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Spanish ethanol faces crunch year as consumption falls

Spanish ethanol faces crunch year as consumption falls

MADRID: Spanish fuel ethanol consumption continued to decline in November, dropping to a seven year low, with domestic output facing an uncertain 2017.

Spanish ethanol consumption fell to just under 21,000t (5,500 b/d) in November, a decline of 7pc on the year, according to strategic reserve Cores, the lowest level for the month since 2009. Taken over the first 11 months of last year demand was 225,000t, down from 258,000t on the year.

The drop comes despite a higher 2016 blend mandate — at 4.3pc from 3.9pc previously — and rising domestic gasoline consumption. Gasoline demand fell to a low in 2014 after Spain’s financial crisis, but has partially recovered with demand in November at 105,000 b/d, up by 4pc compared with November 2015. Gasoline consumption was 110,000 b/d in January to November, up from 107,000 b/d in the same period a year earlier.

Spanish ethanol demand has fallen as a result of a new framework introduced by the government at the start of 2016, which allowed biofuels certificates issued by regulator CNMC — which are tradeable, have a two-year life and can be set against state mandates — generated in the larger biodiesel market, to cross over and be set against bioethanol targets.

CNMC data, which lags several months behind other statistical sets, show a fall in Spanish ethanol imports, exports and production in the first six months of this year, its most recent figures. Just 10,600t of fuel ethanol imports arrived in Spain in January to June, down from 37,000t in the same period in 2015. This suggests refiners and other blenders are not importing cargoes to blend into gasoline, will fail to meet the mandate with physical volumes and will instead redeem certificates to hit targets. Ethanol’s share of gasoline in Spain stood at around 3.3pc in calorific terms at the end of November, short of the mandate.

Domestic blenders and distributors of gasoline and blended ethanol are facing a further conundrum in 2017, as the mandate increases to 5pc from 4.3pc. The increase comes as Spanish production has been cut back — indebted producer Abengoa shuttered its 158,000 t/yr unit at Salamanca last April, with no sign of a restart. Abengoa has been trying unsuccessfully to sell its three Spanish bioethanol plants — Salamanca, Cartagena and Coruna, which have 430,000 t/yr of total capacity — for a year. But a well supplied European market in 2016, and uncertainty over future demand for food-crop biofuels, cautioned buyers. The firm effectively gave away its 375,000 t/yr Rotterdam plant, which cost €550mn to construct, receiving just €50mn($53mn) from buyer Alcogroup , most of which went to pay creditors.