Nippon Oil hopes to slash domestic biofuel costs

Source:
http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2007-01-16T142516Z_01_T302222_RTRUKOC_0_US-BIOFUEL-SUMMIT-NIPPONOIL.xml&WTmodLoc=IntNewsHome_R3_reutersEdge-2
By Ikuko kao - Reuters Summit

TOKYO (Reuters) - Japan's top oil refiner Nippon Oil Corp. (5001.T:
Quote, NEWS , Research) hopes to more than halve domestic ethanol
production costs over the next ten years through research into biomass
ethanol, a senior company official said on Tuesday.

Japan's move to introduce ethyl tertiary butyl ether (ETBE), a gasoline
additive made from ethanol, this year doesn't make business sense at
current costs, Ikutoshi Matsumura, a director and senior vice president
of Nippon Oil, told Reuters.

The country plans to start selling ETBE-blended gasoline from April, but
prices of sugar and corn, the normal sources of ethanol, have been
rising sharply.
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"Even though crude oil prices are relatively high at $50, $60 or $70 (a
barrel), biofuels do not make economic sense for companies like us due
to recent rises in sugar and other grain prices," Matsumura said.

The industry needs sizable new projects, dedicated to produce ethanol
for transportation fuel, to bring down ethanol prices to push long-term
efforts to boost biofuel use. It also has to stop shifting grains from
food, he said.

"We want to launch a big project by the end of this year, jointly with
the government, universities and Southeast Asian countries. Ethanol
prices will not fall without big projects."

The project aims to develop plants able to grow quickly under harsh
conditions to cut costs to produce and import ethanol to Japan to 50 yen
($0.415) per liter, Matsumura said.

That compares with current domestically produced ethanol prices at
100-200 yen per liter, while Japanese retail gasoline prices are about
130 yen per liter now ($4 a gallon).

Importing ethanol from Brazil, the world's largest ethanol exporter, now
costs Japan about 70 yen per liter.

Matsumura also said Nippon Oil may invest several billion yen to convert
existing equipment and start producing ETBE at its plants by using
domestically produced and imported ethanol.

"Our company will be able to produce about 100,000 kl of ETBE in 2009."
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Nippon Oil and other Japanese oil companies will jointly import 7,500 kl
(47,000 barrels) of ETBE from France for the first time ahead of the
start of test sales at 50 gas stations in April.

In 2008, the import may double as 100 gas stations will start selling
bio-gasoline.

By 2010 the oil industry target is to blend an annual 840,000 kl of
ETBE, containing 360,000 kl of bioethanol, with gasoline so that biofuel
blends will make up 20 percent of the country's annual total gasoline
demand of 60 million kl (1 million bpd). ($1=120.46 Yen)
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