Bio fuel in Viet Nam

Bio-fuel potential

Materials for biofuel production are abundant in Vietnam. They include food energy crops such as corn, soy bean, cassava, sugar cane (first generation), non-food energy crops such as jatropha, buffalo grass, algae and wastes from industry and agriculture such as animal fats, left-over food, rice straw, rice husk etc. (second generation).

Vietnam has recognized the potential for second-generation biofuels and prioritized them in the country’s biofuel development plans. The main feedstock for biofuel in Vietnam in the period up to 2015 with outlook to 2025 were identified as: (1) used fats and oils including used oils collected from food industries, (2) algae, considering its low demand of land and ecological conditions and short development cycle, (3) agricultural crops such as bagasses, cereal, sesame, peanut, coconut, and basa fish fat, (4) jatropha which can be grown on around 9 million hectares of bare land or land strips along the national highways (Nguyen Duoc, Biodiesel Vietnam: potentials and challenges, Viet Bao, 29 January 2010). These identified targets will guide future investment in the sector.

Biofuel legislation

The legal framework for bio-fuel production and trading in Vietnam is nearly complete.  Bio-fuel has been designated a key industry and bio-fuel production projects enjoy the highest level of investment incentives.

From 2007 to 2010, Vietnam worked on finalizing a legal framework to encourage the production and use of bio-fuel, design the roadmap for using bio-fuels in Vietnam, learning bio-fuel technologies, training human resources for this industry, zoning and developing material areas for bio-fuel, build bio-fuel plants to meet 0.4 percent of the country’s need for petrol by 2010. This start-up work is basically on schedule.

In 2007, two national standards for bio-ethanol and bio-diesel were issued. In October 2008, the Ministry of Industry and Trade approved projects to grow trees as materials for producing bio-fuels, to develop technologies for producing bio-fuels, to design plans and policies to support the development of bio-fuels in Vietnam and to test and apply ethanol petrol in Vietnam.

In June 2008, the Ministry of Agriculture and Rural Development also approved a project to research and develop jatropha bushes in Vietnam.

The Ministry of Finance in 2007 and 2008 issued two circulars on state funding for bio-fuel development programs.

In 2009, the Ministry of Science and Technology issued two national standards on bio-fuels.

From 2011-2015, according to planners, Vietnam will begin to produce additives, enzymes and other materials for bio-fuels and expand their production, develop new varieties of high productivity, and expand biofuel plant capacity to satisfy 1 percent of the country’s need for petrol by 2015.

From 2016 to 2025, Vietnam will build an advanced bio-fuel industry that will produce 100 percent of the national requirement for E5 and B5 fuels, i.e., will provide five percent of the fuel needed to run the nation’s motor fleets.

Biofuel projects

Vietnam first began biofuel production around 20 years ago.  However, to date Vietnam has had only some initial experience in research, pilot production and commercial production of biofuel. The actual deployment is still far below the economic and realizable potentials.

Prior to 2009 biofuel technologies in Vietnam are generally old and inefficient. Equipments are out-of-date and have low capacity and energy efficiency. Fuel collection rates and productivity are low and the cost of operation is high relative to productivity. Technologies used to mix biofuel with traditional fuel are in early stages of development. At the same time skilled human resource in this industry is still weak (Nguyen Phu Cuong, 2009).

On the demand side, biofuel is not widely used in Vietnam yet.  Sales and distribution of biofuel are still in the pilot stage (Nguyen Phu Cuong, 2009).

However since the deployment of the Decision 177 of the Government on a “Scheme for Development of Biofuel up to 2015 with a vision to 2025”, investments in biofuel research and production have increased. Biofuel research is focused on biofuel technologies, application in electricity generation and transportation use.  Unlike the situation during 1990s when researches were still spread on a broad scope and mainly focused on lab or field research, which did not link to the market, research and development of biofuel in recent years has been oriented towards applying international and regional technological advancement into Vietnam’s conditions. The government has invested in domestic research capacity to advance the biofuel sector in accordance with the framework of Project 177, as well as in other national and provincial funding programs available for scientific and technological development of Vietnam.

Pilot and commercial production has been increasing in the last 5 years in which 2009 can be considered as the year of the biofuel industry kick-off in Vietnam. During 2009 many ethanol plants were built in Quang Nam, Phu Tho, Quang Ngai (Dung Quat), Binh Phuoc and Dong Nai (To Quoc Tru, 2010). Investments have been piled up from domestic enterprises including the Petrovietnam. It is planned that by 2011, there will be 5 ethanol  producers with a total installed capacity of 365,000 tons per year - enough for mixing 7.3 million tons of E5 (Nguyen Phu Cuong, 2009).

For ethanol, some typical projects include:

1) Green Field Co. Ltd.’s production of ethanol in Quang Nam Province: 100,000 tons/year, fixed and working capital of US$ 44 million. This biofuel plant was built in 2007 and began operating in 2008 (AITVN database). It was the first bio-ethanol production plant in Vietnam (Nguyen Phu Cuong, 2009). The project was supported by preferential loan from the Government of VND 100 billion (~ US$ 550,000) to invest in a waste water treatment system. Its ethanol product satisfies the national standard TCVN-7116-2007; is guaranteed to be purchased fully by PVB a subsidiary of PVOil/ Petrovietnam (Nguyen Phu Cuong, 2009).

