European LPG distributor UGI International signed a deal with Polish biofuel developer Ekobenz earlier this month to market bio-LPG produced at the latter's new 22,000 t/yr biofuel plant in Bogumilow, central Poland. The plant converts waste bioethanol into a bio-blendstock for gasoline. The only commercially available bio-LPG to date has come as a by-product of hydrotreating vegetable oil (HVO) to create biodiesel, with global output of around 200,000 t/yr. UGI will receive its first shipment from the facility at Gothenburg in Sweden this spring, it said earlier this month. Argus spoke with UGI International business development vice-president Neil Murphy about the deal:
Where does UGI plan to sell the bio-LPG produced at Bogumilow?
We plan to sell it in the Nordics at first, where we will use our UGI subsidiaries and already have a developed market for bio-LPG — the Ekobenz supply simply helps to meet growing demand. There is also a growing demand [for bio-LPG] in most countries in Europe and we expect to be able to support this as it arises. The proprietary technology employed by Ekobenz produces high-quality products at a moderate cost, paving the way for large-scale, commercial production that can be easily expanded in Europe.
Why has UGI chosen Sweden to sell the bio-LPG?
In recent years in Denmark, Finland, Norway and Sweden we have experienced a demand for, and willingness from customers to invest in, more sustainable solutions. Today, it is clear that bio-LPG demand is growing in the Nordics, the UK and France, which has caused us to focus on bioethanol to bio-LPG growth. And the Swedish government has shown a strong commitment to a sustainable future through its newly introduced tax exemption on biofuels.
Which sector will UGI target the bio-LPG sales to?
We are experiencing interest for bio-LPG from all customer segments. But initially our focus will be on the B2B [business-to-business] segments of our Nordics business, with logistics efficiency helping us to prioritise.
What sort of premium will this bio-LPG command?
Pricing is in development, but we have secured customers who gain real value from the commercial terms we have entered into. As with many other emerging products and services, we would expect stability to arrive in the next few years to the bio-markets but as yet that stability is not evident. Slight premiums will be unavoidable initially, but the important point is that we are able to distribute the green molecules that better align with the customers' requirements.
What quantity of bio-LPG will Ekobenz supply UGI with?
Ekobenz can produce up to 22,000 t/yr of advanced biofuel, which includes a proportion of bio-LPG based on this bioethanol pathway. We are not at liberty currently to specify the exact volume of bio-LPG but it is less than 60pc of production and the technology, which is patented in Poland and Europe, lends itself to modular expansion in the future — an aspect we will be jointly exploring.
Why has UGI followed this route to securing bio-LPG rather than the more-established HVO-biodiesel production process?
At UGI, we are embracing many technologies as the biofuel market is young and emerging. We cannot afford at this stage to omit any perceived opportunities. HVO is well established, but with an increasing demand for the feedstock, it is believed costs may escalate considerably. Bioethanol is becoming a strong second as a proven liquid feedstock and represents a healthy medium-term future. Ekobenz is the first company in the European market to produce bio-LPG from bioethanol, and we have secured this supply.
Could this production method become a core supply source for UGI?
This is one of many options we are pursuing to secure bio-LPG. We are exploring emerging biofuel feedstocks such as bioethanol, HVO, r-ammonia [renewable ammonia], r-DME [renewable dimethyl ether] and associated technologies. For the foreseeable future, LPG will be vital for our market's energy needs encompassing industrial process, heating and transportation. We are committed, as one of the biggest LPG suppliers in the world, to ensure LPG contributes today and tomorrow to enable a more sustainable society to emerge.
