Parratt & Associates Scoping Biorefineries: Temperate Biomass Value Chains

2.2 Significance of oil industry to Biorefineries and Biomass Value Chains

Oil and natural gas dominate the global energy, fuel and chemical markets. Though most people associate oil and gas with transport fuel, they are in fact key inputs into energy production and a huge range of commercial products derived from petroleum (everything from pesticides to fertilizers to chewing gum to window cleaners to synthetic carpets). Factors supporting the emergence of biobased economies include price fluctuations, risks associated with long-term scarcity of affordable oil, national security and the overdependence on foreign oil.

Oil is the largest component of the world energy sector. In 2005 oil accounted for 40% of global energy consumption and 96% of transport energy consumption. Based on historic growth rates (3.4% growth in 2004), oil consumption is expected to increase to 119M barrels per day in 2020, more than 44 million barrels per day over current production capacity⁶. By this time, China will most likely be importing the same quantities as the USA, with increased demand driving prices up. The following figure 2-1, from Duncan and Youngquist, plots oil production curves from 1960 through to predicted levels in 2040.

Figure 2-1: Peak Oil predictions⁷

The demand for transportation fuel will provide the largest increase, mostly from the growth in private car sales. Many observers have predicted that oil supply has stagnated even as consumption has risen, with the rate of new discoveries peaking in 1962 and global oil output likely to peak within the next 10 years and then drop off rapidly thereafter.⁸

Recently, in June 2010, President Obama of the USA said

“For decades, we have known the days of cheap and easily accessible oil were numbered. For decades, we’ve talked and talked about the need to end America’s century-long addiction to fossil fuels. And for decades, we have failed to act with the sense of urgency that this challenge requires. Time and again, the path forward has been blocked – not only by oil lobbyists, but also by a lack of political courage and candor”.⁹

The majority of Australian oil is currently imported from UAE, Malaysia, Vietnam and PNG. Australia’s net deficit in petroleum continues to expand. The 2009 data from ABARE¹⁰ indicates a 195.3M barrel deficit in energy production from crude oil, or an A$17.2B trade deficit. The projected disparity will increase by 2029–30 to become 471.7M barrels, equating to a trade imbalance of $41.6B dollars in 2030¹¹. Current estimates suggest that it may be feasible to produce between 30–70% of Australia's total transport fuel requirements from biomass¹².

Rising prices driven by increased demand and growing instability in the oil and natural gas markets are both factors that will increase the growth rate of the bioeconomy. Rising demand indicates a growing demand for alternative fuels. The market will gain impetus from rising costs, in turn making long-range transport of biomass more difficult. This may spur locally based, smaller bioenergy and bioproduct development, though this is by no means certain.

The energy sector and the chemical industry are thoroughly interlinked. Changes in energy prices flow through from crude oil prices, then onto chemicals and subsequent products developed, e.g. plastics.¹³ However, given the above it is likely energy policy will continue to be the key driver for change to the use of renewable sources and, this will have direct and indirect impacts on chemical and material sciences and the potential to deliver them from renewable biomass sources.

2.3 Biorefineries and the Demand for Chemicals

The world relies heavily upon fossil fuels as its major source of chemical and intermediary inputs for manufacturing. The global chemical market was worth approximately USD$1200 billion in 2005, comprising 60% commodity chemicals and polymers, 30% specialty chemicals, and 10% fine chemicals. Growth projections for the industry were estimated at 3% to 6% per year through to 2025, with biobased chemicals expected to increase from 2% of the total market in 2005 to 22% in 2025.¹⁴

In 2007 the chemical and plastics industry was part of Australia’s fourth-largest manufacturing sector. This sector also included the petroleum and coal industries. With an estimated 85,000 employees, the sub-sector accounted for 8% of manufacturing employment and 12% of manufacturing value added. The chemicals and plastics component dominates the sub-sector, accounting for approximately 85% of employment and value added. The total sector accounted for $4.2B in revenue in 2003–04.¹⁵ If the global projection for growth and product substitution were followed through into Australia, biobased chemicals could be equated to approximately $2.5B of a $10.8B market in 2025.

The United States Department of Agriculture has examined the market potential for biobased products from biorefineries to 2025¹⁶, and the report provides a useful guide to the scale of markets and the market sectors likely to be most relevant to biobased co-products in the near to medium term. The greatest future opportunity lies in biobased replacement and substitution within the chemicals and materials sector.

Long-term success, however, will depend on the development of so-called “platform chemicals” from biomass transformation in biorefineries. These platform chemicals are versatile building blocks that can be used for the production of many different value-added chemicals and materials. These products could form the basis for the continuation and expansion of the plastics and chemicals industry in Australia.

2.4 Biorefineries and Greenhouse Gas Emissions

Industrial biotechnology, encompassing the development of biorefineries, is the application of biotechnology for the processing and production of chemicals, materials and energy.¹⁷

The World Wildlife Fund (WWF)¹⁸, working with Novozymes, indicated that industrial biotechnology could reduce greenhouse gas (GHG) emissions by 1–2.5 billion tonnes by 2030. This would require a range of applications, in addition to the development of biobased products. For example, the use of ethanol as a 10% blend in petrol can reduce GHG emissions by up to 5.7%. Biodiesel can reduce emissions by as much as 89.5%, if based on waste vegetable oils, or 29%¹⁹ if based on tallow-derived biodiesel.

The eventual impact of industrial biotechnology on GHG emissions will depend upon the development of appropriate policies and strategies. The WWF report identifies the following issues that any policy will need to address;

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  support existing and new efficiency-enabling solutions to fully harvest their short-term potential;
  
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  anticipate and nurture the progression toward large-scale bio-materials and closed loop systems, where closed loops systems refer to cradle to cradle life cycles or zero waste;
  
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  create an overarching framework in which incentives are provided for the achievement of GHG emission reductions and low carbon feedback; and
  
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  ensure that the supply of industrial biotechnology feedstock land is managed according to principles of sustainability.²⁰
  

The following table 2.1 summarises the potential benefits of the application of industrial biotechnology to GHG emissions.

Table 2-1: GHG Emission Reduction Potential - Summary²¹

Type of Industrial Solution	Estimated GHG emission reductions vs. baseline 2030
Efficiency enabling in the food and traditional industries	Food industries: up to 139 MtCO2e Others industries: up to 65MtCO2e
Biofuels	207 to 1 024 MtCO2e
Biobased materials production	282 to 668 MtCO2e
Closing the loop	376 to 633 MtCO2e
Total	1 066 to 2 528 MtCO2e

A recent International Energy Agency (IEA) report on major criteria for biofuel sustainability²² suggests that policies aimed at improving the GHG emissions savings from bioproducts (particularly biofuels) should encourage the use of;

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  manure and biomass residues to substitute for petrochemical based fertilisers;
  
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  residue biomass for heat and electricity generation in co-generation systems; and
  
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  co-allocation of lignin (a significant component of plant tissue) to substitute for petrochemicals, to eliminate high energy intensive industries. The use of lignin for chemicals results in significant GHG emission reductions.