First palm oil-based renewable diesel plant to be built in Brazil

Palm oil producer Brazil Biofuels (BBF) and Vibra Energia, the main fuel distributor in Brazil, entered an agreement to unlock the construction of the first hydrotreated vegetable oil (HVO) plant in the country, local media has reported.

BBF will invest BRL1.8 billion ($323 million) in the new unit that will use palm oil as feedstock, rather than the country's usually-abundant supplies of soyoil, and is expected to start operations by 2025 in the tax-free zone of the city of Manaus in Amazonas state.

The use of palm oil is a highly controversial feedstock in biodiesel because of its cited role in land-use change and deforestation in tropical countries.

In view of that, the commodity's use in both FAME biodiesel and HVO will be capped in Europe from 2023 and scaled-down before an outright ban in 2030, while crops blamed for deforestation were targetted in international commitments announced at the recent COP26 UN climate conference.

Under the agreement, Vibra Energia will commercialise the whole output of the plant that will have an initial capacity to produce 500 million litres the palm oil-based HVO per year.

“Vibra has been contacted by clients such as the mining and agribusiness industries that need diesel to operate their supply chains and that have a decarbonisation agenda,” Vibra’s executive operations director Marcelo Bragança told the local business newspaper Valor Econômico Tuesday.

Brazil is considering whether to set a 2% HVO mandate in Brazil's biodiesel mixture but, according to Bragança, even without the mandate the outlook is favourable for HVO demand in the country.

HVO is considered less emissions-intensive than regular diesel, and can be used directly in diesel-fuelled engines or blended at any rate with fossil-based diesel.

But the use of palm oil and soyoil in HVO, also known as renewable diesel, has long been targetted by environmental groups - particularly in countries that have been ravaged by widespread deforestation and land-use change.

BBF said it will source palm oil from its units in the north of Brazil as well as from 10 new areas that the company has mapped in the Amazon region.

Yet the HVO is touted as a green fuel by producers, and BBF said the palm plantations would be on land subject to 'palm oil zoning' that is said to only permit the planting of palms on areas deforested before 2007.

Palm oil hasn't been foremost among deforestation concerns in Brazil because beef and soybeans are responsible for a much larger share of the country's deforestation rates, but the move to use palm is likely to draw the ire of green groups.