China to start biodiesel production?

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Forget gasoline prices, diesel prices are what drive China’s economy. Many methods of transportation rely on diesel in China; trucks, trains, boats etc all carry cargo or people around the PRC, but when prices of diesel rise, so does the price of practically every thing else.

 BEIJING, July 14 – China’s top planning body has approved construction of three state-owned biodiesel plants, with total annual capacity of 170,000 tonnes, using jatropha oil as feedstock.

PetroChina’s <0857.HK> Nanchong refinery in southwest Sichuan province would build a 60,000-tonne-a-year plant, while Sinopec Corp <0386.HK> would build one in Guizhou with annual capacity of 50,000 tonnes, the National Development and Reform Commission said.

Top Chinese offshore oil and gas producer CNOOC Ltd <0883.HK> would build a 60,000 tonne-a-year plant in the southern island province of Hainan, it said.

It did not give an investment amount or say when the plants would be completed. All three would use jatropha oil, vegetable oil produced from the jatropha scrub plant, as feedstock.

The commission said it hoped the three oil giants would share their experience in production, sales and management for future expansion of the industry.

The planning body did not say when the country would mandate the use of biodiesel in cars.

China’s active biodiesel plants are almost all private and use waste cooking oil as feedstock, including the country’s largest Gushan Environmental Energy Ltd <GU.N>, China Clean Energy Inc <CCGY.OB> and China Biodiesel International Holdings Co. Ltd <CBI.L>.

China Clean Energy Inc said it had halted biodiesel production since March, as Beijing-regulated diesel prices made the biofuel unprofitable after waste cooking oil prices surged 40 percent, in line with edible oils prices.

China has set a target to use 200,000 tonnes of biodiesel by 2010 and 2 million tonnes by 2020 to ease its dependence on imported crude.

China moving to avoid an addiction to foreign crude can only be a good thing, and driving down costs at the pump is also a great thing. We cant wait until the big marques, such as VW, introduce their ultra economical diesel range into the PRC to make the most of this biodiesel.