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U. S. Biodiesel Market Presented December 4, 2006 BioFuels in the Energy Matrix – The Opportunity and the Challenge

U. S. Biodiesel Market Presented December 4, 2006 BioFuels in the Energy Matrix – The Opportunity and the Challenge Jess Hewitt Gulf Hydrocarbon National biodiesel marketing company Member National Biodiesel Board Biodiesel Terminals: Houston Texas Hammond Indiana

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U. S. Biodiesel Market Presented December 4, 2006 BioFuels in the Energy Matrix – The Opportunity and the Challenge

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  1. U. S. Biodiesel MarketPresented December 4, 2006BioFuels in the Energy Matrix – The Opportunity and the Challenge Jess Hewitt Gulf Hydrocarbon

  2. National biodiesel marketing company • Member National Biodiesel Board • Biodiesel Terminals: • Houston Texas • Hammond Indiana • Production Off Take Agreements for Biodiesel Producers

  3. Sales and Production

  4. 750,000 mt 950 m liters US Biodiesel Demand Biodiesel Tax Incentive Changes to EPACT Bioenergy Program 2 Million 500,000 Conversions: 1 mmt ~ 300 m gallons ; 1 gallon = 3.8 liters

  5. BQ-9000 Accredited Producers Production Locations (9/13/06) 86 Plants

  6. Type of Seller Both Retail & Bulk Distribution (227) Bulk Distribution (1365) Retail Outlets (489) Distribution Locations (May 06)

  7. No Window Plant Status Construction (65) Expansion (13) Biodiesel Plants Under Construction & Expansion (9/13/06)

  8. Industry Plant Size Industry Capacity 580 million gallons per year (1.9MMT) Avg Plant Size 6.7 million gallons per year (22,330MT) Conversions: 1 mt ~ 300 gallons; 1m gallons ~ 3,333 mt; 10m gal ~ 33,000 mt

  9. Size of Plants Under Construction & Expansion Construction Capacity 1.4 billion gallons per year (4.6mmt) Avg Plant Size 17.9 million gallons per year (56,660mt) Conversions: 1 mt ~ 300 gallons; 1m gallons ~ 3,333 mt; 10m gal ~ 33,000 mt

  10. Production Capacity by State (Preliminary as of 8/28/06) Conversions: 1 mmt ~ 300 m gallons; 1m gallons ~ 3,333 mt; 10m gal ~ 33,000 mt

  11. Production Capacity Trends • The industry is trending toward larger facilities • Plants capable of handling multiple feedstocks are becoming more common • Production capacity does not equal production for several reasons • Some facilities are just starting up • Some facilities choose to run less than 24/7 • Some facilities have not effectively debottlenecked their systems to maximize their output • Some facilities overestimate their capacity

  12. Industry Implications • If growth in production capacity is realized, it could have feedstock price implications in the short term. • New capacity is probably going to replace some existing capacity • Not all companies will survive

  13. Demand DriversPolicy and Energy Markets

  14. Reasons for Industry Growth • Federal Energy Policy • Strong Diesel Prices • State Energy Policy

  15. Federal Energy Policy • Ultra Low Sulfur Diesel (USLD) 15ppm • Phase in 2006 thru 2010 • Lubricity • Biodiesel Blender’s Tax Credit $1.00/gal • Renewable Fuels Standard • 7.5 m gallons 2012, ethanol/biodiesel • 1.5 credits for biodiesel

  16. What Does it Cost?

  17. US Crude Oil, Diesel Fuel and Biodiesel Spot Prices Sources: Energy Management Institute and The Energy Information Administration

  18. Biodiesel and Diesel Prices Sources: Energy Management Institute and The Energy Information Administration

  19. OEM Acceptance

  20. Increasing OEM Support • Diesel powered Jeep Grand Cherokee CRD to have B5 factory fill • Mercedes BlueTech • DaimlerChrysler approves B20 in 2007 Dodge Ram pickup’s used in fleets • GM working towards B20 • EMA approves a B20 specification

  21. Will biodiesel void my warranty? • The use of B20 and below will not void the warranty of any major US engine manufacturer • Position statements can be found at www.biodiesel.org • Caterpillar • Cummins • Detroit Diesel • International • John Deere • Case New Holland • Volkswagen

  22. Diesel Vehicles • J.D. Power estimates diesel vehicles will make up 7.5% of passenger cars by 2012 (up from 3% in 2004) • Highly fuel efficient • Cleaner and quieter

  23. Diesel Vehicles • Diesel is getting cleaner • New EPA regulations: • .07 grams of NOx per mile • All emissions drastically reduced • Ultra-low sulfur diesel fuel

  24. Biodiesel Lowers Emissions • Decreases EPA-targeted emissions • Virtually free of sulfur & aromatics • Soy B100 reduces lifecycle CO2 by 78%

  25. Emissions

  26. Environment • Biodegrades as fast as sugar • B20: helps diesel portion degrade twice as fast • Nontoxic

  27. Feedstock Supply

  28. Soybean oil, Palm Oil and Yellow Grease Prices Source: The Jacobsen Publishing Company

  29. USDA Soybean Oil Price and Ending Stock Projections Source: USDA Economic Research Service

  30. Feedstock Pricing Trends • Institutional investors have taken an interest in biodiesel production and helping to provide support for soybean oil prices • The switch to oil with lower trans fatty acid oils due to labeling laws could help bring down soybean oil prices • Animal slaughter numbers have been strong but biodiesel plants are not coming on stream fast enough to soak up any of the extra fat on the market.

  31. Jess Hewitt • Gulf Hydrocarbon • www.gulfhydrocarbon.com • Biodiesel 24/7 • Brazil-Texas Chamber of Commerce • Houstonian Hotel & Conference Center • Houston, Texas

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