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Shell stakes green future on sugar biofuel in $2bn Brazil venture

Rowena Mason, The Telegraph
The oil major has signed an agreement to form a new company with Cosan, a Brazilian industrial group.

Cosan will provide $5bn of its assets, including all its production facilities and an ethanol-trading unit, while Shell will contribute $2bn in cash, 2,740 service stations, and stakes in two green technology businesses. The 50-50 joint venture will assume Cosan’s $2.5bn of debt.

The two companies want to increase production at Cosan’s mills from 2bn to around 5bn litres of ethanol, exporting the fuel beyond Brazil’s relatively mature market.

“This venture represents the best entry of scale into sustainable biofuels,” Mark Williams, head of Shell’s downstream business. “It is the biggest move into biofuels of an international oil company.”

Peter Voser, Shell’s chief executive, has pledged to concentrate on developing biofuels and clean coal, as part of the company’s attempt to reduce its carbon dioxide emissions.
(2 Feb 2010)

White House report: Develop more crops for biofuels

Philip Brasher, Des Moines Register
The nation won’t meet its biofuels goals unless the government accelerates the development of biofuel crops and products, the White House says.

In a report being released today, an administration task force said the government needs, among other things, to set targets for commercializing new types of fuel crops, such as switchgrass.

The government also needs to work regionally to develop fuels and feedstocks that make sense in each part of the nation, the report said.

In the Midwest, where corn ethanol production is concentrated, the government could focus on increasing sales of E85, a combination of 85 percent ethanol and 15 percent gasoline. In the Southeast, the focus could be on making ethanol from sugarcane.

The 14-page report makes some recommendations that could raise concerns in the industry, including a suggestion that federal agencies identify environmental and social issues that may confront biofuels development…
(3 Feb 2010)

Obama Set to Outline Biofuels Strategy

President Barack Obama on Wednesday will outline a government strategy to boost development of U.S. biofuels and address their environmental challenges, an administration official said.

The strategy will be laid out in a report by the Biofuels Interagency Working Group, a body the president established to help spur investment in biofuels and make the industry more environmentally friendly.

Obama and members of his Cabinet are scheduled to meet on Wednesday with a handful of state governors to discuss energy policy and the “opportunities and challenges presented by the transition to a clean energy economy,” the official said.

The president is pushing for the United States to overhaul its energy habits by switching to less-polluting fuels and reducing its dependence on foreign oil.

…Obama charged the biofuels working group, which includes the leaders of the Department of Agriculture, Department of Energy and the Environmental Protection Agency, with retooling the nation’s policies toward biofuels in many areas.

The group was asked to develop a strategy to increase biofuels production, investment in the industry, and the use of “flex fuel” cars, which can run on either gasoline or fuel that is mostly ethanol.
(3 Feb 2010)
The report is apparently title “Growing America’s Fuel” and will be released later on today, one assumes. -KS

Biofuel requirements for cars may help destroy the rainforest, watchdog says

The Telegraph
Fuel providers are compelled to add an increasing proportion of biofuel to diesel and petrol under the Renewable Transport Fuels Obligation. This year 3.23 per cent must be made up of biofuel and by 2020 that increases to 13 per cent.

However, the first annual report by the Renewable Fuels Agency (RFA) claims that fuel companies are exploiting a loop hole which means they are not required to disclose the origin of nearly half the biofuel supplied to filling stations in 2009.

Last year Esso reported the source of only 6 per cent of its biofuel while BP reported 27 per cent. Shell, the best performing of the main oil companies, only revealed two thirds of its biofuels origins…
(29 Jan 2010)

Biofuels: the Biggest Supply Response to the 2000s Oil Shock

Stuart Staniford, Early Warning (Risks to Global Civilization)
There are four kinds of liquid fuel alternatives to crude oil in actual commercial production at the present:

* Biofuels – ethanol and biodiesel, primarily from food crops around the world
* Tar Sands – synfuel and bitumen, primarily from Canada
* Gas-To-Liquids (GTL) – from South Africa, Malaysia, and increasingly Qatar
* Coal-To-Liquids (CTL) – primarily from South Africa, but just starting in China

In this piece, I summarize some research I’ve been doing to look at how each of these sources responded to the oil price increases of 2005-2008. Two sources, GTL and GTL, haven’t shown any particular price sensitivity to date and are at low levels. Tar sands growth has shown modest price sensitivity but mainly appears to be growing on its own internal dynamics.

Biofuel production growth appears to be extremely oil price sensitive, and increased the fastest and reached the largest volume in response to the mid-to-late 2000s oil shock. I have argued in the past that there are structural reasons for this: given the comparatively low capital requirements and small plant size of biofuel plants, they can respond much faster to episodes of high oil prices than can the other sources, all of which tend to involve larger, slower-to-build, more capital intensive plants. This has important implications for food and land prices in future oil price shocks. Food prices are likely to rise quickly and markedly in response to oil shocks, public policy permitting.

… It appears that the behavior of the overall politico-economic system in the presence of an oil shock is to turn first to biofuels. However, a biofuel response in future similar to the response to the last oil price shock will cause fairly dramatic increases in food prices.

That’s probably not a very good idea.
(1 February 2010)
Stuart Staniford was an early contributor to The Oil Drum. His articles are based on his ongoing research, and are always worth looking at. -BA