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June 27, 2019

Bio-fuels and our exports


June 27, 2019

Pakistan’s current account deficit has created many problems for the economy. The country’s major imports are from the oil sector. There is a misplaced notion that nothing can be done about reducing these imports.

Bio-fuels based on local agro-waste are a viable option and a competitive route. Not only can bio-fuels replace imports or lead to equivalent exports, they can also generate employment, increase farm incomes and revitalize rural life. Utilizing agro-waste would not compete with food supply, a risk that has often been put forth. Also, electrical vehicles can have a significant impact on the demand side. A strong case has been made in the following to create a market share of 30 percent bio-refining to make an impact of $4-5 billion towards improving the trade balance.

Pakistan has a population of more than 200 million and a large agricultural base. There is a great demand of all sorts of energy including transport fuels. An estimated $12-18 million of oil imports are there. Furnace oil imports have gone but have been replaced by LNG. On the other hand, there is a large variety of raw materials, agro-waste and municipal solid waste, which can be commercially utilized to replace these imports – at least partly. Pakistan is the 10th largest sugar producer and occasional exporter and importer. The sugar industry yields many materials which can be converted to fuel and energy. Already, ethanol is being produced ,which can be increased by 50 percent by entering into a Cellulosic processing field, without any need for further land or sugarcane.

In Pakistan, agro-waste (wheat, maize, cotton, rice husk, straw and stalks) alone is to the tune of 135 MTPA; assuming 50 percent collection and 20 percent conversion efficiency, 13 MTPA of bio-fuels can be produced. As against this, the annual demand of transport sector is 13 MTPA as well. One can consume it or export it and import an equal amount of transport fuel of gasoline and diesel. MSW is an extra 48 MTPA, which can also generate an equal amount. Advanced 2G bio-fuels can be produced out of it.

Although ethanol is an energy product, it is not being used in the country, but is being exported. In about 40 countries or more, 5-10 percent ethanol is added to gasoline to replace fossil content and also as an oxygenate to enhance RON levels(anti-knocking property enhancer) from RON82-87 to RON 92-95.These products are called E5 and E10, the numbers representing the ethanol content. E5 is almost a standard fuel in most developed and progressive developing countries.

There are two types of ethanol; one produced from sucrose obtained from sugar molasses and maize starch; this is called 1G-Bio-Ethanol.There is also 2G-Bio-Ethanol which is produced from cellulosic materials obtained from agro-waste and even MSW. 2G Ethanol production in a sugar refinery has the following advantages: 1) use of sugarcane and its byproducts; 2) use of raw materials already present in the production units offering a logistical advantage and cost saving; 3) increased ethanol production by 50 percent without additional land requirement of sugarcane cultivation; 4) production of bio-fuel during the off-season; and 5) reduction of carbon emissions.

In 2014, Brazilian company Raizen (JV of Shell Petroleum) installed a 2G Ethanol plant with a capacity of 42 million litres per year with a CAPEX of R$250 (US$62 million). Enzymes have been sourced from a famous Danish company Novozymes. Raizen plans to install seven more such plants by 2024, taking production to one billion litres per year.

The sugar industry is quite controversial. It has been largely established under government licensing and capital credit facilitation to the elite and the powerful. The CCP(Competition Commission of Pakistan) has recommended reducing the land availability for sugarcane cultivation since it consumes water that we don’t have. There is competition for land for other more competitive and value-added crops like cotton. The powerful sugar plant owners do not pay the right prices and at the right time; agricultural productivity of land under sugarcane production is low and the sucrose content is low also. Land owners and sugar plant owners are held responsible for not providing farmers services and advice; and there is price collusion and hoarding.

However, there is a positive side as well; there is a foreign exchange saving to the tune of $2.5 billion, which otherwise would have increased our import bill as is happening in the case of other food items such as cooking oil and tea. The sugar industry can improve its image by investing in high technology and efficiency, decreasing the cost of production and improving resource efficiency; 2G Ethanol is one such route. The Capex requirement, as per data provided earlier, is not so high. There is already ethanol production of 600,000 MTPA out of 16 distilleries. It would be saving more foreign exchange if it is utilized locally. It could be increased by 50 percent without any increase in land use. Increased energy availability in the offseason will be quite a welcome addition.

There are other materials and wastes that are being recycled into bio-ethanol. Agricultural and even municipal solid waste is being converted to bio-ethanol. In Edmonton Alberta, a MSW to bio-ethanol facility has been set up by ERKEM in 2014. The facility processes 100,000 tons per year of MSW into 38 Million litres of bio-ethanol. It is a two-stage process; the first stage produces SynGas and in the second stage the SynGas is converted to bio-ethanol. Alternatively, one could truncate the process partly or wholly and only produce SynGas and convert it to SNG and pump it to the gas grid.

In India, a pilot plant and later larger demonstration plant (capacity of 10 tonnes per day of raw material) has been built which processes agricultural waste like rice or wheat straw, cotton stalk, bamboo and wooden chips. There are plans to upgrade it to a commercial scale facility.

Pakistan is among the top ten sugar-producing countries of the world. There is a need for the sugar industry and the government to promote and facilitate investment in these areas. The government should develop G-to-G cooperation with the Brazilian government so that private-sector cooperation is facilitated. Similarly self-financing projects could be promoted to process agro waste and MSW, cleaning the urban and rural areas and producing bio-ethanol or biogas.

Pakistan has a large pool of scientists in the bio-technology area and a number of research institutions that can play a major role in this respect. They should be encouraged and tasked to work in this area.

The writer is a former member of the Energy Planning Commission and

author of ‘Pakistan’s EnergyIssues: Success and Challenges’.

Email: [email protected]