Required Report

- public distribution

Date: 8/20 /2008

GAIN Report Number: CO8014

CO8014



# Colombia

Bio

- Fuels

Annual

2008

Approved by:

R.Todd Drennan

U.S. Embassy

Prepared by:

Leonardo Pinzon

Report Highlights:

The Colombian government issu e d its policy framework for bio fuels production and

announced it wil l temporarily import 500,000 li ters of ethanol pe r day to blend with gasoline

to reduce its gasoline consumption and to ease gasoline price increases . Colombia will

expand ethanol product ion to 1.45 million li ters from sugarcane and will pro duce 550 million

li ters of bio diesel from palm oil by the end of 2009.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Bogota [CO1]

[CO] USDA Foreign Agricultural Service 

# GAIN Report

Global Agriculture Information Network

Templ ate Version 2.09GAIN Report

- CO8014 Page 2 of 6

UNCLASSIFIED USDA Foreign Agricultural Service Table of Contents

Executive Summary

................................ ................................ ............................. 3

Production

................................ ................................ ................................ .......... 3

Consumption

................................ ................................ ................................ ....... 5

Trade

................................ ................................ ................................ .................. 5

Stocks

................................ ................................ ................................ ................ 5

Policy

................................ ................................ ................................ ................. 6

Other Relevant Reports

................................ ................................ ....................... 6GAIN Report

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UNCLASSIFIED USDA Foreign Agricultural Service Executive Summary

Colombia ’s blend ing requirements are for 10 pe rcent ethanol for gasoline and 5 percent

bio diesel for diesel

. Current ethanol production made from sugarcane has reached 1.05

million liters per day, whi ch only covers 70 percent of total domestic needs. A n ew ethanol

production plant which also uses sugarcane will begin producing by 2009 and will add

400,000 li ters per day to Colombia’s production

. Pilot programs are underway to produce

ethanol from dif ferent feedstock s . Biodiesel started to be blend ed with fossil diesel in 2008

and it is expected to cover a mandatory 5 percent mix

, using a total of 500,000 litters per

day by the en d of

2009. All biodiesel in Colombia is produced from palm oil and the s ector

expects to be exporting biodiesel by the year 2010.

O n March 31, 2008, the Colombian government through the National Council for Socia l and

Economic Policy (CONPES) agreed on a policy framework for biodiesel production. The

document includes the c reation of a National Bio fuel s Comm ission headed by the Ministry of

A griculture, which will allow for t ax exemptions for feedstock s used in biofuels for fifteen

years . It will also guarantee a minimum price to bio fuel producers

, develop infrastructure for

biofuels transportation, and promote scientific research fo r alternative fuels

.

The Colombian Government announced that it will allow up to 500,000 li ters per day in

ethanol imports to cover l ocal blend needs and reduce increased gasoline prices

.

Pro duction

Currently

, Colombia produces ethanol from sugarcane and biodiesel from palm oil

. Sugar

m ills and palm oil producers h ave the most organized and developed producer associations

and scientific research centers. Ethanol production started in late 2 005 and palm oil bio fuel

production in late 2007. The regulation s established a blend at 10 percent ethanol with

gasoline and 5 percent biodiesel with fossil diesel. Current Ethanol production covers 70

percent of the local ne eds to comply with the mandate d blending and biodiesel would reach

the 5 percent only by 2009 if there are no delays in the facilities’ installation.

Ethanol: Of the 13 sugar mills in Colombia, 5 of these plants produce the total current

ethanol capacity with an output of 1.05 milli on li ters per day. These five plants are own ed by

sugar mill s situated in the Cauca river valley in southwestern Colombia. There is a new

project underway called the Riopaila sugar mill that will add 300 ,000 lit ers of production per

day. An extension is also underway at the Manuelita plant to expand production by 100,000

liters/day, which will bring Colombia’s ethanol output up to 1.45 million li ters per day by the

end of 2009.

Ethanol production/Consumption/trade (million liters)

2005 2006 2007 20 08*

Ethanol

Beginning stocks 0 5 15 10

Production 29 269 275 299

Imports 0 0 0 60

Total supply 29 274 2 90 3 5 9

Exports 0 0 0 0

Consumption 24 259 2 75 335

Ending stocks 5 15 1 5 24

* estimateGAIN Report

- CO8014 Page 4 of 6

UNCLASSIFIED USDA Foreign Agricultural Service Research and feasibility studies for new sources o f ethanol production with different feed

stocks, sugar beet s, yucca and others have been developed. However, there is concern that

there will not be enough supply of these feedstocks to maintain biodiesel production, and this

has created a barrier for inv estment in the ethanol sector. Small

- scale p ilot production p lants

operating with the government support have not yet entered into production.

