Australian Biofuels 2012 Industry Overview - Transport fuels Australian Institute of Energy 2012 National Conference InterContinental Sydney 20th November 2012 Presenter: Mike Cochran Ecco Consulting Pty Ltd/ APAC Biofuel Consultants Adelaide, South Australia

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Discussion Outline • • • • • • •

Biofuels’ contribution to fuel security to date Australia in the world biofuel market Ethanol in Australia – production, capacity, feedstocks Biodiesel in Australia – production, capacity, feedstocks Product identification Consumer acceptance Policy developments – excise, mandates, carbon price impact, industry support • Advanced biofuels commercial challenges • Aviation commercial challenges

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Australia’s liquid fuel dependency – the background picture • In terms of oil dependency, Australia is currently about 57% dependent on imports • In 2011-12 (before Clyde shutdown) Australia refineries imported 567 kbd crude oil; domestic sourced – 100 kbd • Product import dependency - petrol (20%)and diesel (52%)(jet=30%)

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What National Energy Security Assessment (2011) said about biofuels • “Liquid fuel energy security ….is assessed as high trending to moderate in the long term, as Australia has continued access to highly adequate and reliable supplies of liquid fuels at price levels that are manageable within the broader economy” (NESA, p8). • “Diversifying fuel types and sources was assessed as being increasingly important in improving Australia’s liquid fuel security. However, taking into account the small contribution made by alternatives such as biofuels, and the technical and commercial challenges they faced over the assessment period, they were seen as likely to remain as niche products.”(p11) Biofuels as part of the LPG, petrol, jet and diesel equivalent energy pool (2011-12) ML GJ/kl PJ % of mix Autogas (LPG) consumption (APS) 1,908 26.2 50 2.8% Total petrol sales (APS less ethanol component) 18,490 34.2 632 35.2% Ethanol consumption 271 23.4 6 0.4% Automotive diesel (APS less biodiesel) 21,549 38.6 832 46.2% Biodiesel 81 34.6 3 0.2% CNG (PTT) 87.8 39.3 3 0.2% LNG (Transport) (APAC est) 71 25.3 2 0.1% Jet 7,348 36.8 270 15.0% (Sources:APS, APAC, PTT) 42,458 1,799 100.0%

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Australia - small producer by world standards but reasonably significant outside the big four regions – USA, Brazil/Argentina, Europe and China. Note the concentration of production. World oil production 2011 about 84 million bpd. World biofuels = 2.1% of world oil consumption. World Biofuel Production 2011 2011 2010 Country GL '000 bpd GL 000bpd Total Ethanol 85.0 1,465 87.2 1,503 Total Biodiesel 21.5 370 18.8 324 Total Biofuels 107 1,835 106 1,826 World Fuel Ethanol Production 2011 Country GL '000 bpd % Share United States 52.8 910 62.1% Brazil 21.0 362 24.7% China 2.1 36 2.5% Canada 1.8 31 2.1% France 1.1 19 1.3% Germany 0.8 14 0.9% Spain 0.5 9 0.6% Thailand 0.5 9 0.6% Australia 0.3 6 0.4% Columbia 0.3 5 0.4% Other 3.8 65 4.5% Total World 85.02 1,465 100% Source:(23 Aug 2011) REN21 Renewables 2012 Global Status Report , p100, www.ren21.net/REN21/Activities/Publications; www.eia.gov/dnav/hist;EIA (for USA) APAC (September 2012).

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World Biodiesel Production 2011 Country GL '000 bpd United States 3.6 62 Germany 3.2 55 Argentina 2.8 48 Brazil 2.7 47 France 1.6 28 Indonesia 1.4 24 Spain 0.7 12 Italy 0.6 10 Thailand 0.6 10 United Kingdom 0.5 9 Belgium 0.4 7 Columbia 0.3 5 China 0.2 3 Canada 0.2 3 Australia (e) 0.1 2 Other Europe 2.2 38 Other 0.4 7 TotalL World 21.5 370 Total Europe 9.2 159

% Share 16.8% 14.9% 13.0% 12.6% 7.4% 6.5% 3.3% 2.8% 2.8% 2.3% 1.9% 1.4% 0.9% 0.9% 0.4% 10.2% 1.9% 100% 43%

Source: REN21 Renewables 2012 Global Status Report, p100 www.ren21.net/RENActivities/Publications/GlobalStatusReport/;eia.g ov/biofuels/biodiesel/production; EIA (for USA)APAC (August 2012)

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ETHANOL – alternative fuel to petrol? Changing demand patterns for petrol in Australia 2006-07 to 2011-12 (APS)

25,000

20,000

ML

15,000

10,000

5,000

• Pattern of petrol consumption in Australia – remaining static to slight decline – unlike diesel • Note rapid decline in RULP; increase in premium grade petrol • Penetration of ethanol blended fuels in the petrol pool – mostly as E10. Very small amount of E85 • Note decline of ethanol blend fuel in 2011-12 – first time since 2006

0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total petrol demand

Reg Unleaded

Prem + Proprietry Petrol

Ethanol Blend

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ETHANOL blended petrol – where is the demand? RULP and blend ethanol sales, by state, 2006 -07 to 2011-12 (APS)

