VZCZCXRO4640
OO RUEHDT RUEHPB
DE RUEHHM #0171/01 0690154
ZNR UUUUU ZZH
O P 100154Z MAR 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5478
INFO RUEHHM/AMCONSUL HO CHI MINH CITY 5714
RUEHHI/AMEMBASSY HANOI PRIORITY 3630
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC PRIORITY 0118

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000171 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ETRD EFIN SOCI PGOV VM
SUBJECT: BIOFUEL OR BUST: ONE COMPANY'S QUEST TO TRANSFORM VIETNAM'S 
ENERGY LANDSCAPE 
 
HO CHI MIN 00000171  001.2 OF 002 
 
 
¶1. (U) Summary:  One enterprise in Vietnam is forging a biofuel 
initiative based on crude oil from a new-generation biofuel 
feedstock, jatropha curcus.  GreenEnergy, Vietnam (GEV) has 
completed the first stage of its project to plant and refine 
crude oil from the jatropha bush, a hardy perennial plant that 
thrives on marginal land inhospitable to food crops common in 
some of Vietnam's poorest areas.  In Ninh Thuan province, GVN 
authorities have awarded GEV an investment certificate for 
jatropha production and put GEV in a prime position for 
developing this second-generation biofuel alternative energy 
source.  Vietnam's increasing efforts to develop biofuel options 
are already providing opportunities to influence energy policy 
through international developmental assistance, training, and 
investment.  End Summary. 
 
From Waste Oil to Miracle Bush 
------------------------------ 
¶2. (SBU) GreenEnergy, Vietnam (GEV) is an emerging player in 
Vietnam's nascent biofuel industry.  The South Carolina native 
who founded the company four years ago got his start in the 
biofuel business by salvaging the cooking oil thrown out by some 
Ho Chi Minh City restaurants.  He created a small-scale refining 
plant that converted the waste oil into biodiesel, which he then 
sold to local trucking end-users.  Looking to broaden his reach 
in the burgeoning biofuel world, he dabbled in inputs such as 
catfish and soybean oil before discovering the widespread 
benefits of the jatropha plant and began "spreading the gospel 
of jatropha."  In a February 6 meeting, the GreenEnergy founder 
told EconOffs that crude jatropha oil (CJO) significantly 
reduces greenhouse emissions and is nearly ideal as a 
sustainable, second-generation crop because of its unique 
ability to thrive in arid, marginal land unsuitable for food 
production (roughly 5 million hectares in Vietnam meet these 
criteria).  Its cultivation does not displace food sources, and 
thus is less controversial than the use of soybean or rapeseed 
for biofuel; nor does it destroy forests or disturb fragile 
ecologies, such as in the cultivation of palm oil.  He explained 
that in addition to jatropha's strong potential as sustainable 
energy alternative, it will also create fair trade economic 
opportunities in rural areas of Vietnam where alternatives are 
lacking and provide a net benefit to communities that cultivate 
the crop. 
 
¶3. (SBU) Faced with fundamental unknowns in the world energy 
market, American Director of Business Development said that 
GEV's business model seeks to exploit locations with agronomic 
comparative advantages (abundant marginal land, lots of sunlight 
and cheap labor) such as Vietnam where CJO is likely to be cost 
competitive with petroleum.  He said that GEV can currently 
break-even when oil is at $45/$50 per barrel and can make a 
profit when it rises to $60.  On an international level, as 
governments begin requiring stricter, sustainable and 
certifiable guidelines, such as those likely to be adopted in 
the EU's Roundtable of Sustainable Biofuel, CJO will be a 
competitive product relative to other types of biofuels. 
 
GEV's Vision...and Government Collaboration 
------------------------------------------- 
¶4. (U) GEV's joint venture with a publicly-traded Australian 
company last year has infused sufficient capital for the next 
two years along with technical expertise, as well as provided a 
platform for institutional investors seeking a "green" portfolio 
component.  The Netherlands Development Organization (SNV), also 
gives technical/training support to GEV projects.  In its first 
jatropha pilot project aimed at determining optimum cultivation 
practices, GEV planted 100 hectares in coastal Ninh Thuan 
province (five hours drive north- east of Ho Chi Minh City) and 
is building a refinery station powered by CJO that it hopes will 
become the premier center for biofuel research, development and 
training in Vietnam.   GEV has also recently launched pilots in 
14 different locations throughout eight provinces.  Though still 
primarily in the first stage of jatropha development, GEV has 
also stepped one foot into the next stage:  verifying 
large-scale commercial dynamics.  It has begun to form 
partnerships with agricultural co-ops that will recruit farmers 
to plant jatropha on their own land, with the goal of producing 
jatropha on 10,000 hectares at each location.   Ultimately, in 
the third stage of production, GEV envisions single or 
aggregated investors contracting land in localized areas and 
priced on a "per hectare capital expenditure" basis. 
 
¶5. (U) GVN interest in developing alternative fuels appears to 
be growing.  In November 2007, the government approved the 
production and use of biofuels and indicated it would create 
favorable conditions for development of the industry.  GEV 
executives said that to date GVN has been supportive of its 
projects and shown cooperation on several levels.  The Ministry 
of Agriculture and Rural Development (MARD) directed its 
 
HO CHI MIN 00000171  002.2 OF 002 
 
 
research division, the Center for Biotechnology and Forestry 
(CBF), to develop jatropha projects and provide recommendations 
for the GVN's National Program on jatropha.  Subsequently, CBF 
has approved GEV expansion plans and land allocation, provided 
contractual collaborations with provincial cooperatives, awarded 
GEV the first jatropha-only Investment Certificates for its 
pro-poor commercial models, and solicited its input in creating 
the National Action Plan.  Also, there has been substantive 
collaboration between GVN and GEV on research and development. 
For example, the MARD Division of Genetics and Agricultural 
Biotechnology plans to establish a tissue culture program at the 
GEV agro-station in Ninh Thuan and continue its genetic research 
on the jatropha germplasm.  GEV sees its relationship with GVN 
as a critical part of its long-term strategy and expects that 
the economic muscle GVN used to make Vietnam the second largest 
coffee exporter in the world will carry over into development of 
the biofuel industry. 
 
Comment 
------- 
¶6. (SBU) Comment:  GEV executives showed giddy optimism when 
talking about their vision for jatropha development in Vietnam. 
While efforts are still in the beginning stages, the potential 
for jatropha cultivation as a biofuel source in Vietnam could 
indeed be significant.  Besides providing a cost-effective fuel 
alternative with greater energy security, its environmental 
benefits and role in poverty alleviation has not been lost on 
GVN, which appears to be taking active measures forward and 
encouraging jatropha development efforts.  Large scale 
production of jatropha has yet to be proven, and international 
experts remain concerned about whether jatropha production can 
be ramped up to commercially viable levels.  Nonetheless, the 
growth of this industry would provide an opportunity to 
influencing the direction of Vietnam's energy policy, through 
private investment (in companies like GreenEnergy), NGO 
technical assistance and professional training, or even official 
development assistance.  End comment. 
 
¶7. (U) This cable was coordinated with Embassy Hanoi. 
DICKEY