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South Africa: Biofuels 'Depend On Big State Subsidies'
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Business Day (Johannesburg)
25 March 2008
Posted to the web 25 March 2008
Linda Ensor
Cape Town
The introduction of biofuels in the rest of the world had been dependent on large government subsidies, South African Petroleum Industry Association (Sapia) executive director Connel Ngcukana said last week.
Estimates based on the capital spent on overseas manufacturing and supply chain and operating costs amounted to an additional 10c/l to 15c/l on the countries' national and petrol sales, Ngcukana said during a briefing to Parliament's minerals and energy portfolio committee.
He said that while Sapia supported the development of a biofuels industry in SA, the successful implementation of the government's strategy would require close engagement with the oil industry.
Ngcukana urged that expert working groups be established to deal with complex practical and economic issues related to the uptake of ethanol into petrol, which the strategy had failed to address.
There were no significant concerns about the use of ethanol in diesel, except for quality concerns.
He said oil refineries were ready to play their part but pricing would have to reflect costs.
Refineries would have to make significant capital investments to accommodate ethanol into their processes and to ensure constant volatility of petrol ethanol blends.
Additional storage tanks would be required and capital investments made in the primary distribution systems.
As ethanol is very soluble in water, it would be necessary to upgrade infrastructure to operate a dry distribution system -- for example tanks, ships, pipelines, transport -- if ethanol were to comprise more than 2% of petrol. It was not advisable to import ethanol because it was likely to contain water.
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Issues that would have to be addressed in the implementation of the biofuels strategy included the need for ethanol-petrol blends to meet the draft vehicle emissions strategy as well as the overall aims of the Air Quality Act.
Ngcukana said adding ethanol to petrol raised volatility or evaporation even at low levels, which would affect vehicle performance.
"Ethanol has a lower energy value than petrol, which means vehicle consumption will increase with increases in the percentage of ethanol," he said.
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