Christine Forster, 11 December 2015

A decision by the Queensland government to mandate the use of ethanol in regular unleaded gasoline sold in the state may provide a small uptick in demand for the blendstock. But it will not put a dent in a forecast crash in Australia’s overall use of biofuels, mainly expected due to falling biodiesel imports.

The parliament of Queensland, in Australia’s northeast, passed legislation on December 1 mandating that ethanol make up 3% of regular gasoline sales in the state from July 1, 2017, rising to 4% on July 1, 2018. The Liquid Fuel Supply (Ethanol and Other Biofuels Mandate) Amendment Act 2015 also requires biodiesel and renewable diesel to make up 0.5% of total diesel sales in Queensland from mid-2017.

The ethanol mandate goes further than the 2% proposed under the bill which went to parliament, but the implementation time frame has been delayed by a year to enable consumers and fuel retailers time to prepare for the change. The government is also currently conducting public consultation over options to increase the mandates going forward.

“In practical terms, the mandate will require E10 to make up 30% of regular petrol sales in Queensland in 2017,” said the state’s Minister for Energy and Water Supply Mark Bailey.

Queensland is currently Australia’s third-largest gasoline market by state, with total sales of 3,852,481 kiloliters in the year to June 30, 2015, according to figures from the Office of the Chief Economist in the federal Department of Industry, Innovation and Science. Sales of regular unleaded gasoline in the state were 2,509,598 kl, with sales of ethanol-blended gasoline, or E10, recorded at 376,887 kl.

Based on the government’s figures and assuming consumption remains steady, Queensland’s demand for fuel grade ethanol would rise by around 75,000 kl when the mandate is implemented in 2017, and again to 100,000 kl in 2018.

Queensland currently has two ethanol plants, one operated by United Petroleum at Dalby and a smaller facility operated by Wilmar at Sarina. Dalby and Sarina have nameplate capacities of 90,000 kl/year and 60,000 kl/year respectively.

According to a recent report by APAC Biofuel Consultants, prepared for the Queensland Department of Energy and Water Supply, the two plants are operating at only around 85%, for a total of about 128,000 kl/year. In addition, APAC assumed United Petroleum was supplying around 40,000 kl/year of ethanol to its interstate operations, leaving Queensland’s total supply currently at around 88,000 kl/year and sufficient to meet the 3% mandate.

The national market is also supplied by Manildra Group’s 300,000 kl/year ethanol facility at Bomaderry in Queensland’s neighboring east coast state of New South Wales.

Queensland’s initial bio-based diesel mandate is also expected to be met by existing producers. Queensland’s consumption of diesel over the period from the 2011-2012 financial year to 2014-2015 was 6,500,000 kl, APAC estimated.

Installed biodiesel and hydrotreated vegetable oil capacity at nine plants in Australia reached 555,000 kl/year in 2009, the consultancy said. There are currently, however, only three biodiesel plants with nameplate capacity of about 110,000 kl/year operating across the country, and these are producing just 70,000 kl/year, APAC estimated.

In a recent report from APAC, the consultancy estimated Australia’s consumption of fuel grade ethanol in the 2014-2015 financial year at 246 ML, down 4.6% from the previous year and 23% lower than its peak of 319,000 kl in 2010-2011. Consumption of biodiesel was 164,000 kl and renewable diesel was 278,000 kl for the year, which in aggregate was up 445% since 2010-2011.

APAC estimated that Australia’s demand for biofuels rose 38% year on year in 2014-2015 to 688,000 kl, driven for the second year in a row by record imports of subsidized bio-based diesel.

But this high level of aggregate demand is set to be short-lived due to lackluster motorist enthusiasm for E10 gasoline and the mid-2015 introduction of excise on bio-based diesel imports, which has reduced Australia’s intake to a trickle, the consultancy said.

“We estimate biofuel demand in Australia next year will revert to pre-2010 levels of less than 360,000 kl,” APAC Joint Chief Executive Officer Mike Cochran said. “This will be mainly driven by the expected sharp decline in biodiesel imports, no significant growth in domestic biodiesel production and maybe a similar up take of ethanol-blended petrol in the lead up to the implementation of the Queensland mandate.”

New South Wales is the only other Australian state with an ethanol blending mandate, but demand for the biofuel is on the wane there as drivers switch away from E10 unleaded gasoline to other grades.

Under New South Wales’ Biofuels Act 2007, the state’s mandate for ethanol is 6% of all gasoline grades and the mandate for biodiesel is 2%. The Act has provisions for exemptions, however, and the targets have not yet been met, with ethanol currently comprising around 2.9-3% of all gasoline sales and 5% of regular unleaded sales, Cochran told Platts.

New South Wales is Australia’s largest consumer of gasoline, with total sales of 5,812,483 kl in 2014-2015, including 1,649,754 kl of regular unleaded and 1,727,201 kl of E10, the government’s figures showed. Victoria, which does not have any biofuels mandates, posted total gasoline sales in the last financial year of 4,772,701 kl, including 3,585,401 kl of regular unleaded and 89,865 kl of E10.

Sales of diesel in New South Wales in 2014-2015 totaled 4,736,568 kl, according to the government’s figures. Diesel sales in Queensland for the year were 6,312,523 kl.

Extracted in full from Platts.