November 22, 2006

Reducing Biofuel Risk through Feedstock Diversification

Following a theme of this blog, as long as ethanol production is constrained to a single feedstock source - corn or sugarcane - the longterm risks and volatility of feedstock prices will become untenable. Either competitive demand for feedstock will raise prices too high or agricultural soil sustainability will be compromised. And, clearly, there isn't enough corn available to satisfy a significant percentage of gasoline consumption. If we are lucky, we will replace the growth in demand for fuel, leaving existing consumption untouched.

However, by converting a wide array of feedstock into ethanol and other biofuels, we not only embrace a greater volume of biomass, but also reduce the risk of unbalanced supply. This will lead to global decentralization of production - important to defusing friction from competitive demand.

GS AgriFuels has the right bioconversion idea. By using gasifiers to process cellulosic feedstock into syngas, they will be able to creatively address local supply procurement and delivery issues. As their website explains...

We use a proprietary new biomass gasifier that is designed to standardize variable biomass feeds and optimize high yields of high-quality syngas in real-time with greatly increased capital and operating cost efficiencies at smaller scales as compared to traditional gasification technologies.

The syngas output of our gasifier can either be used to generate heat and power with standard generation equipment or catalyzed into liquid fuels such as ethanol, methanol and synthetic diesel with the Fischer-Tropsch process.

Looks like they have the front end down. However their reliance on F-T process makes it appear that they may need to look for a more efficient process for converting the syngas into biofuels. Here is their press release as published on Business Wire...

GS AgriFuels to Build Integrated Multi-Feedstock, Multi-Fuels Production Facility in Memphis, Tennessee

NEW YORK--(BUSINESS WIRE)--Sept. 6, 2006--GS AgriFuels Corporation (OTC Bulletin Board: GSGF) today announced its plans to build an integrated multi-feedstock, multi-fuels production facility in Memphis, Tennessee.

GS AgriFuels has executed several of the agreements necessary to develop its Memphis site and expects to commence construction of the Memphis facility later this year.

"We strongly believe in the potential of renewable fuels, but our view is that the domestic clean fuels industry faces significant challenges over the coming years," said Kevin Kreisler, GS AgriFuels' chairman and chief executive officer. "Among other challenges, the biodiesel sector faces high concentrations of risk in the soy markets and the corn-derived ethanol sector is facing both increasing corn prices and decreasing distillers dried grains prices. Our belief is that these risks can be mitigated with feedstock diversification and with the use of proprietary new technologies and production improvements. Our business model incorporates elements of each."

GS AgriFuels intends to use standard fuel production technologies and a number of proprietary technologies, including innovative pre-treatment, process intensification, gasification, catalytic, and carbon capture technologies, synergistically at small-scales to enable the refining of many forms of biomass into clean fuels, including biodiesel and ethanol.

"Our development plans are based on the premise that feedstock diversification and integrated multi-fuel production capability at relatively small-scales will allow us to hedge risk and proactively manage fluctuating market conditions in opportunistic ways," added Kreisler. "We are designing our facilities around this philosophy."

GS AgriFuels is currently developing several sites for the construction of its planned integrated multi-fuel production facilities. GS AgriFuels' planned Memphis facility will have an initial nameplate capacity of 10 million gallons of biodiesel and 5 million gallons of ethanol, methanol and/or biomass-derived synthetic diesel and will commence production in 2007.

GS AgriFuels' expects to scale its Memphis, Tennessee facility to in excess of 45 million gallons of annual fuel production given that facility's location in a major distribution hub. Additional information on GS AgriFuels' development plans is available online at

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