Insight Conversation: Clarence Woo, Asian Clean Fuels Association

This seven-part Insight Conversation series examines the opportunities and challenges in Asia's biofuels sector. This week, S&P Global Commodity Insights speaks with Asian Clean Fuels Association's Clarence Woo about biofuel policies and adoption in Asia. The next edition features Suhas Baxi, co-founder and CEO at India-based BiofuelCircle, on opportunities and challenges in India's biofuels industry.

Clarence Woo has two decades of experience in the oil and gas industry, and is currently the executive director of Singapore-based Asian Clean Fuels Association. ACFA works with governments and industry on clean fuels policies and adoption, and has contributed to clean fuel developments in Asia, the Middle East and North Africa.

Woo talks to Commodity Insights Senior Editor Aditya Kondalamahanty about the biofuels policies in Asia and the challenges faced by the region in producing and in adopting the use of biofuels.

What are the key challenges you face when working with the governments regarding cleaner fuel policies?

First and foremost, the preparation of the implementation needs to be in place for effective policy. That means that policymakers need to take a very robust look at all the potential pitfalls and questions, as well as question industry players. They have to involve OMCs [oil marketing companies], top manufacturers and relevant industry players.

Secondly, scientific bodies must be involved. When it comes to measuring land use and water use, future food demand and carbon intensity of such programs -- all these things have to be analyzed very closely because you need to overcome any disputes or any parties who may raise questions. For example, we can see what's happening with the EU and palm oil-based biodiesel from Asia.

I think in Asia, this has been missing to a certain extent. The first biofuels wave started in 2005 when a lot of governments in this region were looking at how they could incorporate biodiesel to their energy mix. But questions -- like feasibility, impact on food prices, complications due weather change, these issues -- remain to this day.

Policymakers need to really take into account specific inputs factors that could create a problem in terms of both the policy implementation and also industry adoption. Today, I think Thailand and the Philippines have implemented their biofuels programs very successfully.

In addition to this, a new generation of biofuels has become even more relevant as low- or zero-carbon fuels, competing effectively even against BEVs [battery -operated vehicles] on GHG [greenhouse gas] emissions life-cycle basis.

Do market mechanics or the state of the economy play a big part in the successful implementation of biofuel policies?

Not so much, I would say. Biofuel policies are connected more to the nation's interests than economics.

For example, in India, the driver [for biofuel policy] is energy security, balance of trade and supporting farmers. Its ethanol program has actually managed to achieve each of these to a large extent, and that's why it's able to grow its ethanol industry to the size it is today.

If you compare this to China, the government supports electric vehicles because it is technologically advantageous to them. They are the biggest producers of batteries -- the metals and minerals, including processing -- so it is in their interest to promote EVs.

We see the same pattern in Indonesia -- its palm oil-based biodiesel program is progressing well as it aligns with the government's targets.

Where do you think the petroleum industry is leaning to in terms of investments and priorities for biofuels?

I will say for investments into the Asian markets, a big focus area is sustainable aviation fuel. I do see a lot of SAF production, either through merchant units or refinery coprocessing, happening today and it's starting to proliferate new investments that are coming on board.

For petroleum companies, I think what works very well for them is coprocessing [of bio feedstocks]. Today, they are looking at synthetic raw materials and e-biomass raw materials as part of the refinery process. This coprocessing could start from 5% and could increase to 30% in the future.

When you have hydrogen coming on board, you really can produce more e-fuels with lower carbon intensity.

Why are petroleum companies partnering with technology and agricultural companies on biofuel projects? What is driving this trend?

There's a couple of reasons. First, to increase the supply of a biofuel like SAF is very difficult. Today, global SAF production is no more than 1% of the world's aviation fuel demand. And we are mostly using animal fats, used cooking oils and byproducts to make it. Increasing production to 20 million-30 million mt is very hard to do without collaborating with different sector partners. Recently, the International Air Transport Association announced that they will require 500 million mt/year of SAF by 2050.

Second, they are exploring new pathways. For example, using ethanol or other alcohols could help to increase supply drastically, so petroleum companies are working across the industry to ensure that the infrastructure exists to deliver SAF, increase production, and invest and collaborate with different types of technology partners to develop processes, such as alcohol-to-jet and e-SAF.

AtJ [Alcohol to Jet] is one of the most viable solutions for increasing SAF production. We are already seeing plans to build such plants in the US by LanzaTech. I think Asia will definitely be on the radar for SAF production through this method.

How can biofuel companies transition away from government subsidies and achieve economies of scale?

We must remember that in Asia, biomass is insufficient and it's really expensive. Also, the supply chain for biorefineries is very poor and fragmented unlike in the US or Brazil, where it is integrated. If you compare, the price of ethanol in the US or Brazil is much cheaper than the price in Asia.

This all comes down to streamlining the industry. In Asia, some companies will produce corn and sell it in the open market and biofuel makers will buy it as per their need. However, in the US or Brazil, corn growers can have second crops in the same piece of land. They can, at the same time, make corn oil and dried distillers grains -- an animal feed. They create different types of products along the way, generating more revenues and reducing overall costs.

It's the combination of higher industrialization and integrated supply chains that helps biofuel companies get better margins.

I think governments also have to create the space and the foundation for Asian biofuel companies to stand on their own. It's not just trade barriers and funding support from the government, there should also be transportation and knowledge sharing.

Essentially, governments really must think through the whole process to make the whole biofuel industry work effectively and become independent.

Also in this series:

Insight Conversation: Alexander Kueper, Neste

Insight Conversation: Pinaki Mukherjee, Zuari Envien Bioenergy

Insight Conversation: Ed Mason, Jet Zero Australia