Biofuels Update: Argentina’s Move to the Brazilian Fuel Model For Ethanol Consumption

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Biofuels such as ethanol have been embraced Globally over the past decade with the US, Europe and Brazil leading the charge. The US EPA has just raised their target for ethanol use in 2017, “requiring that energy companies blend 19.28 billion gallons of renewables into the nation’s fuel supply” a 6% increase from 2016 targets.

This past week, Leticia Phillips highlighted what Brazil has accomplished with biofuels in Ethanol Producer Magazine: “Ethanol and bioenergy produced from sugarcane already constitute 15.7 percent of Brazil’s energy mix, replacing more than 40 percent of gasoline and avoiding 600 million tons of carbon dioxide emissions since the beginning of the ethanol program in the 1970s.”

Global biofuels leader Europe has changed their tune a bit about biofuels; just this week Reuters reported that: “The European Commission is considering halving the maximum amount of crop-based biofuels used in transport after 2020 over concerns they increase rather than reduce carbon emissions”. Instead of increasing their target, Reuters reports that they plan on decreasing their liquid biofuels target to 3.8 from 7 percent by 2030.

The KNect Energy team will be heading to Biofuels Latin America next week so we thought we’d go straight to the source and ask two of Argentina’s biofuels leaders what’s been happening with ethanol production in their country. We sat down with Martin Fraguio, the Executive Director of MAIZAR, Argentina and Oscar Rojo, the Commercial Director of Tabacal Argentina and President of Cámara de Alcoholes to get the status on bioethanol use and production in Argentina.

KNect 365: How big is the bioethanol industry in Argentina?

Martin Fraguio: Today the bioethanol industry consists of five corn to ethanol plants that produced in 475,000 cubic meters in 2015 and the sugar cane industry that produced 328,000 cubic meters in twelve plants also in 2015. The total production expected for 2016 is 970,000 cubic meters of ethanol for the fuel market. (Revenue is) around $700 million.

KNect365 Energy: The US EPA has the “Renewable Fuels Standard”,  I read in your recent interview with us that Argentina will be increasing the ethanol blend from 10-12%. What is the name of your similar program?

Martin Fraguio: The blend rate was increased in January 2016 from 10 to 12%. The program is called “Ley de biocombustibles N° 26.093” or the Biofuels act. It was approved by the National Congress of Argentina in 2006, and has enforced an initial 5% blending rate for ethanol and biodiesel since January 1st 2010. Since then both rates have increased.

KNect365 Energy: The U.S. eliminated the 54 cents per gallon tariff it imposed on ethanol imports in 2012. Do you think this may change with the new US Trump administration?

Martin Fraguio: No, there doesn’t seem to be any evidence of such protectionism being planned for the ethanol industry, we have to wait and see.

KNect365 Energy: Your talk for our Biofuels Latin America event will be about how Argentina will be “moving from E12 to E26”, can you please explain what E12-E26 means for our readers?

Martin Fraguio: We have been discussing for more than ten years now that Argentina could copy the Brazilian fuel model. In this country gasoline has a very high ethanol blending rate, today 27%. At the same time hydrous ethanol is sold as a pure fuel in an independent pump. The Argentine auto industry has argued that it would be better for them to jump from E12 to a high blend (above 20%), instead of crawling in small steps of 1% or less. Therefore, it seems as if Argentina would stay for some time at a blend rate of 12% and when the investments in plants and flex fuel vehicles are sufficient, jump to a rate in the 20%’s and later to 26%.

KNect365 Energy: Who are some of the organizations, besides the ethanol producers that you work with to promote the ethanol industry?

Oscar Rojo: The other two key players in the development of bio-ethanol business are the Cars Producers Association (Adefa) and petrol companies (Petrol Chamber – YPF – Shell). Obviously the Government has a major role in determining and promoting policies that foster the business, the Ministries involved are: Agribusiness, Energy, Production and Environment.

KNect365 Energy: Can you tell me a little bit about the history of ethanol in Argentina and your hopes for its future?

Oscar Rojo: The biofuels in Argentina started their development in 2006 when the Biofuels Law was passed by the Congress and the Government set the policies for its development. Biofuels made their effective entrance in the market in January 2010 when started the blending of gasoline with bio-ethanol. Initially only cane ethanol participated and as of 2012 corn bio-ethanol entered the market.

The development was sustained throughout this years, with strong involvement from the Government progressively increasing the blending mandate. In 2014 the blend was increased to 10% and as of April 2016 a decree was issued increasing it to 12% where we are now. The Government has expressed its idea to continue the development by increasing the blending and/or adding hydrated as is in Brazil.

Currently several alternatives are under evaluation. It is expected that in the near future some determination will be made. The industry is evaluating the implications of these alternatives so as to give its views to the Government and then be prepared for accompany the development of the business.

You can ask Oscar Rojo and Martin Fraguio more questions about the future of ethanol at our Biofuels Latin America event next week in beautiful Buenos Aires!
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