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. Last Updated: 07/27/2016

Firms Seek New Bioethanol Sources

Russian companies, frustrated by slow legal reforms, have abandoned costly projects to produce bioethanol from grain and are instead trying to make the environmentally friendly fuel component from other sources.

One Siberian plant has started production, and two projects are under development, a far cry from the dozen projects mooted when oil prices were rising last year, industry officials and lawmakers said.

"We are tired of fighting," Alex Ablayev, president of the Russian Biofuels Association, said on the sidelines of a bioethanol conference Wednesday.

"We have found a compromise, and now we are talking more about producing fuel from timber waste and straw," he said. "But I still believe that until we have created a market for grain-based bioethanol progress will be slow."

Alexei Petrykin, a sector expert with the Federation Council, told the conference that it was difficult to overcome a widespread conviction in Russia that output of bioethanol from grain would lead to a food crisis.

This belief, he argued, is not true. "There is an excess of feed grain in Russia, and stable demand will lead to an increase in grain production."

The current tax system was an obstacle to the development of new projects, Petrykin said. Russia applies an excise tax of 27.7 rubles ($0.83) per kilogram of gasoline containing 1.5 percent of ethanol, which rises to 191 rubles ($5.72) if the ethanol content rises to 10 percent.

This makes production of bioethanol unprofitable. To change this, a group of lawmakers prepared a new law in May 2008, but parliament has yet to start dealing with it, Petrykin said.

Some projects, however, are progressing. The market leader is the Titan group, which launched the Biocomplex project in the Omsk region.

By producing gasoline with a bioethanol-based component, Ethil Tertiary Butyl Ether, and exporting the gasoline itself, the company avoids payment of the excise tax, project founder Mikhail Sutyaginsky said.

Biocomplex, which plans to produce 150,000 tons of bioethanol per year in its first stage, is a replica of a similar project run by the Sutyaginsky family across the border in Kazakhstan.

The Kazakh complex produces bioethanol as a byproduct of other commodities. It makes gluten used to improve the quality of flour, bran and yeast to make animal feed, which in turn is used by poultry and pig-breeding farms in the complex.

Another Russian project envisions production of 250,000 tons a year of bioethanol in Tambov region, said Dmitry Arsenyev, CEO of NPK Ekologia, the engineering firm drafting the project.

"It will use local grain and molasses remaining at local sugar beet refineries as raw materials," Arsenyev said.

NPK Ekologia has also been charged with drafting a project in Nevinnomyssk, a town in the Stavropol region. The plant would be located next to a local utility and would have design capacity of 200,000 tons, Arsenyev said.