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 Feedstock a Worry for any Chinese Biodiesel Growth

30/11/06 ( www.planetark.com) BEIJING - China, the world's number two oil importer, plans to start using biodiesel in cars next year in an attempt to cut its dependence on imported oil, industry officials said on Wednesday.

So far, China has not introduced biodiesel, made in the most part from vegetable oils, though it is already the world's number three ethanol fuel producer and is expanding its use to more cities and provinces.

The officials, gathered for a biodiesel conference in Beijing, said China would introduce rules to blend conventional fuel with 5 percent biodiesel, a renewable energy known to burn cleaner.

It was not immediately clear in which cities or provinces it would be launched.

Zhang Yongguang, a director with the Research Institute of Petroleum Processing of the China Petroleum and Chemical Corp. (Sinopec), said many foreign and private investors were already building biodiesel plants in China.

They would add up to annual capacity as much as 3 million tonnes, compared with only 100,000 tonnes at present, he said.

Sinopec is also planning to build a 50,000-tonnes-a-year biodiesel plant, possibly in the northwest region of Xinjiang, which would use cottonseed as feedstock, Zhang said.

Xinjiang is the country's largest cotton growing area with annual cotton output of nearly 2 million tonnes.

Zhang said the new capacity would use cottonseed, rapeseed as well as oil-bearing trees as feedstock.

The industry officials said the biggest worry was getting enough feedstock for biodiesel as China has already a shortage in vegetable oils, importing large quantities of soybeans, soyoil and palm oil each year.

"The top problem for developing the industry is raw material," said Sinopec's Zhang.

"Giving the rising world edible oil prices, it is not viable to import edible oils for production of biodiesel," he told reporters on the sidelines of the conference.

The officials said the government was unlikely to open the biodiesel market completely to private investors, especially as the industry needed heavy subsidies. The restriction should also help avoid fierce competition over feedstocks.

"If we open the market, many small plants would join. How can we secure the environment and raw material supplies?" said Shi Lishan, a division-chief with the National Development and Reform Commission's energy bureau.

Zhang added: "State-owned companies would have to play a leading role in the biodiesel industry, just like in the fuel ethanol sector."

At present, Beijing provides subsidies --- estimated at 1,300 yuan ($165.8) per tonne of fuel ethanol -- and only allows blending of ethanol produced from the four designated plants, though there are many other producers in the country.

PetroChina and Sinopec control more than half of the country's petro stations and hold stakes in the four fuel ethanol plants, together with COFCO, the country's state-owned grain trader.

The finance ministry said early this month Beijing would subsidize producers of ethanol and biodiesel, when oil prices are below the cost of producing the biofuels. The ministry gave no details. (US $1=7.839 Yuan)

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