13 Oktober 2004

China: Mainland turns to corn-based ethanol

The mainland is set to greatly expand production and sale of corn-based ethanol in an attempt to reduce oil imports and curb urban pollution. The move, which also aims to help farmers, comes as crude oil has risen to more than US$50 (HK$390) a barrel. But critics of ethanol say it is not yet a solution to China’s energy shortage problems – and is wasteful of resources.

A senior mainland oil firm manager, who requested anonymity, told The Standard on Monday: “For the time being it is premature to push ethanol gasoline nationwide because production technology needs to be improved to cut costs and raise efficiency.”

Three tonnes of grain will produce one tonne of ethanol, a blend of grain and conventional crude oils.

As in the United States, where ethanol production is also being promoted, mainland authorities are having to subsidise ethanol costs to make them the same retail price as petrol and diesel.

Several cities have already experimented with ethanol, but now Beijing has approved its expanded production and sale in Hubei, Shandong, Hebei and Jiangsu provinces, China Business Times said. The newspaper suggested that this is a prelude to Beijing promoting ethanol nationally next year.
As well as its energy concerns, Beijing is anxious to clean up the capital’s air for the 2008 Olympic Games.

Ethanol is already on sale in Zhengzhou, capital of central Henan province, but a check at one main roadside garage found that only 200 litres of ethanol is sold daily compared with 8,500 litres of petrol and diesel. Retailers also make less from ethanol.

Car drivers are said to be worried about possible damage to their engines caused by ethanol use.

For a time, Zhengzhou authorities attempted to enforce ethanol use by ordering vehicles with certain licence plate letters to switch to the fuel.

The US is one of the world’s biggest producers and users of ethanol. The Renewable Fuels Association said the American ethanol industry is expected to produce about 1.2 billion litres this year. According to bio-fuel promoters ethanolmarketplace.com, it will take about eight billion litres of ethanol to replace just 10 per cent of China’s present gasoline consumption.

China’s ethanol is only 10 per cent corn-based and 90 per cent conventional oil. In the US, the blend is 30-70.

Critics of ethanol in the US include prominent Cornell University professor of agricultural sciences David Pimentel. He said production costs and government subsidies result in a total corn ethanol production cost of about US$1.74 per gallon in the US, compared with about 95 US cents to produce a gallon of petrol. He said the US spends about US$1 billion a year to subsidise ethanol production and large-scale production of corn damages soil.

“Abusing precious croplands to grow corn for an energy-inefficient process that yields low-grade automobile fuel amounts to unsustainable, subsidised food burning,” Pimentel said.

One recent Chinese ethanol production cost estimate was about 4,000 yuan (HK$3,767) per tonne, sold at 3,000 yuan per tonne under state subsidy.

Last week, Hong Kong Union International kicked off its third mainland ethanol venture in Jinan, Shandong province, to produce ethanol with partner Penglai Jinchuang Group. Other ventures are in northeastern Jiling and Liaoyuan.

Source: The Standard.com Oct. 13, 2004.

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