Ethanol (C2H5OH an alcohol) can be used for a variety of purposes, including use as a beverage, in industrial applications and as a fuel.

Ethanol can be produced in one of two ways; synthetically from petroleum or natural gas, or it can be obtained from the fermentation of starch and sugars and turned into a biofuel. On a global scale synthetic feedstocks play a minor role, less than 5 per cent of overall output is accounted for by synthetic feedstocks.

Synthetic alcohol production is concentrated in the hands of a few mostly multi- national companies such as Sasol, with operations in South Africa and Germany, SADAF of Saudi Arabia, a 50:50 joint venture between Shell of the United Kingdom (UK) and Netherlands, the Saudi Arabian Basic Industries Corporation, BP of the UK as well as Equistar in the United States (US).

The other 95 per cent of biofuels are derived from common agricultural plants and form a renewable energy source. Examples include; corn, sugarcane, soybeans, grapes, wheat and waste starch (cellulosic materials).

Cellulosic materials, including grasses, trees, and the straw from agricultural grain crops can also be converted to alcohol. While the process is more complex relative to processing sugars and grains it has the potential to revolutionise the commercial production of ethanol as it will allow a much greater amount of ethanol to be
produced from a given land area or biomass volume. This is seen as the next generation of technology but the process is only just being proven on commercial scale in a project in Canada.

Ethanol can be produced in two forms; hydrous (or hydrated) and anhydrous.

World ethanol production by type (million litres)
ethanol production
Source: Renewable Fuels Association (RFA)

INTERNATIONAL MARKETS

At present global ethanol production is 40 billion litres (equivalent to 400 x 100,000 tonne super tankers) and the sector has been growing rapidly:

The International Energy Agency (IEA) predicts ethanol alone has the potential to make up 10 per cent of world gasoline use by 2025 and 30 per cent in 2050. But compared to petroleum, the use of biofuels including ethanol for transport is still quite low in nearly every country running at less than 2 per cent of total consumption.

By far the largest producers and consumers of ethanol are the US and Brazil. Brazil mandated the compulsory use of ethanol in 1975 today it accounts for about 30 per cent of gasoline demand due. In the US, ethanol still represents less than 2 per cent of transport fuel but the overall size of the economy puts its total production at close to the level of Brazil.

WORLD TOP 20 INTERNATIONAL PRODUCTION COUNTRIES

World ethanol production, (million litres)
rthanol graph

Source: F.O. Licht, cited in Renewable Fuels Association, Homegrown for the Homeland: Industry Outlook, Washington.

INTERNATIONAL TRADE
Latin America is likely to continue to lead the world in fuel ethanol production. This may be explained by the high yields achieved from their sugarcane crops and the fact that many of these economies have low costs of production. Brazil will continue to be the world’s largest exporter of ethanol. In turn the EU, the US and China are set to become large markets importing ethanol for their transport sectors.

World production of ethanol is predicted to continue to grow vigorously at least up to
2012 as there are a large number of fuel ethanol projects in the pipeline.

The rate of growth in world trade will depend on several factors.

• Cost of feedstocks.
• Price of crude oil.
• Removal of trade restrictions on exports.

At the moment, the fact that fuel ethanol is being subsidized almost everywhere in the world provides a powerful justification for countries to impose high import tariffs in order to neutralize these subsidies.

If this notion forms the basis for future policy making there is every reason to be pessimistic about the prospective development of world trade. Without an open trading market fuel ethanol supplies are bound to be volatile resulting in fluctuating prices and consumer uncertainty.

Despite these controversies the outlook for fuel ethanol is bright and strong rates of growth in both production and trade can be expected for the next several years.

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