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Japanese oil industry’s strategy for biomass fuels

Japanese oil industry’s strategy for biomass fuels. 2 July, 2008. NIPPON OIL CORPORATION Director, Senior Vice President And Chief Financial Officer PETROLEUM ASSOCIATION JAPAN Vice Chairman of Policy Planning Committee Japan Biofuels Supply L.L.P. Chief Operating Officer SHIGEO HIRAI.

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Japanese oil industry’s strategy for biomass fuels

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  1. Japanese oil industry’s strategyfor biomass fuels 2 July, 2008 NIPPON OIL CORPORATION Director, Senior Vice President And Chief Financial Officer PETROLEUM ASSOCIATION JAPAN Vice Chairman of Policy Planning Committee Japan Biofuels Supply L.L.P. Chief Operating Officer SHIGEO HIRAI Japan Biofuels Supply Limited Liability Partnership

  2. Strategy for Biofuels (1/2) 1.Basic Policy to Introduce Biofuels • Tasks for introducing biofuels (bio-ETBE, bio-ethanol) • - Stable supply and sustainability (To be of bio-origin and prevent negative impacts on food security, environment and biodiversity) • - Economics (Price is higher than gasoline on an energy-equivalent basis and highly volatile due to dependence on sugar price) • - Product quality (To secure safety of cars and prevent air pollution) • (2) Policy • - Blend Bio-ETBE, not Bio-Ethanol directly, into automotive gasoline to bear product liability giving first priority to consumers’ safety and security, and product quality assurance • (3) Target of introducing Biofuels • - Biofuels used in 2010 ⇒ 210 MML/y (C.o.e.) 360 MML/y (Ethanol equivalent) 840 MML/y (ETBE equivalent) = =

  3. Strategy for Biofuels (2/2) 2. Introduction schedule (1) Original schedule2007.4 - Test marketing of Bio gasoline at 50 gas stations in the Tokyo metropolitan area. (12MML/y of Bio-ETBE) 2008.4 - Test marketing of Bio gasoline at 100 gas stations in the areas expanded to Kansai and Tohoku region (16MML/y of Bio-ETBE) 2009 FY - Blend 200MML/y of Bio-ETBE into automotive gasoline 2010 FY - Blend 840MML/y of Bio-ETBE into automotive gasoline (2) Additional introduction- Now under discussion on the feasibility of introducing additional volume of biofuels Maximum target volume : 500 MML/y (C.o.e.) = 860 MML/y (Ethanol equivalent) = 2,000 MML/y (ETBE equivalent) - The stable supply of energy is very important for Japan due to limited domestic resources. Japan is aiming to produce bio-ethanol domestically without competition with food and starting research and development to produce secondgeneration biofuels (cellulose-based feedstock, mostly grass/wood-based) at lower cost.

  4. Japan Biofuels Supply LLP (JBSL) Stable and effective procurement of Bio-ETBE and Bio-ethanol (as a feedstock for Bio-ETBE), and efficient distribution to the refineries all over Japan 1. Purpose of the establishment 2. Outline of JBSL (1) Name Japan Biofuels Supply LLP (JBSL) (2) Date of Establishment January 26, 2007 (3) Chief Operating Officer Shigeo Hirai (4) Partners Idemitsu Kosan Co.,Ltd. Tonen General Sekiyu K.K. Taiyo Oil Co.,Ltd. Fuji oil company,Ltd Cosmo Oil Co.,Ltd Kyokuto Petroleum Industries Ltd. Kyushu Oil Co.,Ltd Showa shell Sekiyu K.K. Nippon Oil Corporation Japan Energy Corporation (5) Paid-in Capital400mil yen (6) Main Activities a. Importing and storing of Bio-ETBE and Bio-ethanol b. Purchasing Bio-ethanol from domestic producers c. Distributing Bio-ETBE and Bio-ethanol to our partners’ refineries

  5. JBSL’s Procurement Plan ProducingCountries Brazil and other Bio-ethanol producing countries Ethanol 250～300 MML(as a feedstock for Bio – ETBE) Ethanol 10～60 MML Import to Japan ETBEProducing countries (US ＆other countries) ETBE 640～740 MMLImport toJapan Ethanol Domestic Production Japan JBSL’simport terminal Ethanol delivery 30 MML delivery ETBE delivery Refineries all over Japan Produce ETBE domestically (100～200 MML) Blend ETBE to gasoline Sell as Bio-gasoline

  6. Requirements for the Bio-Ethanol in ETBE used in Japan • Stable supply( Stable supply is very important for Japan ) • 2. Sustainability including food security • (1) Feedstock of ethanol should not compete with food • - Utilize feedstock that should not cause food price hike or shortage of food • (2) Contribute to GHG reduction - Ensure highly positive GHG balance of ethanol over their life cycle (sugar cane fields, production at ethanol mills, transportation, utilization) • (3) Protect environment and biodiversity - No conversion of high carbon density lands and high biodiversity lands • (4) Ensure decent working conditions • 3. Traceability • We recommend Brazil to set up a governmental certification system because it’s difficult to trace when ethanol is mingled in terminal tanks or pipelines • (1) The government issues the certification of bio-origin for the exporting ethanol. • (2) The ethanol factories or suppliers that secure sustainable production can get the certification of sustainability from the government

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