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Biofuel plant to be built in Tambov Region

An in-depth look at the Russian press, March 12.
RIA Novosti
Vedomosti

The former deputy chairman of the Gazprom board, Alexander Ryazanov, has decided to build a biofuel plant for exporting fuel to Europe and the United States as it is unprofitable to sell biofuel in Russia. The cost of the project is 220 million euros.

Marat Ishmiyarov, director general of the Metasintez company which manages the project, told the Vedomosti paper that the company had already found a construction site for the plant and has prepared a feasibility study. The plant will be built in the village of Dmitrovka (Tambov Region), where the company has leased out a 23.5-hectare plot of land. The plant is to reach its annual projected capacity of 250,000 metric tons of biofuel by 2011. Investments in the project will amount to 220 million euros, of which 85% are to be borrowed from Russia's state-controlled trade bank Vnesheconombank (VEB).

The project is aimed at exports because the biofuel sales are unprofitable at the moment in Russia, Ishmiyarov said. The federal standard (GOST) permitting the production of alcohol-laced gasoline was endorsed in 2004 but bioethanol, which is a component of such fuels, is subject to the same excise duty as food alcohol, he said.

The company intends to export biofuels to Europe and the United States. Considering transportation costs, annual income from biofuel is projected at 202 million euros with around 12% of annual profits. This, however, will depend on the prices for raw materials, primarily wheat.

Russia has never produced biofuels before.

According to Dmitry Rylko, director of the Institute of the Agrarian Market Studies, this is a business of high risk: Russia will have to compete with Brazil, which has cheap sugar cane and later with Ukraine, which plans to produce biofuels from maize.

However, if grain prices reach $200 per one metric ton and oil prices $100 per barrel, biofuel production will be profitable in Russia, said Alexei Ablayev, director of the National Biofuel Association.

Kommersant

Date:  12.03.2008

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