Nippon Oil hopes to slash domestic biofuel costs

By Ikuko kao - Reuters Summit

TOKYO (Reuters) - Japan's top oil refiner Nippon Oil Corp. (5001.T: Quote, Profile, Research, Stock Buzz) hopes to more than halve domestic ethanol production costs over the next ten years through research into biomass ethanol, a senior company official said on Tuesday.

Japan's move to introduce ethyl tertiary butyl ether (ETBE), a gasoline additive made from ethanol, this year doesn't make business sense at current costs, Ikutoshi Matsumura, a director and senior vice president of Nippon Oil, told Reuters.

The country plans to start selling ETBE-blended gasoline from April, but prices of sugar and corn, the normal sources of ethanol, have been rising sharply.

"Even though crude oil prices are relatively high at $50, $60 or $70 (a barrel), biofuels do not make economic sense for companies like us due to recent rises in sugar and other grain prices," Matsumura said.

The industry needs sizable new projects, dedicated to produce ethanol for transportation fuel, to bring down ethanol prices to push long-term efforts to boost biofuel use. It also has to stop shifting grains from food, he said.

"We want to launch a big project by the end of this year, jointly with the government, universities and Southeast Asian countries. Ethanol prices will not fall without big projects."

The project aims to develop plants able to grow quickly under harsh conditions to cut costs to produce and import ethanol to Japan to 50 yen ($0.415) per liter, Matsumura said.

That compares with current domestically produced ethanol prices at 100-200 yen per liter, while Japanese retail gasoline prices are about 130 yen per liter now ($4 a gallon).  Continued...