2) Petrovietnam’s production of ethanol 99, 7% from cassava and sugarcane in Phu Tho Province: 100 million liters/year, total investment cost is US$ 85 million, ground breaking in 2009, planned to operate in 2010.

3) Petrovietnam’s production of ethanol 99.7% from cassava in Dung Quat industrial zone: 100 million liters/year was built in 2009 and planned to operate in 2011.

4) Vietnam Bioethanol joint stock Co.’s production of ethanol in Dak Lak province: investment cost of US$ 60 million.

5) Saigon Petro’s production of ethanol 99.7% from cassava: 40 million liters/year, initial investment of US$ 5 million, operated in 2009.

6) Southern Biofuel and Petrochemical joint stock Co.’s production of ethanol 99.5% in HCMC: investment cost of US$ 2.1-2.7 million.

7) Petrosetco’s production of ethanol (in cooperation with Japan): 100 million liters/year, planned to operate in 2010.

Sources: AITVN’s database 2010 and others

For biodiesel, investments are spread on a broad range based on type of feedstock:

1) Fish fat: Minh Tu Co. Ltd’s in Can Tho City with investment cost of US$ 830,000, 2007-2009;

2) Jatropha: Dai Dong Co. Ltd’s planting of 50,000 ha jatropha in Ha Giang province, investment cost of US$ 187 million;

3) Jatropha: Saigon Mang Den Co.’s planting of 5,000 hectares of jatropha in Kon Tum Province at a total investment of US$2 million; Doan Minh Giang Co. in Son La province;  Hieu Giang Company with 170 hectares in Lam Dong province; Minh Son Co. with jatropha nursery; Duc Viet Co.; Nui Dau Co. in Lang Son province; Thien Nhien Co. in Phu Tho; SECOIN with jatropha nursery and a number of agro-forestry cooperatives in Son La, Kon Tum and Binh Thuan Province, etc;

5) Vietnam’s Institute of Industrial Chemistry’s pilot project on technology and equipment for planning an industrial scale factory producing B100 and B5: investment cost US$3.7 million, 2010-2011.

Sources: AITVN’s database 2010 and others

Although not a complete list, the activities mentioned above have depicted an active investment climate for biofuel in the last few years after being catalyzed by the Government Scheme in 2007 to develop biofuels (Decision 177).  The scheme has set the targets of producing 100,000 tons E5 per year and 50,000 tons of B5 per year by 2010, satisfying 0.4%  fuel demand of the country by that year and until 2025 biofuel production will be sufficient to satisfy 5% of domestic fuel demand. The scheme sets 6 important tasks to develop and establish a market for biofuel domestically and also on the world market.

Investments in biofuel today come from both public and private sectors in which investment from Petrovietnam and its subsidiaries have surpassed the investment from private companies. Besides biofuel production has opened up market demands for agricultural and other wastes which were not commercialized before.

Development of biofuel in the coming years will continue be guided by the government’s Project 177 “Project for Development of biofuel to 2015 with a vision to 2025” (Decision 177/2007/QD-TTg of the Prime Minister). Under the plan on bio-fuel development to 2015 with a vision to 2025, Vietnam will produce 1.8 million tons of ethanol and vegetable oils for use as fuel annually, meeting 5 percent of domestic petrol and diesel demand in the next 15 years. Support mechanisms such as state investment, subsidies, tax preferences, and other capacity building programs will help investors to reduce their investment risk and generate satisfactory returns on capital.

In the next several years, however, there remain many challenges for biofuel development in Vietnam including:

1) Production cost is still high and the sector needs Government support to compete with subsidized cost of fossil fuels;

2) Infrastructure for production and distribution are not yet fully built out;

3) Access to export market of biofuel requires strict compliance with various quality standards and other environmental and social requirements by importing countries that Vietnam does not have to capacity to comply with yet;

4) Biofuel prices in Vietnam are still higher than that in neighboring countries (Nguyen Quang Khai, 2009).

Foreign investors have shown signs of interest in Vietnam’s biofuel industry. Many development projects sponsored by JICA, the Netherlands Government, and the Korean Government have supported research pilot production of biofuel recently. The US-based Golden State Biofuel alone has pledged a US$200 million investment to develop 10 ethanol plants that utilize rice husk. The plants will use equipment manufactured in the US (Global Trends in Sustainable Energy Investment, 2010).

Vietnam is keen to engage in international cooperation and foreign direct investment for development of biofuel. Via these channels, Vietnam can mobilize both investment and experiences from other countries to develop its biofuel sector. During 2007-2009, MOIT on behalf of the Government of Vietnam, entered into cooperation protocols with Germany and Brazil on technical cooperation in feedstock planning, technology transfer, distribution and transportation system development, etc.

However, applications of foreign technologies in Vietnam should be taken with care due to many reasons. Firstly, not all technologies can be applied to Vietnam’s ecological conditions. Secondly, biofuel technologies are costly which implies a significant financial loss in case of failure. A stepwise development of the technologies consisting of pilot production and then commercial production is needed.

(Source : Copyright © GIZ Renewable Energy Project)