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The higher is the price on oil, the greater demand has biofuels. Even for investors who used to play for the high stakes. Each fuel station will have about ten alternative biological fuel types for different vehicles, the exhausts of which will smell pretty good, like fried sunflower seeds. Traditional gasoline is considered to be an unwarranted luxury and only toffs-retrogrades will use gasoline as a fuel. Only the concern Thermoyad which supplies special batteries for vehicles competes with the manufacturers of alternative types of fuel, but it has earned no trust after a series of explosions at the thermonuclear stations. Such a future awaits us in 50 years, according to the fantastic novel H2O by Yana Dubinianskaia.

Indeed, the production of biofuels in the world begins to develop rapidly in those periods when the global oil price is growing. In 2011, after the rapid rise in price of energy, the topic of production of fuel ethanol and biodiesel from agricultural products becomes relevant again. For vertically integrated companies which control the biofuel chain, including the cultivation of sugar beet or corn on their own fields, a spirits distillery, a mini oil refinery, and the mixing facilities for these components, this business will produce a considerable income.

Ethanol unleashed

In the near future, there will be no domestic demand for biodiesel, Maria Kolesnik, an analyst of AAA consulting agency, suggests. "In Europe, there are too high subsidies for the producers of biodiesel, and therefore the price for export of rapeseed is very high: 4,9-50 ths. UAH per ton. This is even higher than could have been earned by processing rapeseed into edible oil, the profitability of which is always higher than profitability of fuel," she believes.

As in the near future Ukraine will not subsidize biofuels in such a volume as Europe does, the production of fuel ethanol which can be produced from by-products of sugar mills or from grain, mainly corn, has higher chances for development. Frankly speaking, now the products of domestic spirits distilleries are one of the most expensive in the world because of the state monopoly in this sector, and it means a lack of investment. That is why the biofuel associations constantly insist on privatization of this field of industry.

But with the current prices for gasoline, even the state spirits distilleries have managed to produce biofuel. The most famous producers of fuel spirits are Gaisyn Sugar Mill, Lokhvitsa Spirits Distillery, Barskiy Spirits Distillery and Luzhanskiy Spirits Distillery. Their products are added to straight-run or low-octane gasolines in the amount of 35-40%. "This is quite a profitable ratio, because fuel, the biological share in which is more than 33%, is exempted from excise duty according to the Ukrainian legislation. It is risky to do a higher concentration of bioadditives because not all car owners are ready for such experiment," Vitaliy Daviy, President of the Association of Alternative Fuels and Energy Market Participants, says.

Great business leaders are also interested in the production of biofuels. Thus, Continuum Company owned by Igor Yeremeev (WOG fuel stations network) purchased the half-constructed plant Coron-agro, but the production has not still been entered. And Oleg Bakhmatiuk, one of the richest domestic agrarians, the owner of the Avangard Agroholding and Ukrlandfarming, is going to grow corn for subsequent processing into fuel at the facilities purchased during the takeover of Dakor. Some other agricultural holdings also announced their intentions to launch such production, but their products are not yet on the market.

According to estimates of Bogdan Kochirko, Head of Laboratory of National Research Institute MASMA, specializing in biofuel production technologies, the construction of a mini oil refinery may cost about 5 mln USD, and the mixing equipment with a capacity of up to 20 cubic meters per hour will cost only about 15 ths. USD. Frankly speaking, an oil depot is required where the mixing process will take place.

The unit for mixing spirits and gasoline costs 15 ths. USD. This is a minimum investment for a producer of biofuels.

The Ukrainian biofuel market has not yet been formed. Individual enthusiasts, who have the necessary equipment and technical conditions, begin to produce biofuels in small amounts. Usually they price the fuel with bioadditives 10-15 kopiykas per liter cheaper than regular gasoline. Or they do not say that gasoline contains a biocomponent and sell it as a regular gasoline. Thus, some market players suspect that several thousand tons of spirits-containing gasoline is produced on a monthly basis even at Kremenchug refinery. However, Sergei Bilenkii, a spokesman of the company, denies such fact.

