Jatropha Economics Public Draft

8/2/2019 Jatropha Economics Public Draft

1/31

Economics of Producing Biodiesel from

Jatropha Mozambique

ExecutiveSummaryJatrophahasrecentlygottenalotofattentionasanemergingfeedstockinthebiodieselindustry

becauseofmultipleclaimsandhypotheses:

DoesnotCompetewithFood: Jatrophacanbegrownonmarginallandandthereforedoesnotcompetewithfood

LowCost:Biodieselfromjatrophacanbeproducedatalowcost($43perbarrelaccordingtoGoldmanSachsasquotedintheWallStreetJournal)

PositiveEnergyBalance: Biodieselfromjatrophahasaverypositivenetenergybalance EconomicDevelopment: Jatrophawillbeanimportanteconomicstimulusforcountriesinthe

tropicsandsubtropics

DoesnotCompetewithFood: AnassessmentofjatrophaprojectsinMozambiquehasshownthatjatrophadoessurviveonareasthatarenotthatvaluableforfoodproduction. However,itisnotcertain

whattheseoilyieldswillbe. Likeotherplants,jatrophaismostproductiveinthepresenceofadequate

waterandnutrients. However,jatrophacanalsoproducesomeyieldsinsandier,drier,andmore

nutrientpoorsoilsthanothercrops.

LowCost: BiodieselfromJatrophacanbeproducedatacostthatcompeteswiththepriceofpetroleumdiesel. However,itisnotclearwhatthecostofbiodieselwillbewhengrownunderdifferentconditions.

Thegreatestinitialcostistopreparethelandforplantingandthegreatestoperatingcostsarepruning

andharvestingtheseedsfromtheplants. Themostuncertaintyatthispointaroundcostisaround

collectionandharvestlogisticsbutbenchmarkstootherlaborintensiveagriculturalproductssuchas

cashewsandcharcoalsuggestthatjatrophacanbeharvestedandcollectedataneconomicallevel.

PositiveEnergyBalance: Bothmechanizedandlaborintensiveschemesarebeingusedtocultivatejatropha. Bothschemeshaveapositivenetenergybalance,withthelaborintensiveschemebeing

muchhigher(over20xoutput:inputratio).

EconomicDevelopment: Withupwardsof65%ofexpensesbeingdirectlyrelatedtolaborthroughoutthe

entire

value

chain,

producing

biodiesel

from

jatropha

has

potential

to

create

significant

income

opportunitiesforcommunityinruralMozambique. Likewise,itcouldhelptobalancethecurrent

accountdeficitbydecreasingfuelimportsandalsoincreasingtheexports,makinguseofMozambiques

comparativeadvantagewithagriculture.

Thekeyeconomicdriversforajatrophaoperationare:


2/31

Revenues

Oilyieldsoftheplantso Nutrientavailabilityo Wateravailabilityo Pestmanagement

Abilitytonegotiatefairpriceso AccesstointernationalmarketsORo Abilitytosupplylocalmarketswithoutbeingforcedtobepricetakerso Economiesofscale

Costs

Clearingandlandpreparationcosts LocalTransportationcosts

o Distancefromnurserytofarmingareaso Distancefromfarmingareastooilexpellingfacility

Distancetomajorportand/orrefiningfacilitiesORlocalaccesstomarketsForconditionspresentinChibuto,Mozambique,thefollowingcostswereobtainedthroughafinancial

modelthatwascreatedwithMicrosoftExcel. Thispredictsacostof$655pertonne($0.60perLiter)to

producebiodieseloverthelifetimeoftheproject.

Clearing&

Planting,$116.4

Nursery,$4.1

General

Maintenance&

Overheads,$67.2

Harvest

&

Transport

toExpelling,$243.1

Expelling&

Storage,$36.3

Transportto

Port,$48.5

Refining,$49.7

International

Transport,$91.8

JatrophaBiodieselCostBreakdown($/tonne)

Clearing&Planting Nursery

GeneralMaintenance&Overheads FertilizerandIrrigation

Harvest&TransporttoExpelling Expelling&Storage

TransporttoPort Refining

InternationalTransport


3/31

Jatrop

NurseThebene

I A A

a

Plantsar

watering

waterthe

theypref

Themajo

wasobse

(~$60/m

aBiodie

yCostsitsofanurs

provedabili

bilityforsing

bilitytomat

orerapidgr

mendments

placedinro

issuperior

if

nlaborers. J

rsun.

rcostofrun

rvedthatha

nth)thatco

selValue

ryare:

tytoselectb

lemanagert

hplantprod

wthofplant

wsofplastic

plantsare

be

atrophaseed

inganurser

approximat

ldproduce4

Chain

estplantsth

omonitorqu

uctiontoam

sduringiniti

Polybagsand

ingculled

(s

lingsonlyne

isthecosto

ly50labore

00,000500,

atwillideally

alityandsuc

ountofland

alphasesdu

watered,ei

lected)beca

edtobecov

fthelaborer

rsbeingpaid

00jatropha

resultinhig

cessofplant

beingcleare

towatering

herbyhand

useit

is

mor

redduringt

stomoveth

minimumw

seedlingsev

erplantyiel

germination

,fertilizer,an

orautomatic

likely

to

eve

heinitial12

plantsarou

geinMoza

ry23mont

ds

dsoil

ally. Autom

nlydistribut

weeks,after

nd. Onenur

bique

s(46cycles

tic

the

that

ery

per


4/31

year). Thisnurseryoperatorsaidhistotalcosttogetthesaplingstothefieldwas$0.06perplant,and

thatthebiggestcostwasrelatedtotransportingtheplantsfromthenurserytothefield.

Transportationofseedlingsfromthenurserytothefieldislikelythecurrentbottleneck,andisthe

reasonmanycurrentfarmersaretalkingoftheneedformobilenurseriesthatwillreducethe

transportationtime

from

nursery

to

the

field.

There

has

been

some

discussion

of

placing

the

Polybags

onwoodenpallets,andthenusingforkliftstomovethesearoundthenursery. Atruckthathada

shelvingsystemforpalletscouldexpandtheholdingcapacityofthattruckbyseveraltimes,therefore

reducingtheamountoftimethetruckspendsdrivingbackandforthbetweenthenurseryandthefields

whereitistobeplanted.

Majorcostsforanurseryare:

Labor Water Fertilizerandsoilamendments Transportationofsaplingstothefield

Labor

50laborersperyearcanprovide108,000manhoursperyear. Ifanurseryproduces3,000,000plants

peryear(enoughfor1,5002,500hectares)thenitisproducing27.8plantspermanhouroflabor. Ata

wageof$0.33perhourthisisequivalenttoabout$0.012oflaborcostsperplant

Water

Thecostofwateratthenurseryisvariable,dependinguponthedistancetothenearestwellorwater

source. Ifthereisasignificantverticaldepthtoreachthewatertablethentheremaybesignificant

energy

costs

associated

with

pumping

water

to

the

nursery.

Materials

Polybagscost$0.10perbaginquantitiesof100bags. Itshouldnotbeassumedthatbagscanbe

reused.

FertilizerandSoilAmendments

4:2:2NPKfertilizercostsabout$900/tonne.Thiscanbeaddedtoseedlingsinordertospeeduptheir

growthrates. Organicfertilizercanalsobeadded

Polyfert,oranothergellingagentisalsoaddedinordertohelpretainnutrientsandtohelptheplan

maintain

access

to

water.

