Biodiesel is produced by reacting methanol with natural fats notably tallow or vegetable oils such as canola or imported palm oil by a process of transesterification. This involves replacing the trialcohol glycerol component of the oil/fat with methanol leaving a more mobile ester which has characteristics of petroleum diesel. The high price of petroleum combined with exemptions from federal excise has promoted a new industry with the first plants coming into operation during 2005 through 2006-07.

With some variation depending on the choice of oil or fats, including tallow, the production of biodiesel requires one litre of methanol per ten litres (ie about 8 per cent of mass of biodiesel produced).

By end of 2006-07, biodiesel production in Australia is anticipated to be 523 million litres per year, which equates to methanol requirements of some 41 000 tonnes per year.

Summary of methanol requirements in tonnes per year

Biodiesel Industries Australia, Rutherford NSW,  1 200 (2006-07), 1 200 (2005-06)

Australian Biodiesel Group, Berkley Vale NSW, Berkley Vale NSW, 2 500 (2006-07), 3 000 (2005-06)

Biodiesel Producers Australiam, Albury Wadonga, 4 700 (2006-07), # ### (2005-06)

Australian Renewable Fuels, Adelaide SA, 3 500 (2006-07), 3 500 (2005-06) *

Riverina Biofuels, Deniliquin SA, 3 500 (2006-07), # ### (2005-06)

Australian Renewable Fuels, Picton WA, 3 500 (2006-07), # ### (2005-06) *

AJ Bush, ???, 4 700 (2006-07), 4 700 (2006-07), # ### (2005-06)

Australian Biodiesel Group, Narangba SE Queensland, 3 000 (2006-07), # ### (2005-06)

Natural Fuels, Darwin NT, # ### (2006-07), 13 000 (2005-06)

Ecotech, SE Queensland, 1 000 (2006-07), # ### (2005-06)

Natural Fuels, Botany NSW, 13 000 (2006-07), # ### (2005-06)

Total, Australia, 42 000 (2006-07), 21 000 (2005-06)

* On November 5 2007, Australian Renewable Fuels chairman Max Ger fter announced the closure of its Perth and Adelaide operations at the cost of 33 jobs.and atttacked Canberra's "pathetic" attitude towards the local biofuels sector.

Industry specialists (Eg Phillip Hardey, Australian Biodiesel Group).consider that the demand for methanol could increase to 75 000 tonnes per year by 2011.


Biodiesel production is enabled by a federal production grant, (Cleaner Fuels Grants Scheme) which effectively nullifies the excise payable on fuel which will apply until 2011 after which it will be progressively phased out to 2015. At present, the grant is 0.38 dollar per litre of fuel (say a 39 per cent level of assistance at the retail value of diesel).

While the production of ethanol requires six units of energy to produce just one, biodiesel is considerably better than ethanol, (and probably the best of the biofuels) but with an energy returned on energy invested (EROEI) of 3, it still doesn't compare to oil, which has had an EROEI of about 30.

In our opinion, biodiesel production in Australia has no net economic value added. The subsidies and waivers from excise represents a form of assistance to the rural sector. Some like Natural Fuels use imported palm oil and so with the methanol at international prices there is little to justify the plethora of small plants being commissioned around Australia.

One hectare of canola crops produces typically just 400 litres of biodiesel. (The litres of diesel required to clear, manage, harvest etc and produce the equipment, transport and refine and distribute are not accounted for in this figure, so 400 is gross).

We say, biofuels do NOT have competitive advantage in Australia and their support under current technologies, represents a cost to the taxpayer.