Why Latin America is the Middle East of Biofuel

(Lat Am Investor) ... However, as mining experts reveal elsewhere in this report, copper supply will be unable to replace every existing internal combustion engine with an EV by 2050. ... That means biofuels will also play an important role. Latin America is already the world’s largest biofuel producer and, more importantly, it has ample room to increase production. A UN report found that thanks to abundant freshwater and vast stretches of unused farmland, Latin America’s has 42% of the world’s potential increase in agricultural production.

When Brazil’s largest biofuel producer, ECB Group, starts operations in Paraguay it will cement Latin America’s leading position in the industry. That’s because the Paraguayan project, Omega Green, is Latin America’s first ever second-generation biorefinery. Omega Green, which opens in 2024, will produce HVO, a type of biodiesel, and SPK, a bio aviation fuel. European oil majors, Shell and BP, have already signed offtake contracts for 90% of production, underscoring the demand for low carbon solutions to the transport problem. BP has pledged to be carbon neutral by 2050 and recognises that biofuels can help it get there. Countries with ambitious environmental targets, such as the UK, will eventually make the same decision. And it’s the technological advantages of second-generation biofuel – from its feedstock to its uses – that will help convince them.

By using an energy-intensive process of applying hydrogen to organic matter, second-generation biofuels can produce a wider range of fuels.

That flexibility – in both feedstock and use – makes biofuel an essential part of the fight against climate change, says Erasmo Battistella, CEO of ECB Group.

“For us to sign the agreements with BP and Shell we had to certify the environmental impact of everything from planting the raw material to how the final product would be consumed.” That’s why “our pongamia is being produced in the vast, barren Chaco region of Paraguay. This is not land that has been deforested for our production, but farming land that we are reforesting for our project.” Indeed, Omega Green has already announced that one-third of its feedstock will be coming from Pongamia, a tree that doesn’t require fertilizer, lives for 100 years and has a low carbon density. “The fuel you produce actually has a negative carbon density score. Imagine that – you are supplying airlines with a fuel that actually sequesters more CO2 than it produces.”

Indeed, Battistella feels that biofuel is subject to far more environmental scrutiny than EVs. “The supply chains for a lot of the metals used in electric cars are not very clean, with child labour involved in mining some of the metals. The process for making batteries can also have a harmful environmental impact.”

“Pongamia is so productive that just 120,000 hectares will produce enough feedstock for 1/3^rd of our needs. With 400,000 hectares it could cover our entire production. That might sound like a lot of land to someone in London but the Chaco region has 24 million hectares.”

“Even though Brazil is the leader in Latin American biofuels, we also see widespread consumption and production elsewhere in the region. Colombia, Paraguay, Uruguay, Argentina and Peru are all using and making biodiesel and ethanol. Latin America could increase biofuel production tenfold just by applying new technology and planting more feedstock.”

Biofuel’s advantages in cities make it a perfect solution for Latin America, which is the most urbanised region in the planet. Moreover, biofuel doesn’t just replace oil in the petrol stations. By-products, such as bio naphtha, can be used as feedstocks to make green plastic.

Ultimately the energy transition is such an ambitious target that countries will have to use all of the tools at their disposal. Latin America’s natural endowment mean that it can increase its biofuel production exponentially, without harming the environment or food supplies. Meanwhile, biofuel’s competitive advantages are well-suited to the region’s needs. Omega Green may be the first second-generation biofuels plant in Latin America but it won’t be the last. It is paving the way for a biofuel boom that will help clean the region’s transport sector. READ MORE