DREditedKlein_AFPM_PresentationTY

All rights reserved © 2013
American Fuel & Petrochemical Manufacturers Annual Meeting
Tammy Klein
Senior Vice President – Downstream Research
Hart Energy
+1.239.970.2231
tklein@hartenergy.com
Biofuels Outlook:
Supply, Demand, Policies
March 19, 2013

Presentation Overview
• Regional Product Demand Growth & Share
• Global Trends
• Global Mandates
• Next-Generation Biofuels
Global Biofuels Overview
• Supply and Demand
• U.S. Ethanol & RFS2
• Brazilian Ethanol Supply & Demand
• U.S. & Brazilian Ethanol Dynamics
Ethanol
• Supply & Demand
• Biodiesel in the EU Countries
• Biodiesel in the Major Producing Countries
Biodiesel
Conclusions

Global Biofuels Overview

-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
North
America
Latin
America
Europe CIS Asia-PacificMiddle East Africa
-0.3%
1.9%
0.1%
1.9%
1.8%
2.6%
2.1%
Regional Petroleum Product Demand Growth
Or … Why Do Biofuels Still Matter?
Annual percent growth shown above bars
Asia-Pacific accounts for 54% of 2011-30 growth, China for 33% of global growth
Source: Hart Energy’s World Refining & Fuels Service, 2012
(million b/d)

Global Biofuels Supply and Demand, 2015-2025
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Total
Supply
Total
Demand
Total
Supply
Total
Demand
Total
Supply
Total
Demand
2015 2020 2025
Ethanol Biodiesel
Source: Hart Energy’s Global Biofuels Center, 2012
 By 2025, total market demand could
reach 5.4% by energy content
 Overall 42% growth in demand from
2015-2025 but questionable whether
supply will be there
 U.S. and Brazil make up 75% of
ethanol supply and demand
 Biodiesel expected to reach 4% of the
on-road diesel pool by 2025
(million gallons)

Global Biofuels Trends and Outlook
• ILUC is a headache for EU policymakers and the obligated parties there
• RFS2 is a disaster for the obligated parties in the U.S.
• Implementation slow in Asia-Pacific and Latin America
Implementation headaches
• Internal market demand continues to grow
• Exports availability subject to year-to-year volatility
• Capital a huge issue
Constraints for Brazilian sugarcane
• Biofuels compete for feedstock against food and feed
• Feedstock prices for soy, sugar, corn and palm oil at all-time highs
• Supplies are tight and stocks are down
Next-generation feedstocks have not emerged
• Technologies still unproven and scale-up has been very slow
• Mandates cannot be met in the U.S. and EU
• Incentives drying up
Advanced biofuels not available
• Ethanol: Strongest growth from Asia-Pacific but the U.S. and Brazil remain largest consumers
• Biodiesel: Strongest growth from Asia -Pacific but the EU remains the largest consumer
BUT: Biofuels uptake expected to grow

Latin America: More
countries push for
mid- and higher-
level ethanol blends Ethanol
Biodiesel
Ethanol & Biodiesel
Partial or no known biofuels program
Africa:
Countries beginning
to set mandates
Middle East:
Ethanol &
jatropha
R&D projects;
algae
Asia Pacific:
High variance
in blend levels
Europe:
RED implementation, sustainability
and GHG savings
North America:
RFS2, LCFS, intermediate blends?
Global Biofuels Mandates in 2013

Focus on Ethanol

0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2015 2020 2025
Asia Pacific Ethanol Supply Asia Pacific Ethanol Demand EU27 Ethanol Supply
EU27 Ethanol Demand Latin America Ethanol Supply Latin America Ethanol Demand
North America Ethanol Supply North America Ethanol Demand
Global Supply & Demand for Ethanol
(million gallons)

0
5
10
15
20
25
30
2015 2020 2025
BillionGallons
RFS 2 - Wet Ethanol
E10, E15, E85
E10, E15, limited E85
E10,limited E15 & E85 - Hart Energy
Scenario
E10, limited E85
U.S. Fleet Ability to Absorb Ethanol
RFS2 Volumes Are Not Attainable Using Ethanol

Brazil Ethanol Demand/Supply Balance
Upsurges in domestic demand – driven by softer prices – will periodically drive down net
export availability. Even during peak years of availability, net exports will fall below most
forecasts (e.g., Ministry of Agriculture, ICONE, UNICA, etc.)
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-15
-10
-5
0
5
10
15
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012f
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
HydrousProduction AnhydrousProduction
HydrousConsumption AnhydrousConsumption
Net Exports

