Bio diversity: How biofuels are adding new dimensions to Asia’s downstream portfolio

The pandemic was rough on refiners, leaving 14% of refining capacity across advanced economies at risk of under-utilisation or closure. To stay agile and survive, many fossil fuels operators turned to new sources to fuel their plants, and their bottom line.

Biofuels – produced from produced from organic matter, or biomass, such as corn or sugar, vegetable oils or waste feedstocks – emerged as a clean, commercially attractive winner. In recent months, BP, Total and Eni, all announced plans to grow their biofuel capacities up to fivefold by 2030. And with the market set to soar to US $46431 million by 2026, with a compound annual growth rate of 7.85%, this is a trend set to outlive the coronavirus.

ADI examines Asia’s biofuel ascent, why not all biofuels are created equal when it comes to sustainability, and the future of a biofueled economy.

Asia’s biofuel ascent

While Europe, the USA and Brazil were early adopters through the introduction of energy policies calling for lower-carbon emissions and cleaner transport, Asia is picking up the pace. In January this year, Indonesia’s state oil and gas company Pertamina announced the second round of testing for the production of a pure palm-oil biodiesel, made at its largest refinery in Central Java. As the world’s largest palm oil producer and exporter, this biofuel has been a steady source of success for the country. In 2019, it set records, becoming the first country in the world to release a biodiesel containing 30% palm-based fuel. These achievements slot smoothly into the government’s promotion of both ethanol and biodiesel, and its mandate for biofuels to cover 5% of national energy consumption by 2025. Biofuels also form a part of the country’s COVID-19 recovery plan, with a $195 million state subsidy pledged to pull producers of palm oil biodiesel from the post-pandemic slump.

The Philippines has also set clear ambitions to be a global hub for sustainable biofuels. One of the world’s largest producers of coconut oil feedstock, the region has ambitions to turn its natural resources into a national advantage. The Government has announced its aims to “coordinate efforts towards the creation of new applications and markets for biofuels” and to “maximize the contributions of indigenous biofuels in the country’s energy mix towards self-sufficiency and better environmental conditions” by 2030. The private sector is also stepping up, not just on a domestic level, but also as part of a greater global energy transition. At the end of last year, the Asian Development Bank in the Philippines the approved $2.5 million in technical assistance to support advanced biofuel development in India.

Sustainability through the generations

In a world increasingly driven by global warming worries and sustainability concerns, part of biofuels’ appeal is their reputation as a cost-effective and environmentally friendly alternative to traditional fossil fuels. But digging deeper unearths a multi-layered debate, and a multi-layered hierarchy of biofuels.

First generation biofuels, created from traditional food feedstocks, such as biodiesel from palm or coconut oil can contribute to substantial reductions of greenhouse gas emissions, but have come under fire for disrupting food chain dynamics, lowering soil quality, and driving up the prices of agricultural products. There is growing concern that Indonesia’s push for palm-oil biofuels will accelerate deforestation: currently the cultivation of the crop accounts for around 5% of global tropical rainforest destruction.

The evolution of advanced technologies has enabled the development of second-generation biofuels, made from non-food feedstocks, such as cellulosic ethanol made from the walls of plants. While the production and transportation are more complex and costly than first generation biofuels, the potential for market versatility and emissions reductions is great: it is estimated that cellulosic ethanol can cut greenhouse gas emissions by up to 86%.

Third generation biofuels produce a non-food feedstock-based fuel that is indistinguishable from its petroleum counterparts.  A group that includes green hydrocarbons, these biofuels allow direct petroleum substitution: meaning they can be used in vehicles without “modifications or additional logistical needs”.

Looking towards a biofueled future

As the biofuel family tree grows, and new technologies further unleash their potential, Asia’s downstream sector could be looking at a biofueled future. There are hurdles to be overcome. In order to meet sustainability goals, biofuels investment would need to see a sixfold increase within the next decade. Just as in Indonesia and the Philippines, governments need to continue to implement sustainable policy and the resources to evolve biofuels that have minimal impact on their environment.

Environments themselves differ, and varying natural landscapes means varying feedstock availability and access. And where feedstock costs can contribute to up to 80-90% of the final fuel price, operators should economise and plan their biofuels business strategy, to ensure that they remain competitive against dropping oil prices.

“Biofuels will never replace fossil fuels because of their price”, explains Mok Thye Yee, Process Technology Manager, Technology & Engineering Division at PETRONAS. “Operators still have to combine the biofuels approach with multiple other solutions”.

Biofuels are not a silver bullet solution, for the planet, or for profit. But in transitioning towards a cleaner energy industry, they are an integral stepping stone to sustainability.

“Biofuels are a critical part of sustainability programmes”, Yee continues. “And they are here to stay, whether we like it or not”.