FEATURE - Argentina Angling to Join Biofuels Race
Author: Karina Grazina
Backed by local seed company Don Mario, Defferrari developed a biodiesel plant prototype in Chacabuco, Buenos Aires province, at a cost of 450,000 pesos ($152,000).
The engineer's goal is to sell similar plants to farmers who are anxious to lower their fuel costs or even achieve self-sufficiency in the face of soaring oil prices.
"The farm sector consumes 76 percent of diesel in Argentina and farming is done throughout the nation. So we have an enormous logistical advantage because we consume fuel in the same place where we could produce it," Defferrari said.
"This would reduce not only freight costs but also pollution," he added.
The cost of this biodiesel is 70 centavos per liter (about 95 US cents per gallon), roughly half of what conventional diesel costs at the pump.
Analysts say biodiesel is the renewable fuel with the most promise in Argentina, the world's top exporter of soyoil and sunflower seed oil.
Biodiesel is made with vegetable oils -- such as soy, sunseed, rapeseed or palm oil -- and animal fats, and it can be used purely or blended with conventional diesel.
As the world's No.2 corn exporter, Argentina is also well-positioned to develop ethanol, an alternative to gasoline that is made with corn or sugar cane. Neighboring Brazil is the world's top ethanol producer and exporter.
"With ethanol production, everything adds value to corn because when the starch is extracted and converted into ethanol, leftover proteins remain as a concentrate that can be used for animal feed," said Gustavo Vergagni, an analyst with V&A Desarrollos Empresarios consultancy.
SURGING WORLD DEMAND
With 12 tonnes of soybeans, the small plant in Chacabuco -- some 145 miles west of Buenos Aires -- produces about 1,400 liters (364 gallons) of biodiesel and 10.2 tonnes of expellers, which are used for animal feed.
Bionerg, the company created by Defferrari and Don Mario, is focused for now on addressing farmers' needs. But it does not rule out producing biodiesel on a larger scale as the international context for biofuels improves.
Analysts say measures being taken worldwide that require the blending of fossil fuels with biofuels will ensure rising demand in coming years.
In the European Union, for example, all fuels must contain a minimum of 5.75 percent of biofuels by the year 2010.
"The outlook is for very strong demand. Europe is consuming more and more biofuels and at this pace, it will not be able to produce enough locally to satisfy demand," said Claudio Molina, head of the Argentine Association of Biofuels.
"In some cases, they will import the raw materials and produce biodiesel or bioethanol there, but in other cases they will seek out finished biofuels and Argentina is in a privileged position because it's an agricultural powerhouse," Molina said.
Another advantage of "green" fuels is their price relative to crude oil, the cost of which recently surpassed that of soybean, palm and rapeseed oil for the first time ever.
LEGAL BLACK HOLE
The development of a robust biofuels business in Argentina is still incipient. Some companies, like Spain's Repsol YPF and some oilseed processors, have shown interest.
But analysts say the sector will not take off until there are laws in place to regulate it.
Sen. Luis Falco introduced a bill that includes tax breaks for companies and would require that at least 5 percent of biodiesel be blended with conventional diesel, with the same ratio for ethanol and gasoline.
"This will give the sector a legal framework so people will want to invest in biofuels. This is important because it's a small solution to energy concerns, it protects the environment and it's a new industry that will create jobs," Falco said.
Although the bill is stalled in Congress, Defferrari is losing no time.
"There is a great deal of interest among producers here and also in Paraguay and Uruguay, where the leg