UK biofuel firm invests in African jatropha

D1 Oils PLC said it has planted over 156,000 hectares of jatropha worldwide up to the end of the first quarter at March 31, adding 10,000 hectares of the total was planted in the last two weeks of the quarter. The biofuel company said the majority of this increase was accounted for by planting in Africa, 'with planting under contract farming arrangements in Zambia continuing to make particularly good progress.'

The company grows jatropha for its seed oil, which yields higher fuel per hectare than corn and soya, and expects first supplies of jatropha oil during 2008. Along with agronomy, the company also refines and trades biodiesel. In a first quarter business update, D1 said it delivered a fifth refinery unit to its producing refinery at Teeside, which will increase production capacity there to 42,000 tonnes per year. The company also said work on its second UK refinery site at Bromborough, which it bought in January, continues on track.

The company announced last month that it anticipates that the new site will add a further 100,000 tonnes of refining capacity by the end of 2007, although its plans to increase output to 320,000 tonnes per year have been pushed back by one year to the end of 2008, prompted by lower margins. The company's principal revenues currently come from refining soya feedstock into biodiesel, and UK refining margins are being squeezed by lower diesel prices and higher feedstock costs.

D1 said last month that it ran its refineries below capacity in order to continue to benefit from 2006 hedged soya prices, but added it would be able to ramp up capacity if diesel prices rose or feedstock costs declined. Ultimately the company is aiming to refine non-edible feedstock like jatropha because it expects prices of edible feedstock like corn and soya to continue to rise as the food and biodiesel markets compete for the product.

The Renewable Transport Fuel Obligation is a government requirement on transport fuel suppliers to ensure that a certain percentage of their sales is made up of biofuels. It will come into effect in 2008, and the percentage requirements for renewable fuels sold on UK forecourts will increase each year to a maximum of 5 pct by 2010. The obligation will be supported by a fuel duty incentive of 20 pence per litre, as well as a 15 pence per litre penalty for those who are unable to supply enough biofuel. D1 believes the introduction of the RTFO and its incentives will improve margins, and expects it will create an annual UK market for at least 1 million tonnes of biodiesel by 2010.

Hemscott