Thursday, April 16, 2009

biofuelwatch - Russia Reins In Bioethanol Plans As Tax Reforms Drag

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Russia Reins In Bioethanol Plans As Tax Reforms Drag
Date: 16-Apr-09
Country: RUSSIA
Author: Aleksandras Budrys

MOSCOW - Russian companies, frustrated by slow legal reforms, have abandoned costly projects to produce bioethanol from grain and are instead trying to make the environmentally friendly fuel component from other sources.

One Siberian plant has started production and two projects are under development, a far cry from the dozen projects mooted when oil prices were rising to record highs in the middle of last year, industry officials and lawmakers said.

"We are tired of fighting," Alex Ablayev, president of the Russian Biofuels Association, told Reuters on the sidelines of a bioethanol conference on Wednesday.

"We have found a compromise and now we are talking more about producing fuel from timber waste and straw," he said. "But I still believe that, until we have created a market for grain-based bioethanol, progress will be slow."

Alexei Petrykin, a sector expert with the Federation Council upper parliament chamber, told the conference it was difficult to overcome a widespread conviction in Russia that output of bioethanol from grain would lead to a food crisis.

This belief, he argued, was not true. "There is an excess of feed grain in Russia and stable demand will lead to an increase in grain production."

The current tax system was an obstacle to the development of new projects, Petrykin said.
Russia applies an excise tax of 27.7 roubles ($0.83) per kg of gasoline containing 1.5 percent of ethanol, which rises to 191 roubles ($5.72) if the ethanol content rises to 10 percent.

This makes production of bioethanol unprofitable. To change this, a group of parliamentarians prepared a new law in May 2008 but parliament has yet to start dealing with it, Petrykin said.

SUCCESS STORIES
Some projects, however, are progressing. Russia's market leader is the Titan group, which has launched the Biocomplex project in the western Siberian region of Omsk.

By producing gasoline with a bioethanol-based component, Ethil Tertiary Butyl Ether (ETBE), and exporting the gasoline itself, the company avoids payment of the excise tax, project founder Mikhail Sutyaginsky told Reuters.

"In fact, we are producing this gasoline at this very moment," said Sutyaginsky, who is also a deputy in the State Duma lower parliament chamber.

Biocomplex, which plans to produce 150,000 tonnes of bioethanol per year in its first stage, is a replica of a similar project run by the Sutyaginsky family across the border in Kazakhstan.
The Kazakh complex produces bioethanol as a by-product of other commodities. It makes gluten used to improve the quality of flour, bran and yeast to make animal feed, which in turn is used by poultry and pig-breeding farms in the complex.

Another Russian project envisages production of 250,000 tonnes a year of bioethanol in the central region of Tambov, said Dmitry Arsenyev, chief executive of NPK Ekologia, the engineering company drafting the project.

"It is one of the projects launched by the former first deputy CEO of Gazprom, Alexander Ryazanov, and it will use local grain and molasses remaining at local sugar beet refineries as raw materials," Arsenyev told Reuters.

NPK Ekologia has also been charged with drafting a project in Nevinnomyssk, a town in the southern Russian region of Stavropol. The plant would be located next to a local utility and would have design capacity of 200,000 tonnes, Arsenyev said.

He said the founders of the projects were building up pools of investors to start building the plants.

(Editing by Robin Paxton)
© Thomson Reuters 2009 All rights reserved




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