Doris Leblond
OGJ Correspondent
PARIS, Oct 2 -- France's oil industry has greeted the launch of the "Flex-fuel 2010" development program with cautious approval for the initial stages of the program, which Finance and Economy Minister Thierry Breton outlined in late September. However, a number of points in the program remain unclear.
In particular, the government has asked various stakeholders to sign the "Charter for Ethanol E85," although it has yet to be clarified over the next few weeks. The stakeholders include the oil industry, the motor fuels distributors, automobile manufacturers, the agriculture and agro industry sectors, and the administration.
Total SA, Esso SAF, Royal Dutch Shell PLC, and BP PLC executives all told OGJ that signing the charter would depend on its contents. They each will decide individually and not within the framework of the oil trade group Union Française des Industries Pétrolières (UFIP).
Ethanol E85
The bioethanol "Flex-fuel Ethanol E85" program was launched on the back of a feasibility study Breton commissioned in early June from Formula One racing champion Alain Prost. Described by Breton as the first "post-oil fuel," E85 contains 85% ethanol and 15% traditional gasoline. The project to introduce it as an alternative to unleaded gasoline in all of France's service stations by 2010 is deemed technically feasible, with the US, Brazil, and Sweden given as examples.
However, the study indicated that in France the project would only take off if "all concerned players launch the dynamics together" and if sufficiently attractive tax breaks make both the fuel and newly adapted vehicles competitive.
These vehicles cost slightly more than those using conventional fuels, and UFIP Delegate Gen. Jean-Louis Schilansky pointed out to OGJ that E85 has 30% less energy yield than gasoline, so it must be sold at a price at least 30% cheaper.
Prost said that automobile manufacturers indicated they could offer flex-fuel vehicles as early as 2007 at a competitive price. He also said motor oil distributors have promised to install at least 500 "green pumps" by yearend 2007 in a number of service stations.
Schilansky confirmed that installation of the E85 pumps within that time is possible, but they would have to be set up at the largest service stations first because installation costs per station would be €20,000-40,000.
Commenting on Breton's announcement that government tax breaks would bring down the cost of E85 to €0.80—far lower than the current unleaded—Schilansky said that if this were really the case, it could very quickly become the anticipated alternative, providing the tax breaks would be perennial.
Regarding the problem of the refining industry's producing too much gasoline, "we will produce the same amount but export more of it," Schilansky said.
E85 vs. diesel
Substituting E85 for diesel, on which half the vehicles in France are now running, would be more difficult, he says. Diesel oil is cheaper in France because of lower taxation. Nonetheless, if oil prices shoot up, it could happen that E85 might prove competitive with diesel oil in time. In any case, the tax breaks cannot be squeezed below the lowest level allowed by the European directives.
Schilansky did not think E85 was likely to be developed in the rest of the EU. "France is the largest agricultural country in Europe and the second worldwide after the US, he pointed out. "She has the acreage to produce the crops to meet the needed ethanol demand beyond 2010." France also has a number of ethanol production plants either already on stream or about to be built, he added.
Breton pointed out other advantages: the ethanol line would give a needed boost to France's farmers—an argument also advanced by Agriculture Minister Dominique Bussereau—biofuels development would benefit the environment by "strongly" reducing CO2 emissions from transport, and E85 would reduce France's oil imports, improving the "global balance with oil-producing countries."