Sugarcane Ethanol Demand Reduced by ‘Blend Wall’
The blend wall forces non-ethanol biofuels (primarily biodiesel) to be used beyond volumes needed for the
advanced biofuels mandate. The remaining ethanol demand will be filled by the cheapest ethanol available.
Carry-over 2012 RINs may allow some continued usage of sugarcane ethanol for RFS compliance in 2013.
0
5
10
15
20
2011 2012 2013 2014
Biodiesel (requirement within the Advanced Biofuels category)
Cane Ethanol (for Additional Advanced Biofuels)
Cellulosic Biofuel Requirment (waived and added to Advanced)
Corn Ethanol (foradditionalRenwable Fuel Req.)
Advanced Biofuels Advanced Biofuels
Additional Renewable Fuels Additional Renewable Fuels
Expected biofuel usage for
RFS compliance, no blend wall
Forecast biofuel usage for RFS compliance,
10% blend wall, no RINs carry-over

Focus on Biodiesel

Global Supply & Demand for Biodiesel
Source: Hart Energy’s Global Biofuels Center, September 2012
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2015 2020 2025
Asia Pacific Biodiesel Supply Asia Pacific Biodiesel Demand EU27 Biodiesel Supply
EU27 Biodiesel Demand Latin America Biodiesel Supply Latin America Biodiesel Demand
North America Biodiesel Supply North America Biodiesel Demand
(million gallons)

Biodiesel in the Major EU Countries
0
200
400
600
800
1,000
1,200
1,400
Finland France Germany Italy Netherlands Poland Spain Sweden UK
Supply Total Demand
(million gallons)

Biodiesel in the Major Producing Countries
0
500
1,000
1,500
2,000
2,500
Brazil Argentina U.S. Indonesia Germany France
Supply Demand
(million gallons) Biodiesel Supply & Demand in 2025

Regional Review

Outlook for Latin America
• Biofuels programs and production stalled in 2011-2012
• Credit is a major problem, but NOCs have taken significant positions that will
help build capacity
• Uneven implementation of programs
Overall
• Ethanol sector consolidating in Brazil
• Ethanol demand to grow 72% in the region by 2025
• Brazil will remain the low-cost supplier
• Peru will depend on ethanol imports
Ethanol
• Region has too much biodiesel capacity
• Argentina remains the most competitive supplier
• Peru will depend on imports
• Brazil has the largest biodiesel demand
Biodiesel

Colombia: B5
Argentina: E5, B5-B7
Brazil: B5
Colombia: E8-E10, B2-B7-B10
Venezuela: E7 (1)
Uruguay: E5(4)
2002 2007 2008 2009 2010 2011 2012 2015 2016
Mexico: E2 (GDL, MTY, DF) (1)
Uruguay: B5 (2) Notes:
(1) Not currently implemented
(2) Delayed
(3) Unlikely to go forward
(4) Implemented ahead of schedule
Brazil: E20
Brazil: E20-E25
Paraguay: E10
Costa Rica: B5 (1)
Jamaica: E10 (2)
Brazil: B2
Paraguay: E24
Costa Rica: E8 (1)
Uruguay: B2 (2)
Paraguay: B1
Panama: E2, E5, E7, E10
Brazil: E25
Ecuador: B5
Argentina: B10 (3)
Peru: E7.8
Peru: B5 (2)
Policy Time Line for Latin America
Numerous Mandates, Uneven Implementation

Outlook for the EU-27
• The EU is expected to rely on ethanol and biodiesel imports to 2025
• RED mandate cannot be met; main obstacles are the “blend walls” in the FQD
and the lack of commercial-scale production of second-generation biofuels
• Overall biofuels consumption by 2020 could reach 6.6% by energy content – well
below the 10% target contained in the RED
• EU imports biodiesel and ethanol even though it has sufficient capacity
Overall
• The EU remains the region most focused on biodiesel and is expected to continue
consuming more biodiesel than ethanol until 2025
• Biodiesel consumption expected to grow owing to increase in road freight and off-
road uses
Biodiesel
• Ethanol trails biodiesel as the most-consumed biofuel in the EU and is primarily
consumed as ETBE
Ethanol

EU:
ILUC still being debated;
Commission report expected
In October
EU:
10% by energy content
renewable energy into transport
and
6% GHG saving for transport fuels
EU:
GHG cut target 50%
July 2012: Commission approved 12
sustainability certification schemes
EU:
December 2010 implementation of
Renewable Energy Directive and
Fuel Quality Directive
in all MS;
GHG cut target 35%
EU:
GHG cut target 60% for new plants;
ILUC factors are applied
2010 2015 202020172011 2012 2018
Policy Time Line for the EU-27
Focus Is on RED Implementation

• Supply expected to meet market demand until 2020. For 2025, region will require
imports from Brazil or other Asian countries such as Vietnam and Pakistan.
• China to have largest market demand between now and 2025, followed by
Thailand and Japan.
• Imports: Japan and Philippines to continue through 2025 with South Korea
starting in 2020; and
• Exports: Thailand to continue as region’s primary exporter
Ethanol
• Supply to meet market demand for all diesel applications, including on-road sector,
through 2025.
• Indonesia to provide largest market demand for all diesel applications by 2025,
followed by China and Thailand. Indonesia’s market demand for on-road diesel is
also expected to be the largest by 2025, followed by Thailand and India.
• Imports: South Korea to continue through 2025
• Exports: Indonesia and Malaysia to continue as region’s primary exporters
Biodiesel
Outlook for Asia Pacific