The second major market player is Azov Oil Company, which controls a mini oil refinery in Mariupol. It has set up the fuel production under the brand Innovative E95 with an octane number of 95 units. They mix their gasoline with an ethanol-containing additive of Luzhanskiy Spirits Distillery in Chernivtsi region as well as with other additives and agents. The company is going to increase the production of alternative fuels up to 20-30 ths. tons per year. "We began to sale our products in Donetsk region, we have signed agreements with a fuel station chain, at which we began to study the consumer's opinion regarding our fuel. The price policy is lower than for the regular A92 gasoline", Andrei Cherednikov, General Director of Azov Oil Company, notes.

The next market player in terms of production volumes is Shebelinsky Gas Processing Plant of Ukrgazvydobuvannya SE, which launched the production of biofuels in mid-March, 2011 and managed to produce about 600 tons by the end of the month, and now it is increasing the volumes. According to Gennadii Kobal, a spokesman of the company, the company works on a give-and-take basis: there is a customer who brings ethanol and receives the products containing about 30-40% of the biological component. In 2008, the plant worked in a similar way with state-owned trading house Ethanol, but this company says that it has nothing to do with fuel and the technical specifications was bought out by a private company.

Biofuel is already available at the fuel stations in Donetsk region. The price per liter is 10-15 kopiykas cheaper than the A-95 gasoline

Higher ethanol content is planned in the E85 fuel, which is going to be produced by Techinservice MG which built the ethanol dehydration units at five state spirits distilleries and has already launched Naumovski Spirits Distillery. "For the time being, we produce fuel ethanol, which we denature according to the legislation with one percent of the A-80 gasoline. But in the summer of 2011, we will launch the production of the E-85 fuel", Yanina Prokhorenko, Commercial Director of Techinservice, says. This product is expected to be sold at the price about 15-20% cheaper than the regular A-95 gasoline, but its octane number will be about 109. This price, according to the representative of the company, differs slightly from the price of the competitors. Accordingly, today Naumovski Spirits Distillery is fully engaged with orders and there is already a queue from future customers which want to purchase the products of Khorostkiv Spirits Distillery which will be launched soon. These two enterprises will be able to produce 36 ths. tons of fuel ethanol per year, and all five spirits distilleries will be able to produce 125 ths. tons of fuel per year. The company buys beet molasses at the Ukrainian sugar mills, but the volumes of their supplies are insufficient for all five distilleries to ensure their operation all year round due to the fact that a large amount of raw materials is exported. They buy the A-80 gasoline on the free market, because the required amount is not big yet.

What is biofuel?

The unit for mixing spirits and gasoline costs 15 ths. USD. This is a minimum investment for a producer of biofuels. Mixtures from gasoline and fuel ethanol — dehydrated denatured spirits as well as biodiesel, which is essentially rapeseed oil, are used the most frequently. Ethanol is imported to the European countries mainly from Brazil, where it is produced from sugar cane. It is the cheapest raw material and other manufacturers rarely compete with it. It is mixed with low-octane gasoline in different proportions, depending on that who will be the buyer. Injection engines can run on it without reconfiguration in volumes of up to about 40-50%, and for carburetor engines these volumes should be less. The fuel with ethanol content of 85-90% is also widely used: in this case the engine should be reconfigured. Ethanol increases the octane number of the fuel, but reduces the calorific value, respectively, the engine runs smoother, but not at full capacity. Except ethanol, other oxygen-containing substances which increase the octane number are added to gasoline. The most famous of them is ethyl tertiary butyl ether, which is a much more environmentally friendly additive than regular metal-containing compounds.

On the contrary, biodiesel in Europe often has Ukrainian roots, because it is produced from rapeseed grown in our country. 98% of these raw materials is exported from Ukraine and is not used for internal needs. The remaining 2% of raw materials is mainly used for the fuel that farmers produce from rapeseed for their own vehicles and do not supply to the open market.

Source: http://investfunds.ua/