Biodiesel: Biodiesel production started in November last year . The first plant reaches a

capacity of 50,000 a year, and belongs to palm oil producer Oleoflores . A n ew plant entered

into production i

n April 2008 that added 36,000 tons per year to the production capacity

. Two new plants will enter into operation during the second half of 2008 and two more plants

i n the beginning of 2009. By next year, Colombia will have a palm oil bio diesel pr oduction

capacity of 486,000 tons (550 million lit ers) per year

.

Recently updated projections from the Colombian Ministry of Energy estimate domestic

biodiesel demand at 83 9,000 li ters per day . Bio diesel in Colombia must comply with current

mandato ry requirement of 5 percent for bio diesel blend ing. According to this forecast,

coverage of

local needs will still be pending by the end of 2009, and the ir previous projection

fo r Colombia to be able to export biodiesel surpluses has been revised.

Bio diesel production/Consumption/trade in M illion s of L iters

2007 2008* 2009**

Biodiesel

Beginning stocks 0 1 7

Production 9 146 550

Imports 0 0 0

Total supply 9 147 557

Exports 0 0 0

Consumption 8 140 540

Ending stocks 1 7 17

*estimate **forecast

Pure ethanol in Colombia is produced with sugarcane and processing plants for ethanol are

located as part of the production complex of sugar and now ethanol production p lants. All

Colombian bio diesel is produced from palm oil.GAIN Report

- CO8014 Page 5 of 6

UNCLASSIFIED USDA Foreign Agricultural Service Quantity of Feedstock Use in biofuel Production in Metric Tons

2005 2006 2007 2008

Biodiesel

Vegetable Oil

Soybean oil

Rapeseed Oil

Palm oil 8,300 211,000

Coconut oil

Animal Fats

Recycled Vegetable oil

Other

Ethanol

Corn

Wheat

Sugarcane 386,000 3,586,667 3,666,667 3,986,667

Sugar beat

Rye

Molasses

Wood

Cassava/tubers

Consumption

Colombia has mandated a 10 percent ethanol blend with gasoline and 5 percent blend bio

diesel with fossil diesel. Currently, Colombian ethanol production covers only 70 percent of

the country ’s needs and Colombian bio diesel production fulfills only 20 percent of total

required mix. In addition, the bio diesel minimum blend requirement will increase to 10

percent by 2010. Current production doe s not cover the minimum requirements

.

Trade

o n May 27, the Colombian government announced that it will temporarily authorize the

national oil company ( ECOPETROL ) , to import 2,500 barrel s per day (500,000 li ters )

, which

will supply those regions w h ere the actua l local production capacity can no t be cover ed while

the local production expands to cover the local demand. ECOPETROL needs more adequate

storage facilities before imports may take place.

Stocks

Since minimum blend requirements are not being covered in Colombia

, stocks merely consist

of working inventories.GAIN Report

- CO8014 Page 6 of 6

UNCLASSIFIED USDA Foreign Agricultural Service Policy

O n March 31, 2008, t he Colombian National Council of Economic and So cial Policy (CONPES)

set the policy and guidelines for promoting th e sustainable production of bio fuels in

Colombia. The CONPES document has the abilit y to make all its recommendations

mandatory

.

The main recommendations were :

1. To preserve the tax deductions for the bio fuels agro

- industry for at least 15 more years.

2. By June 2008, the ministry of Energy will adjust t he price regulation scheme to en s ure

that a minimum price is paid to producers.

3. To create a c ommission w h ere the Ministry of Agriculture, Ministry of Energy, Ministry of

Agriculture, Ministry of Trade, Ministry of Environ ment and Social Protection and t he

National Planning Department wi ll all have voting rights . The ministry of Ag riculture will

be accountable to promote an d implement agreed upon policies

.

4. To define a cost reduction program for bio diesel production.

5. T o include infrastructure needs for the bio diesel market and the latest developments of

Colombian plans to expand infrastructure.

6. To include into the regional transporting plans those that will help producti on and

commercialization of bio diesel w here there are or will be bio diesel production plants.

7. To evaluate the feasibi lity of building pipelines for transporting bio fuels.

With this policy document , the bio fuel s sector has the policy framework that guarantees a

minimum price to p roducers, tax exemption to feed stocks growers , a minimum price to

producers and an overall co mmitment fro m the government to support bio fuel production

and development.

Other Relevant Reports

www.dnp.gov.co

www.minminas.gov.co

www.fedepalma.org