Policy Time Line: Asia-Pacific
Thailand:
B2
Taiwan:
B1
South Korea:
B1
Australia (NSW):
2% (E)
China
(10 provinces):
E10
New Zealand:
E3, E10
Philippines:
B1
India:
E5
Philippines:
B2, 5% (E)
Indonesia:
3% (E), 2.5% (B)
South Korea:
B2
Australia (NSW):
4% (E), B2
Thailand:
B5
Philippines:
E10
Taiwan:
B2
Australia (NSW):
6% (E)
Malaysia:
B5
Indonesia:
15% (E), 20% (B)
Philippines:
E85, B20
Indonesia:
1% (E,B)
Indonesia:
5% (E, B)
India:
E10, B2
Note:
National Mandate
Partial Mandate
Target
Voluntary Introduction
Japan:
500,000 kloe (E)
China (Hainan):
B5
Thailand:
B3
Pakistan:
E10
Vietnam:
E5
Australia:
E85
Philippines:
E15, B5
Indonesia:
10% (E, B)
Philippines:
E20, B10
New Zealand:
E85
Thailand:
E20, E85
New Zealand:
B5
Taiwan:
E3
Vietnam:
E5
Japan:
ETBE
Malaysia:
B5
Taiwan:
B5
Pakistan:
B5
Pakistan:
B10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2020 2025
Vietnam:
E10, B5
Vietnam:
E5
Vietnam:
E10, B5
Thailand:
E10

Outlook for North America
• Restructuring needed, crisis of confidence
• Next-generation, E85 and E15 not the solution
• Physical blend wall impact deferred by banked RINs
RFS2
• Production slowdown, increased exports from the U.S.
• E15 market penetration super slow in the U.S., E10 slow in Canada
• CAFE will exacerbate impact as gasoline demand declines
Supply & Demand
• Proven basement consumption demand for octane
• Blend wall limiting consumption, E15 and E85 penetration limited
Ethanol
• Production driven by RFS (both countries), expansion capped by pricing
Biodiesel
• Some commercial production arriving
• Capital scarce, projects dwindling
Next-Generation Biofuels

Policy Time Line for North America
Note:
• Blue – mandate
• Red – suspended/not in effect
• *Mandates in Louisiana, Montana (E10), Pennsylvania
and Washington depend on meeting local production
or price triggers
• **Applies April-September. Reduction to B5 for cold
weather months.
2015: Minnesota: E20, B202007: Minnesota: B2
2007: Ontario: E5
2007: U.S. RFS2 Enacted
2022: U.S.RFS 2: 36 BGY
2020: California: 10% GHG
Reduction Target
2013: Massachusetts: B5
1997: Minnesota: E10
2005:
U.S. RFS 1 Enacted
2006: Hawaii: E10
2005: Louisiana:
B2*, E2*
2002:
California: CaRFG3
Standards effective
2010: Canada RFS: E5
2010: Ontario: E5
2010: Quebec: E5
2010: British Columbia:
E5, B3
2010: Florida: E10
2010: Pennsylvania: B2*
2011: British Columbia: B4
2011: Alberta: E5, B2
2008: Washington:
E2, B5*
2008: Missouri: E10
2008 Manitoba: E8.5
2007: Saskatchewan: E7.5
2011: Oregon: B5
2009: Minnesota: B5
2009: Oregon: E10, B2
2009: Montana: E10*
2009: Manitoba: B2
2013: Minnesota: B10**
2012: New Mexico: B5
2012: British Columbia: B5
2012: Canada RFS: B2
2012: Saskatchewan: B2
20222015 2020 20302008 2010 2013201120092007 2012

Conclusions

Conclusions
• Blend wall constrains further ethanol penetration; gasoline demand decline will further drive
consumption down
• The Brazilian ethanol market suffers from competition with the sugar industry
• The EU ethanol market is also limited by blending levels and declining gasoline consumption
• These factors have led to a reduced ethanol demand and potential oversupply until 2025
Ethanol: No Shortage Until 2025
• The use of biodiesel in off-road applications creates a very large demand in the EU-27
• Great uncertainties with regard to the sustainability of available supplies
• Argentina seen as major potential supplier to the global market, but hurdles seen in the
domestic (price setting, taxes) and export markets (export taxes, sustainability)
Biodiesel: Large Deficit Expected Until 2025
• 60% of the demand is to be met by ethanol
Biofuels: Global Demand Equivalent to 5.4% by Energy
of Gasoline and Diesel Pool by 2025

Thank You!
www.globalbiofuelscenter.comwww.ifqc.org www.hartwrfs.com
Hart Energy
1616 S. Voss, Suite 1000
Houston, Texas 77057 USA
www.hartenergy.com
Our Services:

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