Southeast European countries are mulling over the prospects of biofuel. Could Bulgaria, Romania or Serbia become the next "Brazilian miracle"?
By Georgi Mitev-Shantek for Southeast European Times in Belgrade -- 21/08/06
With world-wide oil prices rising, some Balkan countries shown interest in biodiesel. [Getty Images]
With the world price of oil climbing, countries in Southeast Europe are pondering whether they can hope to reduce their dependence on this commodity. Domestic and foreign investors in Bulgaria, Romania and Serbia have embarked on the construction of plants for the production of alternative fuels.
Until recently, the possibility that biodiesel could be used as engine fuel was scoffed at in the Balkans. Not any more. Fuel derived from industrial plants, primarily rapeseed and sunflower, is turning into a significant investment. EU regulations stipulate that at least 2 per cent of diesel on the market this year has to be of plant origin, with an annual increase in market share of 0.75 per cent up to 2010.
Romanians were the first to embark on the battle for market share, both domestically and Europe-wide. The country now produces three million tonnes of biodiesel annually. Portuguese firm Martifer is building a biodiesel plant in Lehliu Gara in the county of Calarasi. The 47m-euro project will be completed by 2007. Significant capacity is planned, up to 100,000 tonnes of biodiesel annually -- a third of Romania’s consumption of environmentally-friendly fuel. There will be work for farmers as well, since that amount of fuel requires cultivation of 50,000 hectares of land.
The second project, worth 133m euros, is headed by MAN Ferrostaal, a division of Germany's MAN. It is building a facility in Atel and Loamnes, in Sibiu County, that by 2008 is expected to produce 400 tonnes of fuel daily from 120,000 hectares.
Finally, the Rompetrol oil company is also hoping for its share of the cake, with an annual production of 60,000 tonnes in 2007.
In neighboring Bulgaria, local fuel retailer EKO Petroleum announced that next year it will begin construction of a biodiesel plant in Vidin, in the northeastern part of the country. This facility is expected to cost around 60m euros. By 2008 it is expected to produce 150,000 tonnes of biodiesel annually, from 400,000 tonnes of rapeseed cultivated on 250,000 hectares of land.
Biofuel is derived from the rapeseed plant. [Getty Images]
Serbia, meanwhile, is planning to build its first factory next year. A domestic producer from the vegetable oil sector, Victoria Group from Sid in Vojvodina, is planning to build a plant worth 15m euros that will produce 100,000 tons of biodiesel annually from rapeseed, soya bean and sunflower. In fact, Serbia is not a stranger to biofuels. In 1995, during sanctions, the Agricultural Corporation of Belgrade Collective, which feeds the Serbian capital, produced some 10,000 tonnes of it. However, the Serbian state has yet to become involved.
The importance of the state contribution can be seen by the example of Brazil. During the first world oil crisis in 1973, when the price increased fourfold, the Brazilians took a long hard look. Given that at that time they imported 80 per cent of their fuel, as is the case today in the Balkans, they were spending half of their state revenue on this commodity. To escape this trap, the country embarked on a project of substituting gasoline with ethanol produced from sugarcane.
This year, thanks to that decision, Brazil will declare itself independent of oil imports. With a production of 3.6 billion gallons of ethanol and 600 million worth of exports, Brazil is covering half of the world market. On their domestic market seven out of ten cars use ethanol, which costs one third as much as gasoline. They are even introducing it to the airline industry.
At a time when world oil prices are once again a source of worry internationally, the Brazilian miracle is attracting more attention than ever. In the United States, where ethanol is produced from corn, plans are under way for increasing production. US research into boosting cost-effectiveness could be of considerable interest to Balkan countries, as production of ethanol from corn is 30 per cent more expensive than production from sugar beets.
The Balkans are certainly in a position to manufacture corn. Romania already produces around 10 million metric tonnes annually, Serbia 6.3 million tonnes, and Croatia 2.2 million tonnes. The possibilities for cultivation are far greater.
The Brazilian example demonstrates that governments must introduce the use of ethanol, as the first phase is always economically non-cost effective. Farmers need to receive incentives to grow corn, rapeseed and other raw materials. Governments must finance the expansion of the network of filling stations for the new fuel, and must require state institutions to use vehicles that use biodiesel or ethanol.
The next step is tax breaks for the use of "environmentally friendly" vehicles, followed by quotas for the use of biological fuels. What happens when all these come together? Volkwagen's Brazilian affiliate can answer that question. Last year it was host to more than 38 delegations from over a dozen countries, all interested in fuel-flex vehicles.