Polyfert

costs

$15

per

kg

and

is

generally

applied

at

the

rate

of

5g

per

seedling.

LandPreparationCostsLandpreparationisthemosttimeconsumingandexpensivepieceoftheinitialestablishmentofa

jatrophaproject,andishighlydependentuponthetypeanddensityofthepreexistingvegetation


5/31

coveringtheproject. Largertreestakemuchmoretimetoclear. Landthatiscoveredintreesmay

quicklyruintheeconomicsofajatrophaproject.

Therearetwobasicmethodsthathavebeenusedtoclearland:

Labor-intensive

Thismethodisthoughttobethemostefficient,butlaborershavemuchmoretrouble,andaremuch

slowerwithanythingthatcannotbehandledwiththeirmachete. Withadequateplanning,landcanbe

clearedandlargertreescanbekilled,withtheirrootslefttorotthroughtheyearuntilthenextseason.

Iftractorsarenotusedforplantingthenthisisnotaproblem. Multiplefarmerswereobservedleaving

largertreesaliveinthefield. Thecostforclearingmildlycoveredlandthatwasaformercotton

plantationwasquotedat$250perhectareduringthemostefficientperiods.

Mechanizedbutsupportedbylabor

Thismethodismoreexpensive,butremoveslargerbrushandtreesmuchfasterthanwithlaboralone.

Thismethodrequiresmoretractorsandfuelthanthelaborintensivemethodandisparticularly

problematicin

more

remote

regions,

where

equipment

is

often

broken

and

in

need

of

repair

50

70%

of

thetime. Thecostforclearingmildlycoveredlandthatwasaformercottonplantationwasquotedat

$650perhectareonaverage. Becausetheaveragetractoruses6080litersoffuelperday,itwould

needtoaccomplishtheequivalentofatleast3040workersperdaytobeworthwhile.

Itmaymakesensetogrowjatrophaonmarginalsoilsifthecostsofclearingandpreparingthelandcan

bekepttoaminimum. However,theloweryieldsthatcanbeanticipatedintheseareaswillnotmake

projectsfeasibleiftheyarecovereddenselywithbrushortrees.

Planting

Costs

PlantingfromnurserycanbedonerelativelyquicklyifthelandisadequatelypreparedandPolybagsare

present. Assumingthatplantsarespacedin3x3rows,eachhectarewillconsistof33rowsand

columns,orabout1089plants. Rowsaremeasuredandstaked,andstringisstretchedacrossinorder

toensurestraightrowswhenplantedbyhand. Itwillalsotakeanadditional20manhourstosurvey

andstakeeachhectare.

Transportofseedlingstotheplantinglocation

Ifeachlaborercandoonetransplantaboutevery10minutes,thenitwilltake180manhoursfor

plantingeachhectare. Dependinguponthedistancefromthepointwheretheseedlingsaredropped

off,itmaytakemuchmoretimetotransporttheseedlingstotheappropriatelocationforplanting.

Transportingsaplingsfromadropoffpointtoanoutgrowerisamajorbottleneckintheoutgrower

scheme,becauseeachoutgrowercanprobablycarrynomorethan20seedlingsbyhand.

180manhoursperhectarewouldcost$57perhectare.


6/31

MaintenanceCosts

Pruning

Pruningcostsincreasewiththeageoftheplant. Simpledevicesusedtomeasureandprunetheplant

maybedevelopedtospeedthisprocess. Thebranchofthejatrophaplantwillsplitthreewaysafter

eachpruning.

The

following

is

an

estimate

of

the

pruning

time

required.

ThefirstthreepruningapplicationscanbedoneinYear1,thelasttwocanbedoneinYear2. Therefore,

thetotalnumberofmanhoursdedicatedtopruningperyearislikely:

Year1 53hours ($16.5perhectare) Year2 336hours($105perhectare)

Weeding

Weeding

does

not

need

to

be

done

over

the

entire

hectare,

or

once

the

plants

reach

two

years

of

age.

However,weedingdoneduringtheearlierstagesofplantdevelopmentisnecessaryinordertopreserve

thenutrientavailabilityinthesoils.

Onemethodthatwasobservedwastogiveeachworkerametalhoop. Thiscouldthenbeplaced

aroundtheplant,givingtheworkersavisualguideoftheareatokeepfreeofweeds,potentially

doublingtheefficiencyoftheprocessbyreducingtheirdecisionmakingtimeandreducingthedesireto

keeptheentireareafreeofweeds.

Assumingthatweedingeachplanttakes5minutesofweeding,eachhectareshouldtake90hoursper

hectareatacostofabout$28.50perhectare. WeedingshouldbedonefourtimesinYear1andtwicein

Year2.

Year1360hours($113.40perhectare) Year2180hours($56.70perhectare) AfterYear2,noweeding

Pestmanagement

Pestmanagementisamajorofareaofuncertaintyamongexistingcommercialjatrophafarmers. Itis

notknownwhattheimplicationsofpestswillbeuponplantyieldsbutproblemshavebeenobservedin

thefield

by

virtually

anybody

who

has

grown

jatropha.

In

Mozambique,

the

most

commonly

observed

speciesofpestsaregoldenfleabeetle,redspider,andstemborers. Abacteriahasalsobeennotedto

formonleavesofjatropha. Thepestsoftencompletelydefoliateentireplantsandfieldsbeforetheyare

counteractedwithpesticideapplication.


7/31

Mostjatrophaplantswillliveevenafterbeingeatenbyplantsbecausetheyarequickandhearty

growersandareabletoregenerateleavesafterbeingeaten.Itisnotknownhowthisaffectstheyields

butitcannotbepositive.

Thereissomespeculationthattheresistanceofjatrophatopestsimproveswiththeageoftheplant.

Thismakes

sense

but

it

remains

to

be

seen

if

this

will

be

the

case

in

Mozambique.

If

people

can

identify

strainsofjatrophawithnaturalresistancetothemajorpestsitwillbeoftremendousvaluetothe

industry.

Oneoperationwasnotedtohave50fulltimeworkerspatrollingandsprayingonapproximately5,000

hectaresofjatropha. Theselaborersaremoreskilledandshouldbepaidahighersalary. Thiscomesout

toabout1fulltimepestmanagerper100hectares. Thecostperhectaremaythenbe:

$12perhectare(labor) $20perhectare(chemicals)

Aerialcrop

dusting

has

also

been

discussed

as

apotential

way

to

manage

pests

more

cost

effectively

at

alargerscale. However,thecosts,uncertainbenefits,andpotentialenvironmentalhazardshave

preventedanyjatrophafarmersfromusingthistechniquesignificantly.

YieldsThekeysitespecificandtechnicaldriversthathavebeenidentifiedtoaffectyieldsofjatrophaare:

Intensityofsunlight Wateravailabilityandseasonality

o Below800mm/yearisonlowend,1200mm/yearisgood,1500mm/yearisexcellento Excellentsoilmoistureholdingcapacityoraccesstoawatertablemayreplacesome

rainfall

SoilnutrientavailabilityandwelldrainingsoilThereislittlereliableinformationontheyieldsofjatropha,whichhaveprobablybeenoverstatedin

manycases. Asurveyoftheliteratureanddiscussionwithexpertsindicatesthatwemayexpectthe

followingyieldconditions:

YieldAssumptions(tonnes/seedhectare)Year marginal moderate productive

1 0.0 0.0 0.02 0.9 2.0 3.0

3 1.5 3.2 4.5

4 2.3 5.0 7.2

5 2.0 4.0 8.0


8/31

Thereisalsoalackofreliableinformationabouttheamountofoilthatcanbeexpectedpertonneof

seedcollected. Ageneticcomponentlikelyplayssomeroleintheoilcompositionofeachseed,aswell

astheenvironmentalvariablesofclimate,nutrientavailability,andavailabilityofsunlight.

