UK biodiesel firm driven out of refinery market by subsidised US exports

Biofuel technology company D1 Oils has announced it is to close its refining plants, claiming it is unable to compete with cheap US imports.

"Imports of heavily subsidised biodiesel from the US, so-called B99, have eroded margins to the point where we have no choice but to consider how to reduce operating costs," said chief executive office of D1 Oils, Elliott Mannis.

The decision to close the business' downstream refining and trading operations at sites in Middlesbrough and Bromborough is subject to consultations with employees, but in all likelihood, the refineries will be closed, a spokesman for the firm confirmed.

"Generally, across the biodiesel refining industry, where markets are open to cheap imports, we don't think anyone is running at more than 10 per cent capacity," he said, adding that those that were continuing to run at such low capacity were probably only doing so to maintain equipment.

"It's difficult to make any money in biodiesel across Europe in the current conditions," he said. "At the moment, we don't believe the UK is a viable place to conduct biofuel refining."

Since the US Energy Act introduced tax breaks for biodiesel in 2004, the European market has been flooded with cheap exports of B99. The D1 Oils spokesman said that approximately one million tons were exported from the US in 2007 alone, undercutting European vegetable oil price.

However, the company remains optimistic for its future and has recently raised money through existing shareholders to expand the business' interest in breeding, planting and managing new varieties of biofuel crops.

Alternative sustainable feedstocks are not subject to the same price pressures as food-grade crops, according to D1 Oils. It is currently pursuing a science and planting programme for Jatropha Curzas, a tropical oilseed-bearing tree and an inedible oil feedstock which can be grown on land unsuitable for arable farming.

"Alternative non-food oil is a much better prospect for biofuels in the future," said the spokesman.

Lord Oxburgh of Liverpool, non executive chairman of D1, said the level of interest shown by the investment community in the refocused company demonstrated continuing market confidence in the potential of D1's new business plan.

In related news, ethanol diesel fuel blend producer O2Diesel Corporation announced it will acquire 100 per cent of German biofuel distribution specialist Yelltec, which focuses on small to medium sized truck fleets and operates an exclusively German-based network of fuelling points. O2Diesel said the acquisition will give the company a significant foothold in one of Europe's largest biofuel markets.