18,000

16,000 14,000 12,000 ML

10,000 8,000

6,000 4,000 2,000 0 NSW

VIC

QLD

RULP

SA

WA

TAS

NT

Aust

• Most demand in eastern states headed up by NSW • NSW 6% mandate impact – currently at 4% • Qld suspended mandate in 2010 – short supplies – currently at 1.4% • Note decline in Qld and Victoria – no mandate, ‘free’ demand

Blended ethanol

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ETHANOL– future production capacity and demand

• Three ethanol plants in Australia –combined capacity 450 ML pa • Plants were at operating capacity until early 2011 - now surplus capacity • Most new ethanol expansion will come from existing plants • Some new expansion plans look firm. But historically, very difficult for new projects to get up • Now sufficient capacity to meet ‘effective’ NSW mandate (say 5%) and possible Qld 5% mandate if introduced • Ethanol Producers Grant – excise equivalent

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BIODIESEL – alternative fuel – blended with mineral diesel • The growth in demand for diesel has been very significant • Demand in 2011-12 amounted 21.6 GL • Note states with greatest growth • Blends – B5 = 5% biodiesel = Australian Diesel Standard (no labelling) • B20 = 20% biodiesel, Standard under review, temporarily acceptable to June 2014

Automotive diesel consumption by State - 2007-08 to 2011-12

25,000

20,000

ML

15,000

10,000

5,000

0 NSW 2007-08

VIC 2008-09

QLD

SA

WA

2009-10

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TAS

2010-11

NT

Aust

2011-12

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BIODIESEL– overcapacity, weak demand, high feedstock costs, corporate rationalisation • • • • • •

Biodiesel sector has been in over capacity state since 2006 Several shutdowns, demolitions Domestic production about 25% of operating capacity Imports increasing – 2011-12 = 37% of total demand Limited and high cost first generation feedstocks in Australia Importers and producers subsidy EGCF (38.1 cpl)

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Consumer Growth of E10 outlets in Australia by State - 2009 to 2012 (APAC)

1200

1000

APAC Biofuel Consultants

Number of E10 outlets

800

• Ethanol sold as blend with petrol – E10, some E85 • Biodiesel sold as blend with diesel- B5=Diesel Standard

600

400

200

0 Total - August Total- August Total- August 2009 2010 2011

NSW/ ACT

QLD

VIC

SA/NT

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TAS

Total August 2012

WA

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Government policies supporting first generation biofuels Federal • Carbon Price in July 2012 gave certain consumers (e.g. mining) of diesel higher fuel tax credit e.g. off-road diesel consumers gain 1.2 cents per litre if they consumed a blend with 20% biodiesel (called B20). • Ethanol and biodiesel were made exempt from the Alternative Fuels Excise Tax which commenced in late 2011 (originally scheduled to phase in by 2015) • Grants ethanol and biodiesel producers (and importers in the case of biodiesel) continue to receive fuel excise equivalent grants of 38.143 cpl. - originally scheduled to close on 30 June 2011 or phase out by 2015, now been extended indefinitely. (est. 2011-12 $147 m) State • NSW reaffirmed its 6% ethanol mandate in October 2011. NSW has the largest concentration of sales of ethanol blended petrol. Was to introduce 10% on RULP but dropped in 2012. • NSW has a 2% biodiesel mandate in place. This is being met partly from regional production and partly from imports from interstate and overseas producers. • Queensland – no mandate – yet!

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New generation feedstock development • Australia remains active in the development of advanced feedstocks for biofuels in particular with algae and cellulosic conversions. • A recent major study identified the fast pyrolysis and supercritical water processes as potentially the most economic for cellulosic conversions. • Recent developments include: – cellulosic based feedstocks such as crop residues, sugar bagasse, farm forestry crops for the production of crude oil and ethanol – alternative sugar crops such as agave tequilana - extremely water efficient desert plant – for ethanol. – alternative oil crops – pongamia and barassica juncea - for biodiesel – algae maybe the most promising among all the alternatives. There are a number of emerging interests in Australia that are quickly moving into the demonstration phase of algae technology.

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Aviation and biofuels • The global aviation - aiming to achieve carbon neutral growth from 2020 • In Australia, Sustainable Aviation Fuel Road Map (‘Road Map’) in May 2011. CSIRO has calculated that by using a variety of existing new nonfood biomass resources and sustainable cultivation practices, there will be sufficient biomass to support almost half of the aviation fuel needs to Australia and New Zealand by 2020 • Qantas flight – Sydney to Adelaide in April 2012 using biojet. Increasing number of overseas airlines trialling biojet • Alliances: – Virgin/Licella – Qantas/Shell and Solena – Virgin/Future Farm Industries CRC (FFI CRC)/Renewable Oil Corporation – Boeing and CSIRO – The Australian Initiative for Sustainable Aviation Fuels (AISAF) inaugurated in August 2012 – Queensland Sustainable Aviation Fuel Initiative (QSAFI)

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Summary • Biofuels – slowed market penetration – east coast mainly and ethanol driven. • Currently about 1% of Australian petrol and diesel • Biodiesel increasing – import dependent however • Govt. policy settled down – but expected to see more growth, especially in ethanol. Carbon price showing positive impact. • States can be demand creators – mandates and promotions • Australia leading in advanced biofuels • Aviation – watch this space!

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