Percentageofoilassumptions(%byweight)

Low 22%Mid 32%High 42%

Moreresearchisneedtoincreasetheoilyieldsofjatrophaonaperhectarebasis. Thiswilllikelybean

ongoingeffortoverthenext1020years. CollaborationonR&Damongfarmers,universities,and

governmentinstitutesisintheinterestofalljatrophaproducers.

EffectsofFertilizer

Fertilizermaybeaddedtoimproveyieldsonpoorsoils,atarecommendedrateof250kgperhectare

for4:2:2

NPK

fertilizer.

This

is

estimated

to

cost

about

$900/tonne

for

the

raw

materials,

or

$225

per

hectare,iffertilizerisdeemedworthwhiletoapply.

EffectsofIrrigation

Irrigationwillsignificantlyincreasetheyieldsofajatrophaproject,butatadditionalcosts. Itisunknown

exactlywhatthebenefitstotheplantproductionwillbe,andthisishighlysitespecific,asarethecosts

ofanyirrigationsystem. Bothdripirrigationsystemsandfloodsystemsshouldbeconsidered. If

jatrophaisnecessitatedtobegrownontrulymarginalland,thenirrigationwilloftennotbefeasible,

becauseconvertingmostlandtoirrigationwillmakeitsuitableforfoodcrops. Also,waterisoftenthe

mostpreciousresourceintheseareas,anddrawingwaterfromanoverdraftedwatersystemwillcause

politicalcontention. Irrigationwillmostlikelyonlybesustainableinareaswherethereisasignificant

excessofwateravailable,bothtothelocalcommunity,theenvironment,andtothecommunities

downstream. Thesesituationsarerareandprobablyonlyoccurwherepreexistingirrigation

infrastructureexistedthatisnotbeingused,orwherelargedamsstoreanexcessofwateryearround.

HarvestCostsThereisnotmuchinformationonharvesteconomicsofjatrophabecauseoftheyoungstageofthe

jatrophaindustry. Jatrophaplantsdevelopseedsatstaggeringintervals,whichmeansseveralpasses

willneedtobemadethrougheachfield. Harvestmaytakeplaceoverseveralmonths,andpossibly

twiceperyearinsomeregions. Multiplescenarioscouldbeusedforharvesting,awagebasedsystem

orasystemwherelaborersarepaidbasedonthequantityofjatrophaseedstheybringtoacentral

collectionpoint,ortocollectiontrucks.

Oxcartsmaybeusedasintermediatetransportationtofacilitatecollectionfromharvesterstothe

centralcollectionpoint.


9/31

Wage-basedsystem

Assumingthatittakesabout3hoursforaworkertopickenoughjatrophatofilla32kgbag,jatropha

maybeabletobeharvestedfortheequivalentofabout$39pertonne. However,thisassumesclose

enoughproximitytoroads,andknowledgeofareaswherejatrophahasalreadybeenharvested,so

thereislessduplicationofeffort.

Harvest paybytime

6.0 hourstofilla32kgbag

0.5 hourstocarryitbacktoapickuppoint

0.5 hourstowalkbacktofield

7.0 totalhoursper32kgbag

31.3 bagspertonne

218.8 hourspertonne

$68 pricepertonne

Awagebasedsystemalsohaslessincentiveforworkerstopickjatrophaseedsthatarenotmature,in

ordertofilluptheirbagsquicker. Workerswouldbeabletocarrytheirbagstocollectionpointswithout

needingtoweighormeasurethemforquantityorquality,whichwouldsavetime. Finally,inthis

system,bagsofjatrophacouldbedumpedandworkerscouldreturntoimmediatelybeginpicking,

ratherthanwaittobepaid.

Priceperquantity

Ifharvestersarepaidbythequantity,thiscouldallowforaquickerrampupoftheavailableworkforce

duringperiodswherethisisneededfortheharvest. Workersshouldbepaidatleasttheequivalentof

theirnextbestalternative.

InMozambique,

one

benchmark

to

compare

this

to

may

be

charcoal.

In

general,

charcoal

production

is

averytimeandlaborintensiveprocess. OnestudyproducedbytheUniversidadedeEduardo

Mondlaneshowedthattheaveragebagsizeofcharcoalwas32kg,andthattheaveragepricepaidfor

thisbagpaidtoproducers(priortotransport)was$1US. Iftheequivalentcouldbeachievedfor

jatrophathenharvestcostwouldbe$31.20pertonne.

Akibbutztypeofsystemmayalsobeexplored,althoughitisuncertainhowthiswouldworkinthe

culturalcontextofMozambique.

Harvestsummary

Thesecostsareestimatesthatwillneedtoberefinedasmoredataiscollectedovertime. Little

informationexists

on

the

economics

of

jatropha

harvesting,

especially

on

large

scale

plantations,

and

especiallyinAfrica.

However,modelingsuggeststwokeypointsabouttheharvesteconomics

Harvestingisoneofthemajorcostsoverthelifetimeoftheproject Harvesteconomicsaredrivenbyrangeinwhichvehicleswithlimitedcapacitymusttravel;


10/31

Thebestplannedprojectswillultimatelyfavorprojectsthatfindtherighttradeoffbetweenhaving

economiesofscaleforoilextractionandthosewhichmayhavemultiple,moredispersedoilextraction

facilitiesthatreducelongdistancebulktransport. Someminimumdensityofoutgrowerswillbe

requiredinorderforharvesttransportlogisticstowork.

LocaltransportationtoexpellerAnoilexpellermustbelocatedwithinthevicinityoftheproject. Oiltypicallymakesupbetween2035%

oftheseedbyweight,andevenlessbyvolume. Therefore,expellingandpurifyingtheoilreducesthe

transportationcostsassociatedwithsellingtheproduct.

Thereareseveralvariationsofmethodsthatcouldbeusedforcollectingjatrophaseedsfromharvest

Payinglocalbukkie(pickup)drivers>butriskbeingcaptivetoamiddlemanmarkup Loadingdirectlyintotruckortractortrailers Loadingintocontainersortrailersthatareleftbytrucksortractorsandarethenlaterpickedup

Withacentrallymanagedplantationstylefarmcontainerscanbeleftinthefield,filled,andthenpicked

upandtakentotheexpellingfacilitybyatruckortractor. Thesecontainerscangenerallyholdabout20

tonnesofjatrophaseed. Onecontainermaybefilledwhileanotherisbeingtransportedandunloaded,

minimizingthewaitingtimethatmustbedonebytheheavyequipmentoperators. Theestimatedcost

pertonneforthismethodofcollectionisapproximately$17pertonne,withthemajorexpensebeing

theamortizationofthecontainersandtheheavyequipment.

