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April 10, 2008

Leading British biodiesel firm closing down UK refineries

The enormous damage being done by "splash-and-dash" imports of American biodiesel was highlighted yesterday when one of the UK's leading operators, D1 Oils, said it was closing down all its refining operations in Britain after running up a £46m annual loss.

The company, which is listed on the London Stock Exchange, said in future it would concentrate on developing jatropha planting in other parts of the world in cooperation with the oil group BP, and said it had raised £15m of new money to stabilise the financial side of the business.

Nearly 90 staff may lose their jobs as the newly built biodiesel refineries and research laboratories are shut down. D1 will hope to sell the sites and equipment but said the economics of the business were now so poor that it would be lucky to make much on their disposal.

Elliott Mannis, the D1 chief executive, said it was "extremely frustrating" that the company had been forced to bow out of refining because nothing had been done to stop the deluge of B99 biodiesel - biodiesel with 1% petroleum diesel - from the US. "It's an unbelievable situation and there is no end in sight," he added.

The biofuels boss said the "upstream" side of the business, by contrast, had very good prospects as demand for biodiesel was rising all the time. The company insists that its jatropha planting on 192,000 hectares of land in India and Africa is fully sustainable and is not competing with food crops.

Some environmentalists opposed D1's strategy, claiming jatropha was not always planted on marginal land unsuitable for food crops. But Mannis denied this: "We encourage farmers to grow jatropha on their marginal land and do not support planting on arable land." He said the first usable jatropha would be ready this year.

City analysts expressed disappointment at D1's annual losses, which compare with a deficit of £12.6m in 2006, and agreed that the US subsidy regime had wrecked refining margins. "The withdrawal from refining comes as no surprise given that refining biodiesel in Europe is not going to be viable until the 'splash-and-dash' double subsidy is ended and significant amounts of cheaper feedstock (such as jatropha) come on stream," said a research note from the stockbroker Ambrian Partners.

Splash and dash is where biodiesel is shipped to the US (sometimes from Europe) to add a drop of ordinary diesel and take advantage of government subsidies on any refining done in the US.

The European Biodiesel Board of producers will formally report on these problems to the European commission and hopes it can put pressure on Washington to end the practice.

The Guardian

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