Interview, part 1
US ethanol is at a crossroads. After the surge in demand following last year's phaseout of MTBE, 6 billion gallons of new capacity is planned, leading to fears of overproduction.
Ron Miller, chairman of both the Renewable Fuels Association and ethanol producer Aventine Renewable Energy, sat down with Beth Evans, managing editor of Platts Oilgram News, at RFA's National Ethanol Conference in Tucson, Arizona, to discuss the outlook of ethanol.
The US ethanol industry is hoping for higher levels of blending in discretionary areas, where reformulated gasoline is not federally mandated. What is the status of that expansion?
Miller: Despite all the demand that was created this last year with the MTBE phaseout, we actually saw a creep in discretionary blending over the previous year, which absolutely floored me...[The US] picked up a couple hundred million gallons of discretionary blending, and I thought we probably killed some of it because of the roughly 2 billion gallons of increased RFG demand... But I think with the industry growth, and with imports balancing some of the RFG growth, it did allow some room for discretionary blending and my guess is it's probably all been done pretty much in the Midwest where we've got ample infrastructure in place.
In 2007, as we see a lot of this new capacity come on and...we'll start to see supply be pushed into the marketplace, and I think the growth area will probably be in the Southeast. We're already talking with people in the Southeast, working on some terminals down there. We know that some oil companies are putting in their own terminal blending systems down there to buy bulk ethanol...like Marathon. We have picked up volumes out of our Atlanta terminal.
Any particular Southeast states look ripe for discretionary blending?
Miller: I think one of the easiest states to get into is Florida, because Florida already is bringing in offshore gasoline and blend components and you have terminals down there that can blend up gasolines, so you sort of have a natural CBOB (Conventional Blendstock for Oxygenate Blending), so ethanol fits right in.
You can either go by rail or by barge. We've gone down there both ways. We've got storage in Houston that we could load...on ocean-going barges. We could also do that out of New Orleans, or we could rail it on CSX or Norfolk Southern [railroads].
Is the infrastructure in place for full-scale blending in Florida?
Miller: I don't think it's there today. But I think by the end of the year we'll be a long way along. People are just starting to put in blend facilities. There are some there, but I think we'll see the real growth in blend facilities this year, and everybody's just sort of waiting to see how fast the [ethanol] supplies are going to come on.
When will new ethanol supply come on line?
Miller: I think the marketplace...is sort of anticipating the plants coming on a little earlier than they may actually come on. Construction schedules get stretched out with delays in equipment, particularly since we're building so many of them right now. So, we think more of the supply will probably come on in the latter part of the year versus the first part.
Created: February 28, 2007
Interview continues on page 2
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