Biofuels Struggle To Find Market

09:23 | 26/04/2012 Industry

(VEN) - Although the first biofuel products have been produced, they have not become universal products on the market as expected.

Domestic consumers have not got used to consuming E5 gasoline

According to Decision 177/2007/QD-TTg dated 20/11/2007, the Prime Minister has approved the "Project for Development of Biofuels until 2015 with a vision towards 2025". The objective of the project is that ethanol and vegetable oil output will reach 250,000cu.m by 2015 and be used to produce five million cu.m of E5 and B5 gasoline, meeting one percent of the country's petroleum demand. It is expected that the rate will be about five percent by 2025.

To implement this project, PetroVietnam (PVN) has built three biofuels plants in Phu Tho, Quang Ngai and Binh Phuoc provinces to produce ethanol from cassava with annual inpidual capacity of 100,000cu.m. It is expected that all of PVN's plants will provide an annual ethanol amount sufficient to produce about 5.6 million cu.m of E5 gasoline per year upon official commercial operation. The Dung Quat Bioethanol Plant run by Vietnam Central Biofuels JSC (BSR-BF) and the Binh Phuoc Biofuel Plant run by Orient Bio-Fuels Co., Ltd. (OBF) have let out the first line of biofuel product and prepare to handover.

Minister of Industry and Trade Vu Huy Hoang said, "Biofuel products have been used by many countries worldwide. Therefore, as Vietnam is involved in producing these products, they should be universally available to consumers."

However, despite biofuel products now being widely available, their rate of consumption remains low.

According to Deputy General Director of PetroVietnam Oil Corporation (PV Oil) Nguyen Anh Toan, although PV Oil supplied E5 gasoline at more than 150 gas stations in 41 provinces and cities nationwide in 2011, only 17.000cu.m of this biofuel product was sold as most domestic consumers remained unconvinced about biofuels. Even if PV Oil and Petec Trading & Investment Corporation (PETEC) managed to supply E5 gasoline through all their distribution channels in 2013, they would only consume about 100,000cu.m of ethanol per year, accounting for just 30 percent of the total ethanol production of the three plants.

Deputy Director of Ministry of Industry and Trade's Science and Technology Department Nguyen Phu Cuong agreed that the introduction of biofuel products to domestic consumers was very difficult because of their habit of using conventional fuels. In addition biofuel products had not been widely promoted locally and varied in distribution mode.

PVN's Deputy General Director Vu Quang Nam added that although biofuels were available on the market, the related legal framework and incentives had not been agreed upon.

In this regard, Director of Ministry of Industry and Trade's Science and Technology Department Nguyen Dinh Hiep insisted that the lack of related legal framework and incentives for biofuel producers had left them in difficulties with tax and fees. They had to suffer from losses in producing and trading of these products and could hardly continue investment. Therefore, the Ministry of Industry and Trade and related ministries had delivered a draft for mandatory use of biofuel products to the Government Office. The draft says that E5 gasoline must be used in seven largest cities across the country including Hanoi, Hai Phong, Da Nang, Quang Ngai, Ho Chi Minh, Ba Ria-Vung Tau and Can Tho from January 1, 2013, and in all other provinces and cities nationwide from January 1, 2015. Similarly, E10 gasoline must be used in the seven mentioned cities from January 1, 2015 and in all other provinces and cities from January 1, 2017.

The draft may be considered as a cure for biofuel producers; however, as the promulgation of those regulations may take time a strategy would be needed now to cope with present situation. For example, biofuel producers need to promote their products to domestic consumers through giving them information on quality and related benefits, to actively upgrade their warehousing chains, transportation and distribution networks.

The Ministry of Transport and PetroVietnam (PVN) signed a cooperation agreement in March 2012. The agreement states that units and enterprises under the Ministry of Transportation will use PVN services and biofuel products. The Ministry of Transportation will propose to the Government a comprehensive set of policies to develop biofuel production and consumption and soon schedule mandatory use of E5 and E10 gasoline. In addition, to create favorable conditions for public consumption of liquefied and compressed biogas in the provinces and cities nationwide, the Ministry of Transport has urged Ho Chi Minh City Department of Transportation to expand the "500 Buses Using Compressed Biogas Project", which is a very positive move to universalize biofuel products locally./.

By Lan Phuong