The Age of Upstream
by Jim Lane (Biofuels Digest) …You see it everywhere. Oil producers are happy, refiners are squeezed. Corn, soy and sugar prices are at historic highs, ethanol and biodiesel producers are squeezed. Iron prices are high, steel producers are challenged. Utilities are doing well, manufacturers dependent on electricity are in the tank.
We’ve heard about the Information Revolution and Global Warming, and the Green Revolution too - but really what we are entering, if someone doesn’t do something about it soon, is the Age of Upstream.
…What is causing the havoc for ethanol producers in the midstream? Prices for commodity feedstocks that rise faster than prices for commodity fuels.
We saw it in the price of fryer oil grease. At one time, waste oils could be had for negative cost. Restaurants were paying companies to dispose of it. Then it was available for free. Now it runs north of 30 cents per pound, or nearly $2.50 per gallon to the biodiesel producer.
…First, we see a divergence in investment strategies. We see many companies like BP, Shell or ExxonMobil invested in the upstream. Shell and BP are now owners of vast sugarcane plantations as well as ethanol production. ExxonMobil – along with Shell and BP, have been exploring algae as a feedstock. Flint Hills Resources has invested in jatropha via SG Biofuels, and BP has been investing in miscanthus via Mendel.
Then there are the midstream players. Take, for example, Valero’s interest in Mascoma or Diamond Green Diesel – both about everything except the feedstock, which is supplied by other partners. Or Petronas’ interest in LanzaTech – again, a company that supplies everything except the feedstock. In Italy this week, Eni has just announced the conversion of its Venice refinery from fossil fuels to biofuels, using the Ecofining process to produce renewable diesel.
What’s a stronger model? … READ MORE