropha?" asks Dirk De Koker, chief operating officer of Green Energy Group.

Published on 1/11/2010

Australia-based Crucas Energy and Eurasia Consolidate of Belgium have each been running trials for more than three years in Thailand, spending a combined 150 million baht on research, and are now planning to establish an industry based on oil production factories in Khon Kaen and Chiang Mai. KT Zmico Securities is currently raising 525 million baht for Green Energy Group to fund construction of the two oil extraction plants. "We have commitments from three to four investors, but we are still aiming to get some Thai investment," said Mr De Koker.

The facility in Khon Kaen will produce the first oil at the end of 2011, while the Chiang Mai plant will start production in 2012. Each will produce 20,000 tones of oil per year, which will need 65,000 tones of seeds.

"Within the next seven to eight years we expect production to grow to 200,000 tonnes annually. At that time it will be a more substantial product than palm oil," said Mr De Koker.

One advantage of jatropha is that it is not edible, while palm oil use in the fuel industry is limited because demand for the commodity from food processors is so huge.

While it takes four to five kilogrammes of seeds to make one litre of palm oil, it takes only three to four kilogrammes of seeds to make one litre of jatropha oil.

As well, it takes four years for palm trees to produce their first seeds, compared with six months for jatropha.

Mr De Koker expects jatropha oil prices to be in the same range as those for palm oil and linked to oil prices in the market.

"We think we will sell it at that time around 22-23 baht per litre, which is cheaper than palm oil today. But when the market is big enough it should have its own market mechanism," he said, adding that prices might be even higher when exported to Europe where there are more government incentives for biofuel feed stocks.

Published on 1/11/2010

The second market that the company aims to penetrate is jet fuel, since the International Air Transport Association (IATA) has stated that all civil aviation operators should use 10% biofuel by 2017.

"By the end of this year, all the rules will be clear and [Jet biofuel] will become a real market," said Mr De Koker.

So far the company has signed memoranda of understanding with European and Japanese companies. It is also in talks with PTT and the refiner Rayong Purifier, as they are also interested in delivering the products in Thailand.

According to Mr De Koker, the company has signed contract farming deals with 10,000 farmers and the total could reach 100,000 once the project is running at full steam.

The contract growing is being organized through a Thai company called Agro Fuel Crops Co. Green Energy Group has settled on a planting system that intercrops sabudam with a commercial legumes such as soybeans, groundnuts or mung beans. This gives the farmers immediate income while the jatropha matures.

"They [farmers] need security and the security is that the factory is there. That way, farmers will have a certain amount of confidence," said Mr De Koker.

Farmers will receive a minimum price of four baht per kilogramme, and if oil prices go up, the price may rise to 5 or 5.50 baht on the assumption that oil prices will stay at least around US$60-70 per barrel.

Seedlings will be distributed to farmers who will pay 50 satang for a deposit and 2-4 baht per seedling. The company would provide free replacements of 10% of the crop per year in order to improve the yield of existing plantations.

"Our yield is estimated at 120 kilogrammes per rai in the first year and 650 kilogrammes in the fourth year," said Mr De Koker. "Our target market includes small farmers from one to six rai, so the time needed for collecting seeds is not

Published on 1/11/2010

an issue. We think it's easy to be maintained by farmers since the farmer and [his or her] family will do the collecting."

Anusorn Chantanaroj, director of District 5 of the Department of Land Development, said the construction of oil extraction factories would ensure a secure market for jatropha seeds and give the farmers’ confidence.

Ananta Dalodom, president of the Horticultural Society of Thailand, is skeptical.

However. He said the two main problems with jatropha were its low yield and high harvesting costs, resulting in a plantation area of not more than 100,000 rai nationwide.

"Currently the yield is on average around 100 kilogrammes per rai, but for a commercial scale it has to be 500 kilogrammes, and I think it will be very difficult to reach 500 kilogrammes in Thailand," he said.

"I don't think it will happen," he said, adding that farmers would not plant jatropha when other plants such as cassava offer better income.

Although Mr De Koker, concedes that harvesting is the most time-consuming part, the company is not aiming for large plantation areas, so labour is not an issue.

Mr De Koker also wants to see more support from the government for jatropha as an alternative energy source.

"We think it should be included in the mandate of the government for biodiesel.

It should be a better alternative than palm oil," he said.