Argentina biofuel companies push for deep changes

Argentinian biodiesel companies are urging the government to speed up regulatory changes so they can ramp up production and exports.

The association of oilseed producers (Ciara) is not only in favor of President Javier Milei's sweeping omnibus reform package, but is lobbying for deeper changes to increase the blending mandate, ramp up production and move to second-generation biodiesel production.

The omnibus bill would change more than 100 articles in the energy sector, including the law that regulates biofuels. The bill was presented in December, but has stalled in congress since February.

"Approval of the omnibus law is essential, because the current biofuels law is bad for the industry and bad for the consumer," Ciara's president Gustavo Idigoras told Argus.

The changes proposed by the Milei administration would, among other things, eliminate price controls, open the door to investment in new technologies and oil-seed crops, such as camelina and carinata, increase exports, and let all companies in the biodiesel sector supply the domestic market. Under current rules, only small firms can supply the domestic market, while large industrial firms export biodiesel.

The legislation also increases the blending mandate for biofuels to 7.5pc from 5pc. Ciara wants the mandate increased to 15pc, which would bring Argentina in line with what is planned for Brazil, where blending is at 14pc and should increase to 15pc under legislation recently approved by the Brazilian congress. The goal in five years should be for a harmonized Argentina-Brazil biodiesel market, Idigoras said.

He also said the changes would have an immediate impact, because Argentina has installed capacity to produce 4mn metric tonnes (t)/yr of biodiesel, but is only producing 1.5mn t/yr because of restrictions in the domestic market and exports. Ciara forecasts exports to increase to at least 2.5mn t/yr if the regulatory changes are approved. Argentina exported approximately 280,000t in 2023, a historic low, because of drought. It exported 1.4mn t in 2022.

Argentina has the right conditions for hydrotreated vegetable oil (HVO) plants and to produce sustainable aviation fuel and biofuel for the maritime industry, Idigoras said, adding that there is a window of at least 10 years where biofuels will play a key role in the energy transition. Green hydrogen will eventually be a competitor, but it will take time for it to scale up production to meet demand, he said.

The industry could enact sector-specific modifications if the omnibus bill was not approved, but that would not be ideal, Idigoras said.

Lawyers working on energy projects agree, saying investors would be less committed if changes were made through executive orders instead of laws. An executive order would have less weight because it depends on the administration in power, while the omnibus is a law approved by congress, according to Ignacio Criado, an attorney at the Tanoira Cassagne law firm.

"The energy sector needs investment and the omnibus bill is a shortcut," he said. "It simplifies regulations and provides transparency."

By Lucien Chauvin