Biofuel majors: Will exports be profitable enough?

Mergers in the booming palm oil sector are creating the biofuel industry’s own ‘Big Oil’ companies, but vertical integration and economies of scale may not be enough to make exports profitable or to replace crude.

Producers of crops such as rapeseed, soya and palm oil have seen soaring prices. A new outlet for supplies looked profitable as oil prices climbed over US$70 a barrel this year.

But most refining of biofuels has been done by small independent firms that risk being caught between rising feedstock costs and an oil price downturn.
“Consolidating assets would not make much difference in reducing costs, unless they can increase supply – the bottleneck is still on available landmass that can produce feedstocks,” said Ibnu Bramono, analyst at consultancy FACTS Global Energy.

Business Times