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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #1253/01 3471019
ZNR UUUUU ZZH
R 121019Z DEC 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 9714
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHBJ/AMEMBASSY BEIJING 0240
RUEHBR/AMEMBASSY BRASILIA 0149
RUEHBY/AMEMBASSY CANBERRA 0139
RUEHLI/AMEMBASSY LISBON 1307
RUEHLO/AMEMBASSY LONDON 0315
RUEHMO/AMEMBASSY MOSCOW 0074
RUEHNE/AMEMBASSY NEW DELHI 0029
RUEHOT/AMEMBASSY OTTAWA 0463
RUEHFR/AMEMBASSY PARIS 0174
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 MAPUTO 001253 
 
SENSITIVE 
SIPDIS 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, AF/EPS, AND EEB/ESC AND CBA 
DOE FOR SPERL AND PERSON 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EMIN EINV EAGR SENV MZ SF
SUBJECT: BIOFUELS IN MOZAMBIQUE: MORE ANALYSIS 
 
REF: A. MAPUTO 1073 
     ¶B. MAPUTO 1051 
     ¶C. MAPUTO 1018 
     ¶D. MAPUTO 958 
     ¶E. 07 MAPUTO 1341 
 
¶1.  (U) This cable represents the fourth in a series in an 
innovative collaboration in energy/resource reporting and 
commercial advocacy between Embassies Maputo and 
Pretoria.  Embassy Pretoria Minerals/Energy Officer and 
Maputo Political/Economic officer visited energy/minerals 
projects in northern Tete province and met relevant 
government and private officials in Maputo October 13-17, 
¶2008. 
 
¶2.  (SBU) SUMMARY:  The biofuels industry is often referred 
to as a potential energy security solution for Mozambique 
given the country's 89 million acres of arable land; of which 
only 12 percent is currently in use; experience with sugar 
cane production; tropical climate; viable irrigation; access 
to ports; and relatively inexpensive labor and electricity. 
The Government of Mozambique (GRM) is still developing its 
policy on biofuels, but has already approved several 
bio-ethanol projects which should become operational in 
several years.  Bio-diesel projects from sources as varied as 
coconuts and jatropha seem less likely candidates. 
Currently, however, international prices of petroleum and 
tight credit markets will likely limit biofuels production in 
Mozambique.  END SUMMARY. 
 
--------------------------- 
MOZAMBIQUE'S BIOFUEL POLICY 
--------------------------- 
 
¶3.  (SBU) In January of 2008, President Guebuza announced 
that biofuels development in Mozambique would not dislodge 
food production and that all refinement would take place in 
Mozambique.  Mozambique's biofuels policy remains in 
development, despite this high-level articulation of 
principles.  Ministry of Energy Director of Renewable Energy 
Dr. Antonio Saide explained to EmbOffs that he is reviewing a 
draft policy which will be under discussion within the 
government.  Dr. Saide said that approval of ethanol projects 
from sugarcane was relatively straightforward because 
Mozambique is familiar with sugarcane (Ref D).  However, the 
GRM is cautious and much less familiar when it comes to 
bio-diesel projects, particularly with respect to 
non-conventional crops, such as jatropha.  The GRM will 
likely not grant further project approvals until the biofuels 
policy has been finalized. 
 
----------------------- 
A BIO-DIESEL CANDIDATE? 
----------------------- 
 
¶4.  (SBU) Mozambique has been identified as a strong 
candidate to benefit from the development of biofuels because 
of its extensive natural resources, including arable land and 
water, inexpensive labor, tropical climate and expanding need 
for fuels.  However, a bio-diesel market in Mozambique is 
improbable until excess domestic production of vegetable oil 
exists.  Currently, the domestic market is unready for 
bio-diesel, as edible vegetable oils have more value than as 
bio-diesel, diesel is cheaper to purchase than bio-diesel is 
to produce, and there is no market for feed cake (Note: 
bio-diesel sales alone cannot cover production costs, there 
needs to be a secondary market for leftover plant material, 
or feed cake.  While not available now, the rapidly growing 
poultry industry may provide a future feed market.  End Note) 
 
------------ 
AND ETHANOL? 
 
