After suffering one of its worst economic crises in 2001-'02, Argentina is on the road to recovery, but despite improved economic indicators, the country continues to suffer side effects from its dramatic recession. For the biodiesel industry, however, the crisis has generated significant opportunities. Low investment in oil exploration in Argentina and record-high international petroleum prices have raised concerns that local oil production will decline in the coming years. If it does, Argentina could become a net importer of gasoline and diesel, which would cause nationwide price hikes at the pump. To make matters worse, natural gas shortages during the winters of 2004 and 2005 have hurt the legions of automobiles that operate on vehicular natural gas (VNG), and analysts predict the supply issues will continue next winter. 
 But these factors, along with a boom in the nation's agricultural output, have forced the country to look into alternative fuels, including biodiesel. The first step toward making the country's biofuels program a reality came last December, when Argentina's Senate unanimously passed a bill that would require gasoline and diesel sold at the pump to contain 5 percent ethanol and biodiesel, respectively. The bill would have three principal effects: it would diversify Argentina's energy matrix, making it less dependent on petroleum; it would create new demand for its massive vegetable oils industry; and it would help clean up Argentina's air pollution, particularly in its major urban centers.
 
 The bill is expected to pass but has been held up by the finance committee of the lower House, which is concerned about granting the industry a series of tax breaks that observers feel is necessary for the program to get off the ground. If passed as is, the bill would mandate the use of 5 percent biofuels in gas and diesel within five years.
 
 The bill has otherwise received ample backing, including the support of President Nestor Kirchner's administration. However, it has also stalled because of the congressional elections held in October. Nonetheless, experts expect the bill to pass later this year or in 2006.

 "If the law passes, it will be extremely important for the oilseeds industry," said Alberto Rodriguez, the executive director of the Argentine Oilseed Chamber. While the chamber has not yet estimated projected demand levels if the law is passed, Rodriguez expects vegetable oil sales to increase substantially. "Soybean is the only oilseed crop with the scale that could meet the demand," he added.
 
 Diesel consumption accounts for over 50 percent of Argentina's fuels consumption, followed by gasoline at 33 percent. With a B5 mandate, Argentina would be required to produce an additional 2.44 million metric tons of soybeans by government estimates.
 
 The Agricultural Secretariat is proposing that a B20 program be adopted in rural areas, which would help farmers reduce their dependency on petroleum-based diesel and reduce the impact of international price fluctuations. 
 With the expectation that the bill will be passed in the near future, Spanish-Argentine crude oil firm Repsol YPF announced in June it would begin producing biodiesel in Argentina, which would make it the first large-scale biofuels manufacturer in the country. In a company statement, Reposol YPF officials said that, given the country's production of oilseeds, there are significant opportunities for biodiesel production in Argentina.
 
 Repsol has already set up a research center for biofuels in La Plata, in the eastern part of the country, where one of its oil refineries is located. The center is studying the feasibility of producing fuel from vegetable oil and animal fats. The project counts on the support of the government of Buenos Aires province and is also coordinated with local farmers.
 
 According to industry estimates, there are an additional 20 biodiesel plants in Argentina, all of which are small scale. Several other small-scale plants are expected to come on line in the coming months, but no other major plant is likely to come off the drawing board unless the law is passed, according to Rodriguez. "For any major investments to move ahead, the tax incentives will need to be well-defined," he added.
 Nonetheless, several small plants recently began operating. In early October, Argentina's second largest seed producer, Don Mario, inaugurated a plant in Chacabuco, Buenos Aires, with the capacity to produce 500,000 liters (132,000 gallons) of biodiesel per year. The small-scale plant will allow the seed company to produce its own fuel, but the seed company also plans to promote the use of biodiesel among its clients.
 
 The technology used in the plant was developed by Bionerg, a company formed by a group of researchers from the Catholic University of Buenos Aires. The plant cost an estimated US$155,000. Bionerg estimates that the plant will allow the company to reduce its fuel costs by 45 percent. According to German Beckmann, an executive from Bionerg, there has been a great deal of interest in the plant from soy producers, and Bionerg expects to bring an additional six plants on line in the near future. 
 
