May 5, 2006

 

Noble group aims to gain 1 billion gallon ethanol capacity in US

 

 

Singapore-listed commodities company Noble Group Ltd is jumping on the bandwagon to invest in the burgeoning ethanol industry.

 

The company aims to capture a seventh of the US ethanol market by 2012 said Gary Mize, former chief operating officer and now director at Noble. That means controlling a billion gallon capacity out of the total seven billion gallons by 2012 mandated by the government, said Mize, referring to a US energy policy law passed in 2005.

 

We already have 8-9 renewable fuel projects now reaching the maturity stage, he said, including a recently-announced US$6.5 million stake in a 44 million gallon/year plant being developed in Madrid, Nebraska.

 

US corn ethanol output, supported by tax incentives and biofuel requirements in the 2005 law, has already sprouted into a 4 billion gallon-a-year industry.

 

Noble stands out among much larger rivals as it has gained exposure but without committing too much capital buying up ethanol production assets, Mize said.

 

"Corn ethanol production cost, depending on the plant location, is roughly $1.05-$1.20 a gallon at today's corn price," said Fabrizio Zichichi, Noble's US-based executive vice president of clean oil products.

 

"At the current sales price of US$2.60-US$2.70/gallon, corn ethanol producers are enjoying good profit," he added.

 

Production costs will fluctuate with corn prices going forward. But there's little sign that corn prices will go sharply up because of rising ethanol output, Zichichi said.

 

He is confident that corn ethanol will remain competitive compared with the gasoline, even if corn prices rise to US$3 a bushel from the current US$2.30.

 

The corn ethanol output cost is likely to be around US$52.5-US$58.8/barrel, at US$3.00/bushel corn price, Zichichi said.