Colombia ethanol soars on Venezuela border closure

OREANDA-NEWS. December 03, 2015. Colombian ethanol production is booming on higher domestic demand tied to a dwindling of smuggled fuel from neighboring Venezuela.

Sugar cane ethanol output reached a year-to-date high of 43.3mn liters (8,793 b/d) in September before falling 6.4pc to 40.5mn l in October, according to biofuels association Fedebiocombustibles.

August ethanol output was revised down to 34.8mn l from the chamber?s preliminary 40.8mn l number.

Cheap contraband gasoline from Venezuela that was habitually smuggled across the porous border started to dry up on 19 August when Venezuelan president Nicolas Maduro declared a border closure.

The supply shortage boosted September demand for ethanol, which is mixed with gasoline in nearly all provinces in Colombia.

Fedebiocombustibles told Argus that ethanol producers underestimated the volume of contraband supply Venezuela.

Rio Paila's 420,000 t/d ethanol plant in Valle del Cauca province also came on line in late August, adding to the boost in domestic supply.

October production was sustained by continued demand from the extension of Venezuela's border closure and Bogot?'s decision to increase the domestic blending mandate to 10pc in southwestern provinces from 8pc.

On 1 October, the energy ministry applied a 10pc mandate to Nario, Valle del Cauca, Cauca, Risaralda, Caldas and Quindio provinces.

Eastern border provinces Guajira, Norte de Santander and Arauca do not have a blending mandate, because of the former prevalence of contraband gasoline from Venezuela.

State-controlled Ecopetrol has been boosting supplies of conventional fuel in the eastern provinces. The government is reluctant to apply the blending mandate there because it would likely drive up politically sensitive pump prices

Colombian ethanol production averaged 37.5mn l per month in January-October. Production rates so far this year suggest producers will top their output target of 415.1mn in 2015, up from 407mn l in 2014.

Colombia's energy ministry set the November wholesale ethanol price at Ps7,473 pesos/USG (\\$2.41/USG), up from Ps6,929 pesos/USG in October in response to a weak peso. The December ethanol price is set at Ps7,736 pesos/USG.