Biofuels 'a new IT bubble'

2008-04-15 17:23

Tiisetso Motsoeneng

Johannesburg - The global biofuels industry is a new dot-com bubble in the making, but, like the IT sector, the grain-based fuels industry is here to stay, a new report claimed on Tuesday.

"As with the internet, we believe that there will be a boom and the dust will settle," said Sander van't Noordende, Accenture's CE of Resources, at the release of the Netherlands-based global management consulting firm's study on biofuels.

"There will be a lot of unsuccessful companies, but also new players as well as the agribusiness, traditional oil companies and national oil corporations already playing in the market," said Van't Noordende.

The biofuels industry is expected to be a major player in the energy sector by 2012, in which there will be price transparency, and producers that have a cost advantage in producing biofuels become net exporters.

Accenture's study further forecast that there would be a market where buyers and sellers spanning multiple geographies would connect and transact.

However, only companies that are able to deal with uncertainties inherent in this evolving market will be among the global players.

Accenture said the challenges in the next five years include the introduction of second-generation technology such as cellulosic ethanol; the development of hybrid cars; and whether countries stick to their targets even in years of poor crop yield or falling oil prices.

Biofuels companies also need to have strategies that would cater or be flexible enough to deal with actions that might be taken by major energy consumers such as the US, China, India and Japan.

Accenture said the global biofuels industry would be shaped by the creation of a global supply market, and the extent to which governments, automakers, blenders and retailers support the fuel as an alternative to petroleum.

Other factors are challenges in creating scale markets in biofuels feedstock, product, transport and distribution, and the technologies in each part of the biofuels value chain.

- I-Net Bridge (News24)