Itochu Corporation to Invest in PetroVietnam's Ethanol Fuel Development Plan

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Researched by Industrial Info Resources (Sugar Land, Texas)--Diversified trading company Itochu Corporation (TYO:8001) (Tokyo, Japan) recently announced plans to invest in the 49:51 joint venture company Orient Bio-Fuels Company Limited (OBF) (Dong Xoai Town, Vietnam), which was established in May 2009 between Itochu and PetroVietnam Oil Corporation (PV Oil) (Ho Chi Minh City, Vietnam), a subsidiary of the Vietnam National Oil and Gas Group (PetroVietnam) (Hanoi, Vietnam). OBF plans to set up a 100,000-kiloliter-per year (or 629,000 barrels) bio-ethanol fuel production facility in the Binh Phuoc province of southern Vietnam.

Construction on the $121 million project has commenced, and commercial operations are expected to begin in April 2012. The plant will be fueled by cassava, which is a commonly cultivated crop in the region. When the project begins operations, the ethanol fuel from the facility will be sold and marketed by PV Oil at its service stations across Vietnam.

PV Oil has finalized plans to set up three bio-ethanol plants over the next two years that will have a combined production capacity of 300,000 kiloliters per year. Itochu will participate in the development of one of these three projects. Itochu's interest in participating in the project is driven by its successful role in implementing similar projects in the Philippines and Brazil.

Vietnam's Ministry of Industry and Trade is developing a system whereby ethanol will be blended with the petrol and diesel sold in the country. In the trial phase initiated in August 2010, gasoline mixed with 5% ethanol (E5) is being sold across five Vietnamese cities. The ministry plans to introduce gasoline mixed with 10% ethanol (E10) by 2015. Vietnam has a huge population of about 86 million, and with the potential demand for fuel expected to continuously rise, the market for ethanol-blended gasoline is expected to be massive.

The Vietnamese government is offering incentives for the utilization and production of bio-fuels. The nation's bio-fuel development plan involves meeting 5% of the nation's petrol and diesel demand with ethanol fuel by 2015. The vision for the plan extends up to 2025. Other bio-fuel sources being explored and utilized are coconut, flax, jatropha, peanut, sesame, and animal products such as catfish fat.

Vietnam's first ethanol plant was set up by Dong Xanh JSC in August 2010. The 100,000-ton-per-year cassava-based plant is already operating at 70% to 80% of its design capacity. The cassava is largely being sourced from the Quang Nam and Binh Dinh provinces. Several other projects are under way across the nation and by the end of 2011, Vietnam is expected to have five operating bio-fuel plants with a combined production capacity of 365,000 tons per year of ethanol. After being blended with gasoline, that would translate to 7.3 million tons of E5 petrol. The nation's legal framework for the production and trading of bio-fuel is almost complete.

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