MAPUTO 00001253  002 OF 003 
 
 
------------ 
 
¶5.  (SBU) Brazil has subsidized its own bio-ethanol industry 
for over 20 years to include establishment of mandates for 
special fuel autos, suggesting that to implement the same, 
Mozambique would have to develop a subsidy scheme to promote 
bio-ethanol.  Further, sugarcane-to-bio-ethanol production 
requires significant chemical inputs, thus limiting 
smallholder participation and competing directly with food 
production.  Finally, bio-ethanol is of marginal benefit at 
best in terms of CO2 production, from an environmental and 
economic basis.  Nonetheless, two production scale 
bio-ethanol projects have been approved and are under 
development in Mozambique. 
 
¶6.  (SBU) The first bio-ethanol project, developed by Rusni 
Distilleries, an Indian concern which has partnered with 
national petroleum company Petromoc and the International 
Crops Research Institute for the Semi-Arid Tropics (ICRISAT), 
agreed in September 2007 to a $30 million sweet 
sorghum-to-bio-ethanol project in Sofala Province.  Currently 
the project is in the feasibility study stage and under 
review by the Government of Mozambique (GRM).  The second 
project, signed by the GRM in October 2008, is led by 
Procana, whose main investor is Central African Mining and 
Exploration Company (CAMEC), and is located in Massinger, 
Gaza Province.  The proposed $510 million project will use 
74,000 acres of sugarcane to produce 85 million gallons of 
bio-ethanol.  A third project awaiting 
GRM approval is in Dombe, Manica Province.  Proposed by 
Principle Energy of the UK to produce 60 million gallons of 
bio-ethanol annually from 49,000 acres of sugarcane, the 
project includes a total investment of $597 million, 
including a $290 million bio-ethanol plant, with construction 
beginning in 2009 and full production expected by 2011.  This 
project may be delayed due to Principle Energy's inability to 
raise sufficient funding. 
 
------------------- 
HOW ABOUT COCONUTS? 
------------------- 
 
¶7.  (SBU) One small project produced bio-diesel from dried 
coconut (copra) and has saved between 20-25 percent on fuel 
costs.  However, this was only possible because the project 
had a processing facility that was able to deal with the 
sub-standard quality of copra used as the source material. 
Other projects failed because of the poor quality of copra. 
A case in point, a Matola-based oil processing plant that 
processes copra into bio-diesel has stopped production due to 
poor quality feedstock which arrived moldy, thus unsuitable 
for processing. 
 
¶8.  (SBU) While Mozambique is a significant producer of 
coconuts, there are international standards for bio-diesel 
that are implemented with the use of automated analysis. 
Because of the composition of coconut oil, these automated 
tests cannot be used for checking the quality of coconut oil 
even though the oil is appropriate for use in bio-diesel. 
Alternative standards are being developed by Brazil and the 
Philippines.  Mozambique may adapt these standards or develop 
its own; however, Mozambique currently lacks the analytical 
laboratory facilities to analyze oil quality for bio-diesel 
use. 
 
--------------------- 
THE CASE FOR JATROPHA 
--------------------- 
 
¶9.  (SBU) The ESV Bio Africa Jatropha bio-diesel pilot 
project is believed to have about 12,000 acres planted, 
although an earlier target had been to have 27,000 acres 
 
MAPUTO 00001253  003 OF 003 
 
 
planted by this time.  Research is ongoing on how to deal 
with the toxic substances in jatropha seed and on oil 
quality. 
 
¶10.  (SBU) Noting the need for a market for the feed cake of 
a vegetable oil sources to make bio-diesel production 
profitable, Jatropha could be problematic given its toxic 
content.  Feed cake typically has a market as feed of poultry 
or cattle, although there is little ranching in Mozambique, 
and poultry production is still developing.  Of further 
concern, jatropha in Mozambique is being eaten by a 
previously unknown flea beetle, which will impact yield and 
long term viability. 
 
--------------------------------------------- --- 
COMMENT: BIOFUELS VIABILITY QUESTIONABLE FOR NOW 
--------------------------------------------- --- 
 
¶11.  (SBU) A May 1, 2008 report on biofuels in Mozambique, 
authored by The World Bank and the Italian Government, takes 
a favorable view of Mozambique's potential, but this is based 
on many untenable assumptions including government subsidy of 
biofuels production and mandated targets for mixing 
bio-diesel.  The report also fails to include world market 
perspectives in the analysis.  Some projections about 
economic conditions that will support a sustainable biofuels 
industry in Mozambique require consistent $70-per-barrel oil 
prices, for example.  While oil prices were well over $100 
for a number of months recently, prices now hover below $50 
per barrel, undermining the economics of biofuel production. 
Tight credit markets also add to concerns about future 
biofuel investments in Mozambique, suggesting that a viable 
biofuel industry is still several years off. 
Amani