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Thursday, July 27, 2006

GENUINE EFFORT OR CYNICAL PLOY?

Ethanol latest bid to boost Okinawa


Staff writer

OSAKA -- In May, Prime Minister Junichiro Koizumi met with Defense Agency chief Fukushiro Nukaga and trade minister Toshihiro Nikai to discuss Okinawa's future.

Tokyo and Washington had just reached agreement on the realignment of U.S. bases in Japan. The prime minister was now interested in discussing macroeconomic projects the central government could promote in Okinawa, where local opposition to the base realignment plan was strong.

Nikai briefed Koizumi on the state's efforts to develop ethanol on Miyakojima from local sugar cane and mix it with gasoline. Although such efforts had been under way well before the May meeting, they now received an extra boost of political support from Koizumi.

Thus, Okinawa will soon become Japan's center for producing ethanol from sugar cane, which will then be mixed with gasoline. Plans call for the eventual production of 700 kiloliters per year on Miyakojima.

Gasoline containing 3 percent ethanol will eventually be sold at 18 gas stations on Miyakojima that are being remodeled to sell the new fuel.

Because the Miyakojima ethanol will benefit only Okinawa, its critics charge that Koizumi's interest was cynical, and that he was only looking for an excuse to placate antibase sentiment with state subsidies.

But the Okinawa ethanol project is also being pushed at a time when Japan has been looking more closely at biomass fuels to meet the greenhouse gas emission reduction goals of the Kyoto Protocol.

In April, the government said it would replace half a million kiloliters of petroleum with biomass fuel by 2010, about half of which is expected to be ethanol.

Under current law, only fuel that is 3 percent ethanol is allowed to be manufactured for automobile use, and pressure is growing from those who support ethanol production to change the law to allow higher concentrations.

Even Japan's oil industry, traditional foes to ethanol producers, is now experimenting with ethanol-based fuel.

"By 2010, the oil industry hopes to use 360,000 kiloliters of ethanol with gasoline to create a mixture that is 20 percent ethanol," said Ikuo Hamabayashi, a public relations official at the Petroleum Association of Japan.

"The ethanol won't be mixed directly, but with ethyl tertiary butyl ether, or ETBE. With this mixture, we hope to reduce carbon dioxide emissions by about 600,000 tons per year."

If the law does change, Okinawa may not be the only place that eventually provides Japanese drivers with ethanol derived from sugar cane. Brazil is the world's largest producer of sugar cane and Brazilian autos are required by law to burn gasoline with at least a 20 percent mixture of ethanol.

In March, the Brazilian state oil firm Petrobas established a joint venture with Nippon Alcohol Hanbai to eventually import ethanol from Brazil. The new joint venture, called Brazil-Japan Ethanol Inc., is waiting for the Japanese government to finalize plans on ethanol use, a decision that could come by the end of this month.

"If the state decides to go with a 3 percent blend of ethanol in fuel, we expect Brazil could export up to 1.8 billion liters of ethanol yearly to Japan starting from 2008," said Kuniyuki Terabe, vice president of Brazil-Japan Ethanol Co.

Japan's move toward using ethanol in autos also comes at a time when the country faces growing concerns over not only short-term spikes in oil prices due to recent tensions between Israel and Lebanon but also long-term supply.

In June, Iran's oil minister warned Japan that if it did not develop the Azadegan oil field soon, the deal would be off.

Japan signed an agreement with Iran in 2004 to develop the field, which has estimated reserves of 33 billion barrels, according to Iran Petroleum magazine's Web site. Production was expected to begin in 2008 and reach 260,000 barrels per day by 2012, of which Japan would import two-thirds.

Despite these concerns, which are also driving recent central government interest in ethanol from sugar cane, both Hamabayashi and Terabe said expectations should be kept low, and that because burning gasoline was still cheaper than burning an ethanol-gasoline mixture, it will be a while before Japanese can buy cars that run on high concentrations of ethanol.

"The Miyakojima ethanol project seems more designed to show the Japanese people that the government is actually doing something to reduce petroleum dependence than to actually provide a long-term solution for the whole nation," Terabe said.

"I wouldn't get too excited about the potential of Miyakojima," Hamabayashi said. "It's very small scale. Despite petroleum supply uncertainties in Iran and elsewhere in the Middle East, the low cost and stability of petroleum, combined with the higher costs of ethanol, mean it will be a number of years before we see it used in Japan to the extent it is in other countries."



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