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USGC Explores Potential Ethanol Demand in Chile and Argentina

Submitted by on August 6, 2018 – 5:26 pmNo Comment

(U.S. Grains Council/Ethanol Producer Magazine)  Increased global bioethanol use is only a well-constructed policy decision away in markets like Argentina and Chile. The U.S. Grains Council (USGC) traveled to both countries in June to investigate their existing ethanol markets and discover how new or improved ethanol policies could boost demand while opening the door to imports.

After participating in the Ethanol Summit of the Americas in Houston in October 2017 (an event sponsored by the Council and its domestic partners), another South American country, Bolivia, decided to dramatically boost its commitment to bioethanol by starting at E10 in January 2019 and rising to E25 by 2025. The Council decided to visit Argentina and Chile with the hope officials there would see the value of enacting similar policies but with substantially more gallons involved.

In Chile, inexperience using ethanol is hindering U.S. ethanol export opportunities. Government regulations do allow blending of ethanol into fuel between 2 and 5 percent. However, importers and domestic refiners have selected MTBE (methyl tertiary butyl ether)—a substance displaced by ethanol in the United States due to potential health effects in drinking water—as the preferred oxygenate based on a lack of knowledge of how to use ethanol and insufficient domestic feedstock production. As a result, Chile is the third largest user of MTBE in the region.

Argentina, in contrast, has both an existing ethanol policy and domestic ethanol industry to supply octane for the 2.4 billion gallons of gasoline consumed annually. The biofuels program, established in 2006, has encouraged the development of a domestic industry that uses both corn and sugarcane as feedstock.

The current E12 blend results in 278 million gallons of ethanol consumption annually, pulled equally from both corn and sugarcane via a government quota.

The sugarcane industry has been unable to fill its portion of the ethanol quota in months preceding the harvesting season when supplies of sugarcane are at their lowest (May-June). Despite goals to increase plant capacity by up to 20 percent, the domestic ethanol industry in Argentina also has geographical constraints that limit sugarcane production in the northern region of the country. These dynamics led to temporary ethanol imports of 1.3 million gallons (5 million liters) in the second quarter of 2018 to compensate for the deficit in local sugarcane-based ethanol production.

In contrast, the country’s corn-based ethanol industry—with five refineries—could increase production but is awaiting the government to signal support before increasing infrastructure investment.

Policy changes could come by 2021, including price liberalization for ethanol. Ethanol producers are in discussions with the government regarding whether to move to the Brazilian model of flex-fuel vehicles that can use pure E100 hydrous or to stay with anhydrous ethanol blended with gasoline at a rate not to exceed a 27 percent blend.  READ MORE

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