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Viewing cable 06BOGOTA1537, GREEN OIL -- GOC EFFORTS TO PROMOTE BIOFUELS

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Reference ID Created Released Classification Origin
06BOGOTA1537 2006-02-17 17:52 2011-08-25 00:00 UNCLASSIFIED Embassy Bogota
VZCZCXYZ0001
RR RUEHWEB

DE RUEHBO #1537/01 0481752
ZNR UUUUU ZZH
R 171752Z FEB 06
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 2392
INFO RUEHCV/AMEMBASSY CARACAS 7193
RUEHLP/AMEMBASSY LA PAZ FEB PANAMA 8778
RUEHQT/AMEMBASSY QUITO 3880
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
UNCLAS BOGOTA 001537 
 
SIPDIS 
 
SIPDIS 
 
DEPT PLS PASS DOE - A/S KAREN HARBERT 
 
E.O. 12958: N/A 
TAGS: ENRG EPET CO
SUBJECT: GREEN OIL -- GOC EFFORTS TO PROMOTE BIOFUELS 
 
 
1.  Summary:  The Colombian government promotes the use of 
biofuels as part of a general strategy to reduce domestic 
consumption of dwindling oil reserves, reduce air pollution, 
and develop economic opportunity in the sugar and yucca 
industries.  Recent legislation requires that gasoline 
contain a mix of 10 percent ethanol in cities with 
populations over 500,000 and many areas of the country, 
including Bogota, are in the process of implementing the 
requirement.  Sugar and yucca producers have factories 
on-line to produce ethanol from their products and more 
investment is planned to meet demand.  The GOC also promotes 
the use of liquid gas for vehicular use and is considering 
how to support the marketability of biomaterials such as palm 
oil for use in diesel production in 2008.  End Summary. 
 
Ethanol Mix: Less Crude Consumed, Cleaner Air, More Jobs 
--------------------------------------------- ----------- 
2.  The GOC is promoting the addition of ethanol to gasoline. 
 The program began with the passage of Law 693 in September 
2001 which required the Colombian government to develop 
biofuels to:  1) improve the environment, 2) develop the 
agricultural sector, especially agro-industry, 3) improve 
fuel quality by obtaining the appropriate mix of bio and 
fossil fuels, and most importantly according to Ministry of 
Mines and Energy (MME) officials, 4) maintain energy 
independence.  Law 693 mandated use of the ethanol mix in 
cities with populations greater than 500,000 with a gradual 
phase-in of smaller cities afterwards.  In November 2005, a 
MME regulation took effect that required that gasoline 
contain a mixture of 10 percent ethanol.  The ethanol program 
began in the southwest region and the coffee growing zone and 
now includes the departments of Cundinamarca, Meta, Casanare, 
and Boyaca.  Bogota joined in February 2006 and Medellin, 
Bucaramanga, Cartagena, Cucuta, and Pereira must comply by 
September this year. 
 
3.  The regulation requiring the ethanol mix expanded to 
include the center of the country (Bogota and surrounding 
cities) on February 1, 2006.  According to MME, seven 
processing plants will produce about 450-500 thousand liters 
for daily distribution in the region for use in approximately 
1.5 million vehicles and save about 370,000 gallons of 
regular gasoline per day out of a daily consumption of 3.7 
million gallons. 
 
Ethanol Program Has Economic and Environmental Impact 
--------------------------------------------- -------- 
4.  MME estimates net sales of USD 172 million a year and a 
savings of USD 150 million per year worth of crude oil.  Five 
ethanol distilleries in the Department of the Valle de Cauca 
came on line at the end of 2005 and other plants in 
Providencia, Manuelita, Mayaguez, and Risaralda opened 
shortly thereafter.  Most of these will process sugar but a 
few will distill ethanol from the yucca root and panela (a 
sweetener made from sugar cane with a high molasses content) 
as well.  The initial investment to open these plants totaled 
USD 120 million for a total production of 1.05 million liters 
a day that will cover demand in Bogota, Valle de Cauca, and 
the coffee region.  MME estimates that a total of 12 ethanol 
refineries are required to produce the 2.5 million liters of 
daily production needed to meet national demand. 
Fedebiocombustibles, the Colombian National Federation for 
Biofuels, calculates that agro-industry needs a total 
investment of USD 680 million to create all the ethanol 
plants required and an additional 103,000 hectares of sugar 
cane cultivation.  Asocana, the sugar association, 
anticipates ethanol production will help guarantee 250,000 
jobs in the sector and create an additional 170,000, although 
the basis of this optimistic calculation may be more in hope 
than realism. 
 
5.  Ethanol availability in gasoline has led to cheaper 
gasoline prices. According to MME, there was an average price 
reduction in a gallon of gas of about 24 pesos (about one 
penny) where the ethanol mix was introduced in 2005.  In 
Bogota, MME expects prices to fall an average of 62 pesos 
(about 3 cents). 
 
6.  MME also predicts positive environmental effects from the 
ethanol program.  Colombia,s vehicles produced at least 10 
million tons of carbon monoxide and related gases in 2005. 
The ethanol program will produce a reduction of 30 percent in 
carbon monoxide vehicular emissions and a 6-10 percent 
reduction in carbon dioxide emissions. 
100,000 Vehicles Run on Natural Gas 
----------------------------------- 
7.  The Colombian government also promotes conversion of 
vehicles from gasoline and diesel to natural gas.  According 
to GOC statistics, there are approximately 100,000 vehicles 
that run on natural gas countrywide and the total will 
increase to more than 140,000 by year-end.  Colombian state 
oil company Ecopetrol reported that the pace of conversions 
has increased from 6,000 vehicles making the change in 2000 
to a record of 42,703 in 2005.  Most conversions occur in 
Bogota and Medellin.  Natural gas fuel is available at 150 
stations nationwide (39 of these are in Bogota).  Many of the 
conversions are for taxicabs. 
 
Biodiesel--Still Under Consideration 
------------------------------------ 
8.  The GOC is considering how to promote a mix of vegetable 
oil or animal fat for addition to diesel motor fuel as 
required by Law 939 of 2004.  Palm oil is the most likely 
fuel.  Fedepalma, the Colombian Palm Oil Association, 
estimated that in 2004, there were about 485,000 hectares of 
the plant in various stages of cultivation.  Colombia is the 
fifth largest producer of palm oil in the world.  Also in 
2004, the industry produced about 630,000 tons of crude palm 
oil.  Resolution 1289 (issued in December 2005) determined 
that a mix of 5 percent of biomaterials in diesel is the 
economically optimal level for commercialization.  Colombia 
does not have production capability to convert palm oil for 
use in diesel motor fuel yet but the GOC goal is to begin 
production by the beginning of 2008. 
DRUCKER