As plant looks at job cuts, biofuels ‘need leap of faith’

Mar 10 2008 by Peter McCusker, The Journal

IN recent months there has been a backlash against the rush to biofuels with some saying it is diverting vital crops away from the food chain and pushing up prices.

Commodity prices for the likes of wheat have more than doubled in the past year, but John Seymour of North East Biofuels attributes this rise to a particularly bad harvest for all the world’s main wheat regions and predicts price falls in the coming months.

Of more immediate concern to UK biofuels manufacturers has been the dumping of cheaper US biofuels on the UK market as a result of US Government subsidies.

At the weekend it emerged that one of the region’s biofuel companies, D1 Oils, is considering shedding some of the 40 jobs at its Teesside plant, which it says is a result of cheap imports of biofuels from the US.

The practice is known as “splash and dash” because US producers import biodiesel from a third country, add a “splash” of petroleum diesel then “dash” to Europe to sell it with the help of a subsidy of 11p-a-litre from their government.

UK biofuel producers have complained to the EU about the practice and the Biofuels Corporation at Seal Sands is one of a number of producers which have registered unease.

Chief executive Sean Sutcliffe said: “US biodiesel producers are able to get a 25% advantage which means they can sell at below European producers’ cost price.

“The move in Brussels is to stop this. It’s the primary reason why biodiesel producers are producing at relatively low levels, including ourselves.” One of the main reasons for optimism among biofuel supporters is new legislation to cut carbon emissions.

The UK’s Renewable Transport Fuels Obligation which comes into force in April, requires 5% of fuels for vehicles to come from renewable sources by 2010, with bioethanol and biodiesel being blended into conventional petrol and diesel respectively to cut their carbon footprint.

Dr Stan Higgins, chief executive of the North East Process Industries Cluster said: “This is a new industry and with a new industry there are ups and downs.

“The industry has yet to stabilise. Companies and researchers are investigating so many different crops to find suitable fuels. What might be wheat today might be some form of grass tomorrow.

“We need to praise the pioneers who are driving this industry forward.

“What we have now is the first generation of biofuel plants, but as the industry moves forward it is paving the way for a second generation.

“At this particular moment in time, the economics of the industry do not look particularly good, but statutory demands mean that people are going to have to buy the fuel and the capacity has to be built.

“There has to be a leap of faith that there will be no change in Government policy.

“At the same time the industry is trying to make the whole process more economic.”

The optimism in the sector was strengthened last week when Stockton company Vireol launched a drive to secure £300m to build a bioethanol plant on Teesside and a second plant at Grimsby, as reported earlier.

The North East biofuel industry covers all aspects of production, known as from “seed to tank”.

Farmers grow two main biofuel crops – wheat, used for bioethanol, and oilseed for biodiesel.

Five Teesside manufacturing plants convert raw materials into fuel. There are crushing, storage and blending facilities on the Tees.

And there are 20 forecourts in the North East selling the fuels.