Localpublictransportmayalsobebenchmarkedinordertounderstandanacceptableoperatingmargin

forlightvehicledrivers. TwobenchmarksinMozambiquetocomparethistwoare:

Chapadrivers(usedfortransportingpeople) Bukkiedrivers(usedfortransportingpeople andcharcoalorcashews)

Withamoredispersedcollectionsystemmaking70kmroundtrippickupswithabukkie,itwas

calculatedthatthecollectioncostwouldbeabout$64.50pertonneofjatrophaseed,whichcoveredthe

amortizationofthevehicle,wageofthedriver,andcostoffuel. Asacomparisonorbenchmark,a

similarchaparidewouldtakeinabout$50inrevenue. Therefore,collectioncanbedoneovergreater

distancesbutthecostswilladdup. Witha33%oilextractionratio,thiscomesouttoalmost$200per

tonne,or$0.20perLiterincollectioncosts.

Asabenchmark

for

local

transportation,

Chapa

drivers

take

in

approximately

$50

60

in

revenue

for

the

70kmtripbetweenChibutoandXaiXai. However,apremiumpricemayneedtobepaidinorderto

divertsomeoftheirresourcestoanewandseasonalbusinesswithlesscertaintyaroundtheirrevenue

opportunity. DriversmaybereluctanttoabandontheirexistingChaparoutesforevenalimitedperiod

oftimeiftheyfearitwillupsettheircustomers. Also,allowingindependentdriverstoloadacommodity

productopensuptheopportunityforanotherbuyertoenterandpotentiallybuytheproduct.


11/31

OilExpellingOilexpellersare,cheap,modularandcanbeboughtgraduallyasanoperationscalesup. Oilexpelling

costspertonofcapacityrangefrom$14perton/yeartoover$40perton/yearofcapacity. Atlarger

scalesover5,000hectares,largerscalecrushingandsolventbasedextractionmaybegintomakesense.

A100

tonne

per

day

extraction

unit

costs

$30,000.

Each

of

these

units

will

also

require

about

8laborers

toruntheequipmentandtohelpwithunloading.

Therefore,eachtonneofjatrophaseedthatisprocessedcanbeassumedtocost$6.33pertonne.

However,thisamountisequivalenttothetonnageofseedprocessed. Assumingthattheprocess

resultsin30%oftheoilproducedbyweight,itresultsinapredictedcostof$21.08pertonne.

Oilexpelling per10tonne/dayexpeller

$ 30,000 capitalcost,10tonne/dayoilexpeller

120 daysoperatedperyear

1,200 capacity(tonnes/year)8hourdays,120dayworkyear

$

25.00

costper

tonne

of

capacity

$ 4.28

amortizedcostpertonneofcapacity(15%interest,15year

payback)

8 laborerstorun

10 electricitypertonne(kW)

$0.045 costofelectricityperkWh

$0.45 costofelectricitypertonne

$ 1,920 wagesforlaborers,perexpeller

$ 1.60 wagesforlaborers,pertonne

$ 6.33 totalcostpertonneofexpelling

30% oilyieldefficiency

$

21.08

costper

tonne

of

oil

Thisefficiencycouldbeincreasedifexpellingequipmentwereoperatedyearround. However,this

wouldbeproblematic,asitwouldrequirelargequantitiesofjatrophaseedtobeleftsitting.

Oilcanbetransportedbeforeorafterthebiodieselrefiningstage. Transportationcaneitherbe

arrangeddirectlywithatransportcompany. Alternatively,Petromocmayestablishcontractsthatallow

themtopickuptheoildirectlyfromthefarmswheretheyareproduced.

OilStorage

Afteroilexpelling,Flexitankscanbeusedtostoreoiluntilitcanbetruckedoffsite. Thesewere

estimatedbyTechnoServetocost$650per21tonneunit,peryear. Thisequatestoapproximately$31

pertonneforoilstorage.


12/31

TransportationtoportTheproductofanyprojectwillmostlikelyneedtobetransportedtoamajorportatsomepoint,either

forrefiningtobiodieselorforblendingintodieselsupplies. Thiscostmaybereducedorremoved

entirelyifmodularrefiningisemployedthatisclosertothefinaldistributionpoints.

Basedupon

data

from

Petromoc

and

other

shippers

of

agriculturally

derived

liquids

we

can

assume:

RefiningAlthougharefinerycanbeamajorcapitalinvestment,itdoesnot

comprisethemajorportionofthevalueadd. Furthermore,

biodieselrefiningprovidesverylittleemploymentbenefitin

comparison

to

the

creation

of

the

vegetable

oil.

Still,biodieselrefiningcouldbedoneinMozambiqueona

modularscale. Thiswouldbemostbeneficialinregionswherethe

distributioncostsofdieselfuelarealreadyhigh,suchastheareas

thatarealongdistancefromtheports.


13/31

Becausejatrophaoilcanbeprofitablyshippedandsold,biodieselrefiningisavaluablerealoption. Ifitbecomeseconomicallyadvantageousfortheprojecttobuildarefinerythereisalwaystheoptiontodo

so. However,onceaprojectinvestsinrefiningcapacity,itmustsupplyataportionofthatcapacityto

payoffthecapitalinvestment,forfeitingtheoptiontoselltothe(potentially)moreprofitableand

subsidizeddownstreaminternationalrefininganddistributionmarkets.

Refining

$180.00 $pertonneinstalledcapacity

$52.00 $pertonneoperatingcosts

$30.78

amortizedcostpertonneofcapacity(15%interest,15year

payback)

$82.78 totalcostspertonneforrefiningofbiodiesel

Weshouldalsoassumethatanybiodieselrefineryisonlyabletooperateat50%ofcapacityonaverage

ifitrefinedinanimmatureandisolatedmarketlikeMozambique. Becauseoftheseasonalnatureof

jatropha,thelackofamaturestoragesystem,therearelackofeconomiesofscaletooffloadsurplus

rawoilsoninternationalmarkets.

Biodieselrefiningprovidesmuchlesseconomicbenefittolaborersperdollarofinvestmentin

comparisontotheproductionoftheoil. Forexample,abiodieselrefineryprocessing40,000,000liters

ofbiodieselperyearwouldneedonlytoemployroughly20people. Ajatrophaoperationproducingthe

40,000,000liters

of

feedstock

for

that

same

refinery

would

employ

at

least

5,000

people.

Refining

180.00$ $pertonneinstalledcapacity

52.00$ $pertonneoperatingcosts

30.78$

amortizedcost

per

tonne

of

capacity

(15%

interest,

15

year

payback)

82.78$ totalcostspertonneforrefiningofbiodiesel


14/31

Managementandotheroverheads

Organization

Fieldlaborersshouldbemanagedbysupervisorsinteamsof1520individuals. Ingeneral,itmakes

sensetocompensateworkerstosomedegreebaseduponmeasurableperformance,whenthisis

possible. Teamscanbetrainedtospecializeincertaintasks,suchasnurseryoperations,clearing,

planting,

etc.,

but

will

also

need

to

be

flexible

in

the

skills

they

develop

in

order

to

adjust

to

different

seasonaldemands. Forexample,plantingshouldonlybedoneduringthewetseason,soplanterswill

alsoneedtobeabletoclearandpreplandduringthedryseason,ordomaintenance.

Supervisorsmaybemanagedingroupsof10,andeffortsmustbemadetomeasuretheprogressofthe

teamsthatarerunbythesesupervisors,ideallyrewardingthemwithsometypeofperformancebonus

orpraise.


15/31

Foranexample10,000hectareoperation:

10managersandaccountants 100supervisors 1500Fieldlaborers(90teamsof1520) 50pestmanagementstaff 50nurserystaff

Tocompensateforadditionalmanagementoverheadsaddanadditional20%toalllaborcosts.

