Spanish Investors Plan New Ethanol Plant for 2009

MADRID - A group of Spanish investors is building a new bioethanol plant in the western region of Extremadura that should be producing fuel from maize in 2009, a director of the company behind the project said on Wednesday.

Alcoholes Biocarburantes de Extremadura (Albiex) has already started work on the site near Badajoz and expects to spend 42 million euros (US$59 million) on the plant in the next two years.

It will produce 110 million litres a year of bioethanol and 87 million kg of grain byproduct that can be used for animal feed.

Director Juan Gargallo said Albiex was not deterred by news Spain's biggest existing bioethanol plant suspended production last weekend, citing high grain prices.

"This project has been two years in the works and you have to take a medium to long-term view," he told Reuters in a telephone interview. "Obviously the cost of grain is high, but we think this is a temporary situation."

The investors expect the introduction of mandatory blending of biofuels in Spain to spur demand for bioethanol in the next few years, and say ethanol prices should soon move more closely in line with oil prices.

EU governments are pushing the use of grain-based bioethanol and oilseed-based biodiesel in transport fuel as a means of reducing carbon dioxide (CO2) emissions, because the plants from which they are made absorb CO2 as they grow.

However, as well as rising grain and food costs there is now growing concern about deforestation in the tropical countries that produce soy and palm oil. Industry sources say a proportion of the dozens of plants now planned in Spain and other European countries may yet be cancelled.

Story Date: 27/9/2007

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© Reuters News Service 2007

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