News

April 29, 2009

GEM Biofuels’ Off-Take Partner Natural Fuel Limited Has Been Put Into Administration

By Rue Swabey

The downturn in the biofuels industry has claimed another casualty. On April 14th Australia-based Natural Fuel Limited went into administration after it missed an interest payment. The renewable energy company, which owns a 600,000 tonne refinery in Singapore and a 50 per cent stake in a 125,000 tonne biodiesel plant Australia, had grand plans to supply biofuel to the Asian market. But the company’s business model was rendered unviable by the high cost of palm oil. In addition to the poor economics of biodiesel production, Natural Fuels expanded too quickly and took on too much debt. Although much biodiesel capacity has been mothballed, utilisation levels remain low and uncertainty high.

In an effort to reduce its dependence on highly-priced palm oil Natural Fuel had signed an off-take agreement with Aim-traded GEM Biofuels in 2008 for crude oil from jatropha seeds. The agreement stated that GEM Biofuels would sell 55 per cent of its future production of crude jatropha oil from its operations in Madagascar to Natural Fuel Ltd at a price of US$500 per tonne. Although jatropha is priced at a discount to palm oil, the economics are still poor, with a production cost equating to...