Aworkerslevelofrankisidentifiedbythecoloringoftheirclothingorprotectiveequipment.

Training

Fivedaysoftrainingwillbepermittedbeforeanyrealworkistobegin. Theprimaryfocusofthis

trainingshouldbesafety. ItwillbeimportantforsupervisorstobefluentbothinPortugueseandthe

locallanguage. Abilitytoreadorwriteisalsoabonus.

AdditionalCertifications

Workersshallbeofferedsomeincreaseinwagesiftheycanproducecertificatesorpasstests

demonstratingthefollowingskills:

AbilitytoreadandwriteinPortuguese AbilitytospeakEnglish Driverslicense Safteycertifications

PersonalProtectiveEquipment(PPE)

Boots,overalls,

gloves,

hardhats,

and

protective

glasses

can

be

purchased

in

bulk

for

atotal

of

about

350

Rand(~$50). Itshouldbeassumedthateachfieldworkerisissued12setsofPPEperyear.

Classesshouldbeofferedforregisteredemployeesandtheirfamilies.

InternationalTransportIfinternationalmarketsaretargeted,sufficienteconomiesofscalemustbereachedfortransportation

tobecomeefficient. Forexample,thepricesquotedbelowindicateaminimumquantityof17,000tons.


16/31

Thiswouldrequireatleast18,00019,000hectaresofcultivationinthevicinityofaporttofilloneship.

Althoughthisiscertainlypossible,itwouldrequireasignificantamountofstoragetobeutilizedinthe

port. Intheimmediatefutureoilmaybeshippedeitherinlinedcontainersorusedincountry.

MarketAnalysisThepriceofbiodieselfeedstockiscurrentlyhighenoughwhereitiscausingsomebiodieselplantsinthe

USandtheEUtoshutdown,asthevalueofbiodieselisnothighenoughabovethevalueofthe

vegetableoiltocoverthevalueofthevariablecosts. Thereasonthatthevalueofthevegetableoil

feedstocksarenearlythesameasthevalueofbiodieselare:

Foodmarketsdelinktheinput(vegetableoils)withtheoutput(biodiesel),andhighervaluefoodmarketsdriveuptheprice

SubsidiestobiodieselblendersintheUSof$0.25perLiterenablethemtoconvertvegetableoiltobiodieselwithsubsidiesthatoffsetsomeoftheirmarginalcosts. Thismakesitpossibleto

importvegetableoilsintheUS,convertthemtobiodieselandreceivethesubsidycredit,and

subsequentlyexporttheoiltoEurope.

Economiesofscalewithshipping17,000

tons

3 tons/hectareofseed

30% yieldofoilfromseed

18,889 hectaresrequiredtofillship


17/31

Thelongtermpriceofbiodieselfeedstockwilldependprimarilyon:

Thepriceofoil Internationalsubsidiesandblendingrequirements Competitionfromfoodmarkets ThevalueofCO2credits(toalesserdegree)

Thepriceofpalmoilbeingusedforbiodieselmaybeanadequatebenchmark,withaslightdiscount

takenbecauseofthefactthatjatrophaisnotafoodcrop,whichshouldgiveaninherentlylowervalue

(unlessinternationalsubsidiesaretweakedtofavorthisnatureofthecrop).

Alternatively,onecouldsignacontractthatislinkingthecostofvegetableoilto

thepriceperbarrelofoil,withsomevariationofthefollowingformula:

(Retailprice

of

diesel

fuel)

x

75%

Forbiodiesel,arangeofforecastsexist. Theconditionofinternational

regulationsandblendingrequirementsintheEUandUSarethekeyprice

drivers,asarepotentialblendrequirementsinMozambique. Theseprices

indicatewhatcouldbeexpectedaftertransportation. Thispricewouldbesignificantlylower(~$75$100/tonne)priortransportationtothetargetmarket.

Recently,thepriceofcrudevegetableoilshavebeguntoencroachupontherefiningmarginsof

biodieselproducers. Thisispartiallydotolinkageswithfoodmarketsandpartiallyduetotheblenders

creditintheUSof~$0.25perliter. Becausethissubsidyisapproximatelyequivalenttotheblenders

credit,refinerscanaffordtooperatewhenthepriceofvegetableoilsarenearthepriceofbiodiesel.

BiodieselPriceForecast(FOBintargetmarket)Low priceofdieselminus15%Mid sameaspriceofdieselHigh priceofdieselplus20%


18/31

OutgrowerEconomics

Anoutgrowersopportunitycostsmustbeevaluatedinorderforittounderstandifitisworthitforhim

toparticipateinanoutgrowerscheme. Onecommonmisconceptionisthatoutgrowershaveunlimited

timeinwhichtoworkontheiroutgrowerbusiness. Inreality,thesefarmersareoftenverybusywith

growingtheirsubsistencecropsandattendingtoraisingtheirfamilies.

Jatrophapresentsseveralproblemsforoutgrowersthatmustbesolvedinorderforanoutgrower

systemtobesuccessful

Ittakesatleast2yearsuntilplantsproducemeaningfulyields,andpossibly45yearsbeforetheyreachmaximumproduction;thisisalongterminvestmenttoapoorfarmerwith

immediateproblems

to

be

solved

and

mouths

to

feed

Plantscannotbeeaten,andsothereisnobackupplanforfarmerswhodonottrustthattheywillreceiveafairpriceforwhattheyproduce

Transportationmakesupamajorcostofgrowingjatropha;longtransportrouteswithmanystopswilldriveuptransportcostsofcollectionandharvestsignificantlyandwillrequiregreater

complexityofthecollectionlogistics. Someminimumlevelofdensitywillberequiredfor

jatrophatomakesense,evenforoutgrowers

0

200

400

600

800

1000

1200

1400

1600

29Jan08 5Feb08 12Feb08 19Feb08 26Feb08

Pricesofbiodiesel,inputs,andbyproductsduringFeb.2008

Glycerin,Central Methanol,contract

Soyoil,crude,GulfcoastUSA Biodiesel,USA


19/31

Pestmanagementhasbeenshowntobeanissuewithjatropha;coordinatingproactivepestmanagementthroughtheuseofpesticideswouldbeverydifficult,andpossiblyunsafe,if

workingwithadispersednetworkofoutgrowers

Jatrophaseedsarenotahighvaluecroponthebasisofweight,butplantproductionishigh.Withefficientcollectionlogisticsinplaceaprocessorcouldaffordtopay$0.10$0.30maximum

tothe

outgrower

farmer,

depending

upon

the

price

of

their

offtake

contract

and

the

support

networkthatisofferedtofarmers,suchaspestmanagement,nurseryservices,andagricultural

extensionservices

Employee-system

AbeginningemployeeinMozambiquewouldexpecttoearnabout$60/monthinwages,or$720per

year. Somejatrophafarmsallowemployeestochoosewhichhourstheywishtowork. Inthissituation,

employeeschosetoworkfrom4amto12pm,whenthedayiscooler,andthentaketherestoftheday

offtotendtotheirownsubsistencefarms. Thisfarmalsosetaside10%oflandontheareagrantedfor

subsistencefarmingbytheemployees,andplowedthelandforthemwithhistractorinordertoreduce

thelabor

they

needed

to

expend.

