Argent Energy abandons New Zealand project

Web exclusive posted August 6, 2008 at 11:19 a.m. CST

London-based Argent Energy has abandoned its plans to build and operate a biodiesel facility in New Zealand.

Argent Energy currently operates the United Kingdom's first commercial-scale biodiesel production facility near Motherwell, Scotland.

The company recently completed a two-year feasibility study to determine whether or not to invest approximately $72 million into a biodiesel production project in New Zealand. Managing Director for Argent's New Zealand subsidiary, Dickon Posnett said the decision was reached not to proceed based on two major factors. He told Biodiesel Magazine that the current legislation favors ethanol by giving ethanol importers a break from the NZ42 cents per liter (approximately $1.20 per gallon) fuel excise duty. "Oil companies are being incentivized to import ethanol," Posnett said, adding that the excise duty relief is set to continue through 2012, which makes it "utterly uneconomic" for Argent Energy to continue with its project.

Posnett also pointed to the tax credit given for American biodiesel as a major cause for distortion in the European and New Zealand markets and said it has prevented serious investors from entering the New Zealand market. According to Posnett, that has led, ultimately, to greater imports from Brazil.

The proposed Argent facility was expected to use tallow as its primary feedstock. Although tallow is an abundant raw material in New Zealand, Posnett said that as long as the ethanol-based subsidy is in place, no company will build commercial-scale biodiesel production facilities in the country. Next month New Zealand lawmakers are expected to pass a biofuels bill which will require oil companies to blend certain percentages of biofuels beginning in October. However, Posnett said because of the current tax relief, oil companies will use as much ethanol as possible in order to claim the maximum amount of subsidy. "And ethanol-blended fuel is being sold at the same price as petrol," he said. "There are no biodiesel subsidies. The government is making a big mistake in not supporting a local industry from the outset. There are a number of contracts now in place for the importation of ethanol and infrastructure is being planned for the importation of biodiesel. Meanwhile, Argent is pulling out and there are no significant supply contracts for any of the smaller local tallow biodiesel payers."

Posnett said he knows of only one small biodiesel production facility in New Zealand, and that plant uses canola oil as its feedstock. The few pilot plants that are using tallow feedstock are not producing enough to convince the oil companies to sign contracts with them, he said, adding that Argent would still consider investing in a New Zealand project if the government begins to level the biofuel playing field. Until then the company will continue to seek out expansion possibilities throughout the United Kingdom and elsewhere.

"Argent Energy is not looking for a hand out," Posnett said. "But we find it difficult to invest where our competitors are awarded what amounts to penalty tries by the referee even before the game begins."