Hunan Rivers turning waste oil into biodiesel

BEIJING (Reuters) - China is capitalizing on humble waste oil from restaurants to spur its biodiesel industry amid spiraling global crude oil prices and a domestic diesel shortage.

But the plants have problems collecting enough waste oil to support their expansion, while prices are also soaring, forcing companies to turn abroad for other sources of feedstock.

"Raw material supplies are the biggest challenge for us," said Liu Jianbo, chairman of Hunan Rivers Bioengineering Co. Ltd, a company cashing in on the recent biofuels frenzy.

"You never need to worry about the market, you can always sell what you can produce," Liu told Reuters in an interview for the Reuters Global Agriculture and Biofuel Summit.

Although China has 100 or more biodiesel plants, Hunan Rivers' expansion is one of three which will get subsidised government loans as part of a drive to use non-food raw materials to produce biofuels and reduce the country's dependence on imported crude.

Beijing subsidizes the country's four ethanol plants and planting of crops for biofuels, but has not subsidised biodiesel plants.

China aims to use 200,000 tonnes of biodiesel by 2010 and 2 million tonnes by 2020.

Hunan Rivers' largest shareholder is a real-estate developer from the booming coastal province of Fujian, where biodiesel plants have sprouted to process old oil from restaurants famous for seafood.

The company plans to spend 80 million yuan ($11.02 million) to add 100,000 tonnes of capacity by 2009 despite poor margins, said Liu, in an interview in a laboratory of Beijing's prestigious Tsinghua University where his company will set up a biorefinery research centre.

The company produces 20,000 tonnes a year now, and it aims to expand some day to 300,000 tonnes, he added.

Its cooperation with the university aims to reduce costs by using various raw materials, as well as studying downstream products.

China's active biodiesel plants are all using waste cooking oil, the lowest-cost raw material after the price of edible oils, including palm oil, soared to record highs in 2007.

Hunan Rivers is in talks with local partners in Vietnam and Cambodia to grow jatropha, a woody plant that is promising for biodiesel. It plans to expand its jatropha acreage in Indonesia by four times to 200,000 hectares by the time the first phase of its expansion is operating.

The company board has set aside several hundred million yuan for expansion and overseas planting, said Liu.

UNPOPULAR BIODIESEL

China has not mandated the use of biodiesel in cars and it has not published standards for blending it into fossil fuel.  Continued...