Outgrower-system

Inordertoearntheequivalentof$720peryear,anoutgrowerwouldneedtoproduceabout3.5tonnes

ofjatrophaseed(paidaround$200/tonne)fortheirproduct. Collectionlogisticswouldbemuchmore

efficientifoutgrowerslocatedneareachotherandfilledupcontainersleftinthefield,whichwould

requireaminimumefficientscaleof2030tonnesofseedinthevicinityofeachcontainer. Thiswould

likelyconsistofseveralfamiliesofoutgrowers,whichwouldthenaddcomplexitywithmeasuringhow

muchtocompensateeachmemberofthegroup.

AverageyieldintheChibutoareauponmaturityisestimatedtobeabout23tonnesfor1000mature

andwell

maintained

plants1.

Therefore,

each

outgrower

would

need

to

maintain

about

2hectares

of

plantsinordertoearnthesameastheypotentiallycouldasemployeesofajatrophaoperation. This

amountoflandisprobablywhatisreasonablyavailableinthecurrentmashambasystemwithout

requiringgreatwalkingdistances.

However,theywouldobviouslynotbeabletoreceivepaymentforatleasttwoyearsafterstartingwork

ontheirproject. Becausethemajorityoftheworkisinclearingandpreparingtheland,thisrepresentsa

significantriskoftimeintoaprojectthatmayhaveuncertainresultsforthem. Also,itassumesthat

thereislittlethievery,eitherinthefieldsorwhenpeoplearestoringtheirharvestforcollection.

It

will

be

important

to

determine

the

work

patterns

of

individuals

throughout

the

year

and

to

ensure

thattherearenomajorconflictswiththetimingofjatrophafruitionifanoutgrowersystemistobe

successful.

1Thisisassumedtobeonmarginalsoils,withoutirrigationorfertilizer. Withirrigationorfertilizertheseyields

coulddouble.


20/31

ByproductsandWasteStreamsFurthervaluemaybeobtainedfrommultiplewastestreamsandbyproducts:

Glycerin CO2credits

Glycerin

Glycerinisproducedatapproximatelytheratioof1:9,Glycerin:Biodiesel,dependinguponthe

equipmentconfigurationandchemicalinputs. Glycerincanbeusedorsoldasafeedstockfor

pharmaceuticals,soap,andotherchemicals. Currently,themarketvalueofglycerinisabout$500per

tonne. Therefore,incurrentmarkets,thiswouldaddabout$55ofrevenueforeachtonneofbiodiesel

produced.

CO2Credits

AjatrophabiodieselprojectmayreceiveCDMcreditsforthebiodieselthatisconsumed. Withtodays

priceforecastsforcarbon,thiscouldcontributeroughly$0.02$0.05perLiter(~$20$50pertonne).

However,themethodologytoobtainthesecreditscanbecomplex,andoftenhasregistrationfeesofat

least$100,000. Therefore,obtainingthesecreditsshouldnotbeassumedtooccurunlessbiodieselis

beingconsumedordistributedcentrallyorinamannerthatcanbetracked.

Risks&BarriersThemajorrisksforajatrophabiodieselprojectare:

Marketrisk

Ifthepriceofcrudeoilordieseldropscannotsustainalevelaboveoperatingcosts,thenprojectswill

shutdown.

This

can

be

addressed

via

long

term

offtake

contracts

and

hedges.

Technicalrisk

Amajorriskofjatrophaisthatthereisstillalotagriculturalsciencethatneedstotakeplace. Thisis

particularytruewithpestmanagement,whichappearstobeagreaterproblemthanwasoriginally

thought. Italsoappliestooptimizingdevelopmentandchoiceofdifferentseedvarietalsfordifferent

climaticandsoilconditions.

Politicalrisk

Inadditiontoahighpriceofpetroleumbaseddiesel,thebiodieselindustryiscurrentlysupportedby

subsidiesintheEUandtheUS. Removalofthesesubsidiesorevenbanningofbiofuelsbecauseofthe

foodversus

fuel

debate

could

lead

to

collapse

of

the

biodiesel

industry.

However,

policies

could

also

be

directedtofavorcropslikejatrophathatdonotcompetewithfood.

Policiesinproducingcountriescouldharmjatrophaiftheyrestrictjatrophacultivationduetoperceived

competitionwithfoodcropsorenvironmentaldamage. Likewise,mandatoryincreasesinminimum

wagewouldsignificantlyraiseproductionpricesinthedevelopingworldandmayshiftbusinessmodels

moretowardsoutgrowerbased orcontractschemes.


21/31

FOREXrCurrency

currencie

addresse

BarriersThemajo

A A A U A

Econo

CostbreThefollo

realizedo

fourtone

projectm

pertonn

crudejatr

iskfluctuations

sappreciate

viacurrenc

toimplemrbarrierstoiccesstoland

vailabilityof

ccesstocapi

nderstandin

ccesstoinfo

icAnalkdowningpiechar

verthe30y

sperhectare

anagerhast

toproduce

ophaoilfor

illnotbea

ersustheD

hedging.

ntationmplementin&longtimel

agribusiness

al

oftaxissue

mationabou

sisofthdisplaysthe

arlifeofa5,

. Itiscleart

egreatesta

iodieselfro

hisprojectis

ajorriskov

llarortheE

projectsare

ineofgovern

skills

aroundrefi

tsoilconditi

Jatrophpredictedc

000hectare

hatthetwo

bilitytocont

thisprojec

$640.8.

erall. Howev

ro,thenpro

currently:

mentproces

ingandblen

ons,climate,

ValueCstbreakdow

project,ata

reatestcost

olfarmest

isroughly$

er,ifproduci

ductionprice

sforproject

dinginMoz

andyieldsfo

ainnpertonne

discountrate

arealsotho

ablishment

75perbarr

ngcountries

swillgoup.

andlandap

mbique

rjatropha

fbiodieselp

of7%. The

sewhichthe

ndtransport

l. Thecosto

seetheir

Thiscanbe

provals

roduced,as

redictedyie

agricultural

. Thetotalc

fproducingt

ldis

st

he


22/31

Thecoststructureofajatrophabiodieselplantationislikelytohavealargeinitialinvestmentfollowed

byrelativelystableoperatingcosts. Thegraphbelowdepictsexpellingandrefiningcostsasbeing

amortizedas

they

are

scaled

up.

This

could

also

be

thought

of

as

atolling

fee

paid

to

an

external

refiner. Iftherefiningequipmentispurchasedupfrontitwouldrequireacapitalinvestmentof

approximately$3.7MM.

Clearing&

Planting,$116.4

Nursery,$4.1

General

Maintenance&

Overheads,$67.2

Harvest&

Transport

toExpelling,$243.1

Expelling&

Storage,$36.3

Transportto

Port,$48.5

Refining,$49.7

International

Transport,$91.8

JatrophaBiodieselCostBreakdown($/tonne)


GeneralMaintenance&Overheads FertilizerandIrrigation





23/31

InvestmentProfile

Thisprojectwasmodeledwithayieldof4tons/ha,totalestablishmentcostsof$1250perhectare,a

midrangepriceofbiodiesel,andadiscountrateof9%.

$

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

CostTimelinefora5,500haJatrophaPlantation


GeneralMaintenance

&

Overheads Fertilizer

and

Irrigation




1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

15,000,000

10,000,000

5,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031

SalestoDomesticMarkets:FCFsandCumulativeDCFs

FreeCashFlows CumulativeDCF ProductionofBiodiesel(tonnes)


24/31

CostofBiodieselProductionfromJatropha:SensitivityAnalysis

Biodieselmaybeproducedprofitablyevenatlowyieldsifthecostsareadequatelymanaged. Alow

cost,lowproductionoutgrowerschememaybesuccessfulifharvestandagriculturaloutreachcostsare

keptinplace. However,ahighlycapitalintensiveprojectwillneedtogetexcellentyieldsabove4tonnes

ofseedperhectareinordertobeprofitable.

