Final Report

FEASIBILITY STUDY OF BIOFUEL

PRODUCTION IN GHANA:
Assessing Competitiveness and Structure of the Industry's Value Chain

CLIENT: TECHNOSERVE

By Monica Caminiti, Michelle Cassal, Maitiu OhEigeartaigh, Yelena Zeru

MA Candidates, International Development Studies

Elliott School of International Affairs - The George Washington University

May 2nd, 2007

 TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................ 4

INTRODUCTION .............................................................................................................. 9
The Project ...................................................................................................................... 9
Methodology ............................................................................................................. 10
Limitations ................................................................................................................ 11

BIOFUELS: THE GLOBAL MARKET AND ENVIRONMENT .................................. 11

Ethanol: Current and Future Trends ............................................................................. 13
Biodiesel: Current and Future Trends........................................................................... 13

GHANAIAN ENVIRONMENT....................................................................................... 14
Country Background: Economy, Politics and Society.................................................. 14
Fuel sector..................................................................................................................... 15
Crop Suitability............................................................................................................. 16
National Enabling Environment ................................................................................... 16
National Policy ......................................................................................................... 16
Trade ......................................................................................................................... 17
Finance for biofuel industry...................................................................................... 17
Analysis ..................................................................................................................... 18
CO2 credits................................................................................................................ 18

ETHANOL POTENTIAL................................................................................................. 19
Demand in Ghana and the EU ...................................................................................... 19
National Market ........................................................................................................ 19
International Market................................................................................................. 19
Sugarcane...................................................................................................................... 20
Background ............................................................................................................... 20
Production Model ..................................................................................................... 21
Analysis ..................................................................................................................... 21
Cassava ......................................................................................................................... 23
Background ............................................................................................................... 23
Model ........................................................................................................................ 23
Analysis ..................................................................................................................... 24
Conclusions............................................................................................................... 25

BIODIESEL POTENTIAL............................................................................................... 25
National Model ............................................................................................................. 26
Biodiesel Demand ..................................................................................................... 26
Supply Chain............................................................................................................. 26
Maximum Feedstock price for Biodiesel B100 ......................................................... 27
Current Feedstock Price Analysis ............................................................................ 28
B5 Production Costs ................................................................................................. 30
Best Case Scenario ................................................................................................... 30

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 B5 Production Costs- Best Case Scenario................................................................ 31
Crude Oil Sensitivity Analysis .................................................................................. 32
Mining Model ............................................................................................................... 34
Biodiesel Demand ..................................................................................................... 34
Supply Chain............................................................................................................. 34
Maximum Feedstock price for Biodiesel B100 ......................................................... 35
B5 Production Costs- Current costs for vegetable oil .............................................. 36
B5 Production Costs- Best Case Scenario................................................................ 37
Crude Oil Sensitivity Analysis .................................................................................. 37
Biodiesel Export Model ................................................................................................ 38
Demand:.................................................................................................................... 38
Potential Export Markets for Vegetable Oil ............................................................. 38
The European Union: a natural market for Ghanaian exports of vegetable oils..... 39
Analysis of the Export Supply Chain Model ............................................................. 39
Competitiveness Analysis for Exports of Ghanaian Vegetable Oils to West European
Markets ..................................................................................................................... 40
Conclusions from Biodiesel Analysis........................................................................... 42

DEVELOPMENTAL IMPACT........................................................................................ 43

CONCLUSIONS AND RECOMMENDATIONS ........................................................... 44

REFERENCES ................................................................................................................. 47

APPENDIXES .................................................................................................................. 49
APPENDIX I .................................................................................................................... 50
APPENDIX II ................................................................................................................... 51
APPENDIX III.................................................................................................................. 55
APPENDIX IV.................................................................................................................. 57
APPENDIX V................................................................................................................... 60
APPENDIX VI.................................................................................................................. 63

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EXECUTIVE SUMMARY

About Ghana:
The Republic of Ghana, which has a population size of 22 million people, is located on
the West Coast of Africa and has been hailed as an example of positive development in
Africa. This country, which is full of ethnic diversity, has been relatively stable in recent
years, both politically and economically. The domestic economy in Ghana continues to
revolve around subsistence agriculture, which accounts for 34% of GDP and employs
60% of the work force, mainly small landholders. In addition, Ghana has many advanced
industries, which include: textiles, steel (using scrap), and oil refining. The current
president has pursued an economic policy of growth acceleration, poverty reduction, and
private investment promotion.

About the Project

The purpose of this project, which was contracted out by Technoserve Ghana, was to
assess the viability of creating a biofuels industry in Ghana, with the express purpose of
using this sector to foster further economic and social development. The main objectives
of the project were: to understand if Ghana could be competitive in this industry, identify
who the major players in the supply chain would be; and to estimate the developmental
impact for the country. Research for the project was divided into three areas of study:
global environment and market; domestic opportunities and enabling environment; and
local value chain analysis.

