Oenon Holdings Inc. May Produce Ethanol from Rice

24/05/07 Alcoholic beverage maker Oenon Holdings Inc. may produce ethanol from Japanese rice to mix with gasoline, a challenging plan in a country where costly farm produce has kept the usage of green fuels largely at bay.

Tokyo-based Oenon said on Wednesday a five-year project to build and run an ethanol plant in Tomakomai city, located in the southern coast of the northern island of Hokkaido, is awaiting government approval.

The Ministry of Agriculture has set aside 8.5 billion yen ($69.8 million) from its annual budget to promote locally-made green fuels to supplement gasoline for auto use given hefty carbon emissions reduction targets to meet under the Kyoto protocol.

"The fate of the project is yet to be known until the farm ministry makes a decision," said Hisako Kawakita, a spokeswoman at Oenon, which has its roots in 82-year old distiller of traditional spirit from potatoes in Asahikawa city, central Hokkaido.

Five other groups have submitted their ethanol plans, waiting for the ministry's decision to be taken with advice from an independent committee by the end of this month as to which project or projects will receive the subsidies, a farm ministry official said.

Japan, the world's second largest gasoline consumer of some 60 million kiloliters (kl) a year, is almost totally dependent on imported fuels, and in 2006 produced only 30 kl of biomass ethanol at government-backed pilot plants.

Japan also largely relies on food from abroad as cheaper imports have driven many farmers out of business and into the cities. Rice, the country's staple food, is one of the few farm products fully sufficient in Japan.

Counting on 2.25 billion yen on subsidies, or a half of the planned spending, the project plans to build an ethanol plant with annual capacity of 15,000 kl, according to private research Hokkaido Intellect Tank, a member of the project together with the Hokkaido municipal government and other entities.

Oenon, named after Oeno, the goddess of wine in Greek mythology, is expected to contribute its existing distillation technology to the project.

The plant's commercial production is expected to start in the year starting in April, 2009, and the product would be used to make ethyl tertiary butyl ether (ETBE).

It was only late last month when gasoline blended with ETBE -- a popular petrol additive for green-conscious drivers in Europe -- started trial sale at 50 pump stations in Tokyo and surrounding areas.

Hokkaido Intellect Tank said in a statement that the project plans to use imported rice as feedstock initially to lower costs, which is later to be replaced with Hokkaido-grown rice.

Large-sized farming is common in Hokkaido, where rice production per acreage for the 2005 crop was about 8 percent higher than the national average.

Oenon formed a holding company in 2003, with several regional alcoholic beverage firms under its umbrella.