EstablishmentCosts(perha) HarvestCosts(pertonneseed)

Yield(tonnesseed/ha)

PriceperLiterinChibuto NPV

$463.25 $35.00 2 $0.37 8,378,401

$463.25 $35.00 4 $0.28 24,949,230

$463.25 $76.25 2 $0.49 5,321,032

$463.25 $76.25 4 $0.40 18,834,502

$463.25 $142.50 2 $0.69 371,689

$463.25 $142.50 4 $0.59 8,982,613

$1,251.35

$35.00

2

$0.53

3,627,948

$1,251.35 $35.00 4 $0.35 20,198,777

$1,251.35 $76.25 2 $0.65 570,579

$1,251.35 $76.25 4 $0.47 14,084,049

$1,251.35 $142.50 2 $0.84 (4,378,764)

$1,251.35 $142.50 4 $0.67 4,232,160

$2,018.03 $35.00 2 $0.67 (978,384)

$2,018.03 $35.00 4 $0.43 15,592,445

$2,018.03 $76.25 2 $0.79 (4,035,753)

$2,018.03 $76.25 4 $0.55 9,477,717

$2,018.03 $142.50 2 $0.99 (8,985,096)

$2,018.03 $142.50 4 $0.74 (374,172)

ProfitabilityinDifferentMarketScenarios

Ajatrophaprojectwillhaveaprofitmarginaslongastheoperatingcostspertonnearelessthanthe

marketvalueofbiodiesel.


25/31

Thesepri

average3

LaborInLabor

is

e

haveatr

communi

from2to

school. A

dependin

ConclThissigns

betterth

beneficial

locations

anddistri

Thisprod

largeproj

produce

esaremode

0yearvalue

tensivenes

stimatedto

mendouspo

tywhereaja

33sincethe

projectcan

guponharve

sionshowthatbi

n,todays

m

tobothpro

thatarenot

butioncosts,

uctcouldbe

ectsdonotd

uchhigher

ledasincrea

sarelistedin

Modeleda

Low

$830.0

andSocialake

up

67%

sitiveecono

trophaproje

developmen

xpecttoha

stefficiencie

odieselcanb

arketprice

o

ucersandc

neartoports

whichalsoh

erybenefici

isplacepeop

ieldswithlo

singvaluest

thefollowin

erage30ye

9

Benefitsof

total

expe

icimpactn

tisbeingde

ofanearby

eover$400

s.

eproduced

petroleumnsumersin

. Producing

elpstobuild

altoAfricas

leorfood. I

werinputco

atarerefer

gtable.

arvalueofb

Mid

1,219.86

ndituresove

arthecom

veloped,the

jatrophapro

haofoperati

romjatroph

iesel.

Thist

frica,which

ndconsumi

theeconomi

economyifa

thelongru

ts,duetoi

ncedtoadi

iodieselper

Hig

$1,56

rthe

life

of

a

unitiesinw

numberofs

ject,inadditi

ingexpenses

atacostle

peof

produ

hasparticula

gbiodiesell

ccaseforbi

dequatecar

,developme

provedkno

selpricefor

onne

h

3.34

nyjatropha

ichtheyare

oresandsh

ontoanew

spentonlab

elthatisco

tionwill

be

rlyhighdiese

ocallyalsore

dieselinAfri

istakento

ntofR&Dar

ledgearoun

cast. The

roject.

This

sited. Inone

pshasincre

ownwellan

oreachyear,

petitive,or

speciallylpricesinm

ducestransp

ca.

akesureth

undjatroph

dbestgrowi

could

sed

d

st

ort

t

awill

g


26/31

practicesandgeneticvarietalsindifferentclimatesandsoiltypes. However,theearlymoverswillbe

theoneswhohaveaccesstothisknowledge,andwillalsohavetheadvantageofhavingacquiredthe

mosteconomicalplantinglocationsforjatropha.

Inlightoftherecentfoodcrisis,jatrophacurrentlyappearstobetheonlybiofuelsfeedstockthatdoes

notcompete

with

food

that

is

ready

to

be

deployed

today.

For

this

reason,

recent

investment

in

jatrophahassurgedandwillcontinuetosurgeintheforeseeablefuture.

Finally,aninvestmentinawellrunjatrophaprojectisstillinmanywaysabetonpetroleumprices

remaininghigh. Thiscouldmakelargeinvestmentsinjatrophaahedgeagainsthighoilpricestomany

corporationsorfinancialinstitutions,aswellasahedgeagainstthepotentialvalueofcarbonemittedby

theirpetroleumconsumptioninemergingcarbonmarkets.


27/31

Appendices

PotentialpolicyoptionsforMozambique

Phase1 (Years13)providestablegrowthconditionsforanascentbiodieselindustry Offerminimumguaranteedpriceof$800/tonneforjatrophaoil,whichisabovethecostsofthe

producerbutpermitoperationstoshiptheirproductabroad

Offerbreaksfromfueltaxes&VATinordertohelpmakebiodieselmorecompetitive Petromocoranotheragencyshouldestablishcentralizedstorageandblendingfacilitiesinkey

producingregions

Producersover150kmfromportsshouldbepermittedtoblendandselltheirownbiodieselwithminimumregulatoryburdenotherthanensuringbiodieselqualitystandards

EstablishprogramatUEMfocusedonbiodieselcultivationandprocessing,seekingpartnershipand

funding

from

outside

organizations

Speedapprovalsprocessformarginalland,identifyclustersoflandand/orcriteriawhereprojectapprovalcanbereducedto90days

o Offerquickerregulatoryapprovalforagreementonprojectstoleave10%oflandavailabletoprojectforfoodproductionorconservationforatleast7years

Goal: atleast200,000hectaresofjatrophaundercultivationonprimarilymarginallandin4years

Phase2 (Years35)fixefficiencybottlenecksinthebiodieselsystemandexpandtoincludeoutgrowers

Ensure

that

appropriate

investment

takes

place

around

oil

storage

in

the

ports

ReevaluatebiodieselpricestodeterminehowmuchbiodieselrefiningcapacityshouldbeinstalledinMozambiqueversussoldabroad

Evaluateprimelocationsformodularbiodieselrefiningontheinteriorofthecountryasameanstoreducetransport/distributioncoststoandfromtheports

StimulategrowthinproductionofMalawiandZimbabwe,minimizetaxationfortheexportofbiodieselfeedstockfromthesecountriesastheywillhelptopayfordevelopmentofrailand

portinfrastructure

IfdecisionismadetoblendintoMozambiquesdieseldistributionsystem,obtaincertificateofcompensationforappropriateCO2credits

Phase3 (Year6out)expandasamajorplayerintheinternationalmarkets Economiesofscalearereachedforinternationalshipping

o Bringsinforeigncurrencyandhelpstobalancethecurrentaccounto Pointlocationsforblendingmakesiteasytoverifythatincometaxesarebeingpaidon

fuel


28/31

Jatrophaprojectswillbemostfeasibleonlandwithminimalclearingcosts,andwherejatrophacanbe

planteddenselyenoughtoreducethelocaltransportationcosts,especiallywithharvesting.

