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:
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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;
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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%
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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)
Clearing&Planting Nursery
GeneralMaintenance&Overheads FertilizerandIrrigation
Harvest&TransporttoExpelling Expelling&Storage
TransporttoPort Refining
InternationalTransport
8/2/2019 Jatropha Economics Public Draft
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
Clearing&Planting Nursery
GeneralMaintenance
&
Overheads Fertilizer
and
Irrigation
Harvest&TransporttoExpelling Expelling&Storage
TransporttoPort Refining
InternationalTransport
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)
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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.
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
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
8/2/2019 Jatropha Economics Public Draft
31/31