 Beckmann said that Argentine farmers are seeking to export and produce value-added products from soybeans and other commodities, and that biodiesel represents a good opportunity. He added that large farmers are eyeing their own production of biodiesel in an effort to limit their exposure to diesel price fluctuations. "The agricultural sector uses a lot of diesel and with oil prices at current levels, farmers are seeking a hedge," he added. While Bionerg has been focusing on the Argentine market, Beckmann said they have received some interest from potential buyers in the United States and in Eastern Europe.
 
 Another plant that recently came on stream is the Química Nova plant, located in Caimancito, in the Jujuy province, which has a production capacity 30 cubic meters (8,000 gallons) of biodiesel per day. The plant uses soy oil as feedstock, and Química Nova has plans to bring the production capacity up to 80 cubic meters (21,000 gallons) per day.

 
 In Villa Mercedes, in the province of San Luis, Zichy Thyssen Biodiesel has plans to invest US$40 million to construct a plant with a capacity to produce 100 tons (1.5 million gallons) of biodiesel annually. Likewise, Horreos de Argentina is also considering a new project which will be located in the province of Santa Fe and will have a production capacity of 300 tons per year (4.5 MMgy). CODESU is studying the feasibility of developing a biodiesel plant based on rapeseed in the province of Neuquen. There are also a series of feasibility studies for at least four other plants. 
 
 If all of the projects currently being considered are built, Argentina will have the capacity to meet local demand for B5, according to analysts. Likewise, Argentine soy farmers will have the capacity to meet increased demand resulting from the production of biodiesel, according to Rodriguez. In recent years, Argentina has expanded its agricultural production significantly and is now the world's second largest corn exporter after the United States, and the third largest soy producer and exporter after the United States and Brazil. 
 
 Since the 2001 devaluation, Argentina has become a major exporter of grains, harvesting 38.3 million metric tons of soybeans during the 2004-'05 season, up 21 percent from 31.5 million metric tons in the previous harvest, according to data released recently by the Agriculture Secretariat. During the upcoming harvest, soy planting is expected to expand by 1.1 million hectares to 15 million hectacres, at the expense of other grains being planted. As Argentina's 2005-'06 crop-year gets underway, analysts forecast a record soybean harvest and surging sunflower seed production, but corn and wheat output will slump.
 
 Argentina posted record soybean, corn and wheat harvests in the 2004-'05 season, which was the result of favorable weather and improved seed technology. Soy acreage and output have both surged since genetically modified seeds were approved in 1996. Production rose over 300 percent in the past decade, reaching a record 38.3 million metric tons in 2004-'05. The government forecasts 2005-'06 soybean output at a record 40 million metric tons, while the USDA foresees 39 million tons in the United States.
 
 Other oilseed output from Argentina's sunflower and rapeseed crops could also benefit from demand for vegetable oils for biodiesel production. Sunflower seed area is also seen growing by as much as 25 percent, rebounding after drought hurt plantings last season in northern provinces, such as No. 3 producer Chaco. Production is forecast at 4 million to 4.1 million metric tons, up from 3.65 million last season but far from the record 7.1 million tons registered in 1998-'99.
 
 The soy crop and soy crushing industry will be the basis for a successful biodiesel program in Argentina, analysts say, as no other crop has near the capacity to meet expected demands. 
 
 "Once the law passes, Argentina will be on the road to becoming a major biofuels producer," Beckmann said. n
 
 Elizabeth Johnson writes regularly for Biodiesel Magazine. Her last contribution, "Brazil's Biodiesel Rush," was published in our August/September issue.

Argentine lawmakers are expected to pass a nationwide B5 mandate that would lessen the nation's dependence on fossil fuels, create new demand for its massive vegetable oils industry and help clean up major urban centers. Producers, most of them small-scale, are rising to the call.

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Upcoming Events

2024 International Fuel Ethanol Workshop & Expo

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Carbon Capture & Storage Summit

North American SAF Conference & Expo

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Argentina'S Climate of Growth