IfinternationalmarketsbecomethetargetofaMozambiquebiodieselpolicythenproximitytoamajor

portwillbeofkeyimportanceandmanyinteriorprojects,wherelandismostavailable,willnotbeas

attractivewithoutveryhigheconomiesofscalebeingreached. Investmentinthebiodieselrefining

stagewillnotbeasattractive,ashigherreturnscanbeearnedthroughthelaborintensiveproductionof

therawoils. Mozambiquewillnotnecessarilyneedtotakeactiontopursuethisstrategyotherthan

reducingthebarrierstoinvestinginbiofuelsprojectssuchastheamountoftimeanduncertainty

aroundtheprojectsapprovalprocess.

IfdomesticmarketsbecomethetargetoftheMozambiquebiodieselpolicy,thenjatrophaprojectsthat

arelocatedontheinteriormaybegintolooksomewhatmoreattractivetoinvestorsifthereispotential

torefineandsellasignificantportionoftheirproductlocallybyusingsmallerscalebiodieselrefining

units.

However,these

projects

will

still

face

the

logistical

complexities

of

getting

equipment

and

materialsintotheirprojectsiteatahighercostsandprojectareaswillneedtobelargeenoughtohave

significanteconomiesofscalewithtransportation. Tostimulatedevelopmentofprojectsontheinterior

Mozambiquecouldmandateahigherbiodieselblendingrequirementinthisregionthenneartheports.

Also,inisolatedareasitwouldbeimportanttoguaranteefairpricesbeingpaidbyPetroMocandother

distributorstoproducers,eitherfortherawoilsorforarefinedbiodieselproduct. Alternatively,

farmerscouldbepermittedtosellB100withoutenteringthesameregulatoryprocessasotherdiesel

distributors.

IfPetroMocoranotherentitydoesmandateabiodieselblend,theyshouldalsoattempttoprocessthe

documentationsurrounding

CO2

emission

credits

themselves,

and

pass

along

some

of

this

benefit

to

biodieselproducersviaahigherofftakeprice. Incurrentmarkets,eachliterofbiodieselblendedby

Petromoccouldgeneratetheequivalentof$0.02$0.05perLiteradditionalrevenuethroughcreditsfor

CO2. IfMozambiqueweretoblend10%biodieselintonetconsumptionof500,000tonnesofdieselfuel

thiscouldresultinadditionalrevenuesof$1,000,000to$2,700,000peryear. Thisvaluewouldbelikely

togrowinthefuture,asthevalueofCERcreditsgrow. Althoughvaluableatthenationalscale,the

massofpaperworkrequiredtoobtainthemhasnotmadeitworthwhileforanyjatrophafarmeror

plantationtoobtainthem,yet.

PotentialforLandAuctions

Becauseof

the

economic

attractiveness

jatropha

projects

have,

the

government

may

wish

to

consider

auctioningtherightstothetoplargepiecesoflandthataredeemedtobeappropriateforjatropha

cultivation. ThiswouldhelptoraiseadditionalrevenueforMozambiqueaswellastodeterminewhich

companiesaretheseriousplayers. Atimewindowwouldneedtocreatedforwhenaprojectwould

needtobeginbyinordertoreduceoccurrencesofmerespeculationontheland. Anotherprocess

couldbecreatedthatwouldallowcompaniestoformallyrequestthegovernmenttoputapieceofland

upforauction. Ifspecificpiecesoflandwereupforauctionitmayattracttheattentionofmany


29/31

Westerncompanies,whicharenotaccustomedtotheconceptoffreeland,andwhowouldotherwise

beunfamiliarwithstartingajatrophaprojectinMozambique.

Thesefundscouldbeearmarkedforspecificprojectsrelatedtoagriculture,suchasthecreationofan

agriculturalresearchcenterthroughtheUniversity. Someportioncouldalsobesetasideinatrustfund

thatwould

pay

~10%

of

the

balance

in

interest

every

year.

OthermeansofstimulatinginvestmentinMozambique

Mozambiqueshouldbeginsendingrepresentativestomajorbiofuelsandrenewableenergyconferences

intheUSandEUtoadvertisetheworkthathasbeendoneonformalizingtheprocessesforestablishing

biofuelsprojects. Mozambiquecouldalsoconsiderpostingaddsinleadingbusinesspublicationsand

newspapersinglobalfinancialcenters. AccesstofinancefromwithinMozambiqueiscurrentlyone

barriertoimplementingjatrophaprojects. Greaterexposuretotheforeigninvestmentcommunitywill

helptoreducethatbarrier.

Descriptionof

Financial

Model

AuserfriendlyfinancialmodelwasdesignedandcreatedinMicrosoftExcelinordertohelpunderstand

thesensitivitiesofapotentialjatrophabiodieselproject. Inputsweregivenforlowmidandhigh

parameters,withmidparametersbeingsetforthevaluesthataremostlikelytobeencounteredin

Mozambique,baseduponpriorresearchandinformationencounteredduring~8weeksspentin

Mozambique,consultationwithjatrophaagronomyexperts,and2visitstoworkingjatrophafarmsin

country. Manyofthelogisticalinputs aroundfreightandtransportcomesfromastudydonebythe

WorldBankforthegovernmentofMozambique,fromPetroMoc(thenationalpetroleumdistribution

company),andfromaUSbiodieselcompanysfreightdepartment.

Ingeneral,

data

from

multiple

sources

was

combined

in

order

to

determine

what

makes

sense

in

Mozambique. EvenwithinMozambique,differentphilosophiesaboutprojectdesignandoperations

seemedtotakeamajorturn. Asawhole,mostofthecommercialfarmerswithover200hectaresunder

cultivationseemedtopreferacentrallymanagedschemetoanoutgrowersystem,atleastatthispoint

inthedevelopmentoftheplant. Therewerealsodifferentstrategiesrelatedtomechanizedversus

laborintensivestrategies,andhighinputprojectsseekinghighyieldsversusthosethatattempttobe

lowcostonaperhectarebasiswhilecultivatingalargeramountofhectaresmorequickly. These

differencesinphilosophiesshouldbeexaminedbeforecostingoutanyspecificprojectinadditionto

makingacarefulapproximationattheyieldthatmaybeobtained.

JeffLeBrun

will

continue

to

work

on

and

refine

this

model.

He

may

be

contacted

for

updated

versions

at

[email protected]


30/31

Revenue&FinancialParameters CostParameters

Operational

Yield (per hectare)Oil extraction efficiency

StartupCosts

Clearing

Nurserylabor

Nurserymaterials

Planting

Pruning

Weeding

PricesPrice of biodiesel

Price of CO2 reduction credits

Price of glycerin

Company discount rate

Cost of debtTax rate

CAPEXCostsOilexpelling

Oilstorage

Biodieselrefining

Biodieselwashing

Tractorleases

Pickuptrucklease

FinancialParametersCompany discount rate

Cost of debt

Tax rate

OperatingCostsPestcontrollabor

Pesticides

Electricityconsumptionforrefiningandoil

expelling

PriceofElectricity

Methanol

Otherchemicalinputsforbiodieselrefining

Localtransport

Transporttoport

InternationaltransporttoEUandUSA(optional)

Fertilzer(optional)

Irrigation(optional)

Costoflabor

Outputs

Net Present Value (NPV)

Breakdown of costs by stage of project

Breakdown of % labor costs

Cost per tonne

Cost per barrel


31/31

Jatropha Economics Public Draft

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