The Future of Biodiesel – Will it Be Sustainable?

POC Conference, March 10th-12th 2009

Developed ByFrost & Sullivan Consulting Team

Frost & Sullivanwww.frost.com

The Future of Biodiesel – Will it Be Sustainable?

Price Outlook for 2009

212th March 2007, © Frost & Sullivan

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312th March 2007, © Frost & Sullivan

Frost & Sullivan expertise in biofuels : we provide strategic advice over the whole palm to biofuels value chain

• Technology Analysis Biodiesel Market

• European Biodiesel Market

• Asian Biodiesel Market

• US Biodiesel Market

• Brazilian Biofuels Market

• Several Due Diligence Projects for Investors

• Market Assessment and Strategy for Players

• Business Planning and Fund Raising

• Information Memorandum for Several Players

• Feedstock and Off-take Sourcing

•Reports •Consulting

4Confidential to Frost & Sullivan

….. What we said last year at the POC (Feb. 2008)

We could get to 4000 RM quicker than we think

Written 5 days prior to POC 2008


….. What we said last year at the POC (Feb. 2008)

4500 RM is now not out of reach at this rate

Written 1 day prior to POC 2008


….. What we have been saying for the last 2-3 years

Same as internet lifecycle!

Infancy Boom Bust Reality


2007, early 2008 : lessons from the past – we will see some or all of this again, 2007 was just a warning

High Crude Oil Price Bad Weather

Commodity Price Shift Biofuels

Extra Demand

Subprime

HIGH PRICES!


Indeed palm prices are high due to the soy situation in South America at the moment – crops are now more interlinked

Frost & Sullivan estimates

1

?

• PriceIncrease


Sustainability issue....

Q. Are Biofuels therefore sustainable, or can we expect more of this?



A. Yes, but …

They will only be part of the mix for fuels until cellulosic kicks in, or non-food crops in the case of biodiesel,

They will be prone to swings in profitability (“swing market”),

They are a financial game where hedging is of utmost importance,

It will thus be a game played by the big boys, esp, with plantations

The big suppliers will push the product onto the market – it is supply led rather than demand led, until proper legislation is put into place



This is still a market that needs:

Low feed stock prices,

Government mandates and subsidies,

High crude oil prices.

And all 3 need to ideally happen at the right time…..


Profitability assessment : We can thus expect a lot of volatility in the market in line with crude oil!


Profitability assessment : causing wild swing

Source : FC Stone


Biodiesel production is not the most profitable part of the value chain

Feedstock

Refining

Biodiesel Logistics Distribution

Blending/Retail *

Relative Profitability

• *With Rebate• Refining Traditionally Tough Business

+ve

-ve

Mills

• The value chain is unbalanced and typical of the chemical industry. To be successful one needs to piece value chain together, and work with partners


So why such an interest still in biodiesel

“It is a political market from a Government perspective, and for plantation companies it is a great way to keep palm oil prices high”.


Market will continue to look for ways to grow especially bioethanol – energy security/ politics will be a key reason behind this

Frost & Sullivan estimates

Millions of Litres

BIOETHANOL

120

40

20

60

120

BIODIESEL

2000

2000 2020 2040

20202010


…whether this model is sustainable over the mid to long term we will see.

Growing population

Crops Competing for Land

Energy needs

Water stress

1 2

3 4


Thank you

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