Ethanol could be Taiwan's Future Fuel

By | September 01, 2002
During the first week of September, BBI International President Mike Bryan traveled to Taiwan on behalf of the U.S. Grains Council to discuss the options for replacing MTBE with ethanol.

"The discussions were fruitful," said Bryan, "The trip served to bring a heightened awareness to the mounting concern in Taiwan over MTBE in the groundwater as well as logistical issues that may be encountered if ethanol were to be used as a replacement fuel component."

Taiwan uses approximately 7 percent MTBE in nearly 100 percent of its fuel. They have begun to encounter contamination of groundwater sources in many wells that the Environmental Protection Agency (EPA) has tested. Some wells are testing alarmingly high with over 100,000 ppb. This is compared to the California standard of 13 ppb for health concerns and 5 ppb for odor and taste. While most of the wells tested were far below the 100,000 ppb, clearly, the permeation of MTBE into the groundwater is a major concern.

Some within the Taiwanese government and oil industry, however, argue that only about 5 percent of the total population of Taiwan obtain their drinking water from groundwater sources. Most drinking water is drawn from reservoirs, rivers and lakes. Others make the obvious argument that it is still not acceptable to pollute any water, when other options are available. On an island of 22 million, 5 percent represents 1.1 million people, a sizeable number to ignore.

"During our meetings, I also pointed out that airborne MTBE tailpipe emissions can contribute significantly to surface water contamination," said Bryan. "A key senator in Taiwan is currently ready to introduce legislation to ban the use of MTBE. This action could meet with substantial resistance from oil companies in the country."

Taiwan has two major oil companies, Chinese Petroleum Corporation (CPC) and Formosa Petroleum Corporation (FPC). The government owns CPC, while FPC is a private company. There are other players in the market including Nationwide Petroleum, who has no refining capacity but does have a significant presence in terms of retail outlets. Also ESSO has a few retail stations in Taiwan. "Gas price wars, while not common, due occur," Bryan said, "In fact, the entire time I was in Taiwan, a gas price war was underway. Prices dropped as much as 20 percent before they appeared to bottom out."

CPC and FPC own the refining capacity and a lion's share of the MTBE manufacturing capacity, although, TASCO Chemical does have significant MTBE production capacity and sells their product primarily to FPC, Nationwide and ESSO. As a result, the elimination of MTBE will likely meet with stiff oil industry opposition.

The potential for ethanol production in Taiwan appears to be a viable option, with two corn refiners already present, and both agreeing to produce fuel ethanol if the market is available. A larger question seems to be whether to simply import ethanol or import corn and create domestic production. Rural economic development is not such as important a motivator as it is in the United States, and land is at a premium. However, if the cost of ethanol could be substantially less if local production were in place that could well tip the balance towards the importation of corn. The cost differential between indigenously produced MTBE and ethanol is clearly the greatest obstacle. On the other hand, if MTBE is banned and the government's options for oxygenating fuel are limited, then ethanol may play an important role.

"I think that ethanol will have a role in Taiwan's future gasoline market," Bryan said. "While it certainly will not be without opposition or obstacles, Taiwan has the potential to become a 130 million gallon market in the not too distant future."