The study was carried out in three phases with the first phase consisting of desk research
on the global market of biofuels. The second phase was carried out through an on-the-
ground assessment in Ghana, to understand the national enabling environment and the
industry’s supply chain. The third phase consisted on building models to estimate the
costs of local biofuel production. It is important to note some constraints in the
methodology that limit the generalization of this study’s findings. Most importantly time
constraints on field research in Ghana, which limited the amount of information collected,
and secondly the lack of current production information on some of the selected crops,
specifically ethanol crops. These are issues that must be taken into consideration in the
interpretation of findings, as proxy data was utilized to build certain parts of the
analytical models.

World Market
From the research results, it can be concluded that the world biofuels market has been
growing at an accelerated pace in the last twenty years, and this trend is expected to
continue in the future. This market can be divided into two broad categories: biodiesel
and ethanol. Biodiesel is manufactured from natural oils, whether they be from animal or
vegetable matter. Ethanol is produced from sugars, either harvested directly or broken
down from starches. Both sectors of the industry have grown significantly, with the
United States and Brazil focusing their production efforts largely in ethanol and the
European Union concentrating on biodiesel.

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World biodiesel production reached 3,524 million liters in 2005, and is expected to reach
11,000 million liters by 2010. Currently world ethanol production is 55,000 million liters
and is expected to reach 70,000 million liters in 2010. In both cases, demand is expected
to exceed supply, therefore there is potential for new players, such as Ghana, to emerge
and engage in the biofuels industry.

National Enabling Environment

The fuel sector in Ghana is currently controlled by the government. The country imports
100 percent of the crude oil it utilizes, however, the refining of oil is carried in country,
by the Tema Oil Refinery, and the storage and distribution to regional depots is carried
out by BOST, a company solely owned by the government. Hence the capacity to
transport and store biodiesel across the country currently exists in Ghana. In regards to
crops that can be used as feedstock for biodiesel and ethanol production, five crops were
identified as suitable for Ghana: these are palm oil, jatropha, and coconut for biodiesel
production and sugar cane and cassava for ethanol.

The national policy environment is favorable for the biofuels industry at this time;
lawmakers in Ghana are optimistic and eager to engage in this sector, specifically
biodiesel. Officials are currently updating a draft policy that is expected to go to
Parliament in the next year to turn into legislation. This policy would mandate the
replacement of 5 percent of petroleum diesel with biodiesel by the year 2010 (through B5
blends1), and an increase of this percentage to 20 percent by the year 2015 (through B20
blends1). Nevertheless, this policy is currently a draft and is subject to change before its
final approval as legislation.

Despite limited access to finance, the government of Ghana is keen to support the
industry. Some larger banks, such as Merchant Bank of Ghana, have received sovereign
guarantees to attract capital for the provision of loans to producers of biofuels. In
regards to financing of feedstock production, the National Microfinance and Small Loan
Center is willing to give smaller loans for the cultivation of jatropha, while the
Agriculture Development Bank will continue providing financing for all crops produced
in Ghana (including jatropha).

Ethanol Potential
Given the lack of policy drive towards ethanol usage, there is currently no ethanol
production in Ghana and the potential for developing this sector seems small in the short
term. The most realistic possibility given these circumstances lays in the potential use of
ethanol as a gasoline oxygenate.

Potential crops for the production of ethanol are sugarcane and cassava. At present, there
is no real discussion in Ghana on introducing the use of sugar for ethanol production.
This lack of interest is largely due to reluctance on making investments in an industry

1
Blends of up to 20 percent biodiesel with 80 percent petroleum diesel (B20) can generally be used in
unmodified diesel engines. Biodiesel can also be used in its pure form (B100), but may require certain
engine modifications to avoid maintenance and performance problems

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that collapsed several years ago, forcing the country to import its entire sugar crop.
However, if Ghana were to utilize this feedstock, it would need to achieve production
costs at the level of Brazil, the world’s largest producer, in order to be competitive. While
there is inherent potential for a cassava-based ethanol industry, issues with food security,
as cassava is currently a subsistence crop for a large part of the population, and steady
feedstock supply prevent cassava from being a suitable feedstock for biofuel production
at this point in time. There is need for wide-spread improvements on yields, reduction of
production costs, and further research regarding food security issues.

Biodiesel Potential
There is potential for the biodiesel industry in Ghana that could be supported by the
already explicit interest of the government and small entrepreneurs, who are already
involved in the nascent industry. This report analyses the possibility of a biodiesel
industry based on three identified crops: jatropha, coconut, and oil palm; and three
potential models of production.

The first model is based on the government’s policy draft for the biodiesel industry and
identifies all of Ghana as the potential market. Based on the analysis of this model, it can
be concluded that if Ghana were to seek a biodiesel industry competitive with current
diesel prices, it would have to increase productivity of jatropha growers, reduce the seed
price by 55 percent, and provide a tax break of 5 percent on the total blended fuel. If this
is not met, the best next alternative is palm oil, which would require further subsidies or
tax breaks on the blended fuel for it to be competitive. However, the price of palm oil is
subject to volatility due to its demand in the food market, which could in turn negatively
influence the competitiveness of the biofuel industry.

The second model takes a sectoral approach, targeting the mining sector as the market for
biodiesel. The most promising sector in Ghana would be that of mining since it
consumes approximately 40 percent of the national production of diesel. Furthermore,
diesel represents around 42 percent of operational costs for the mining industry, and
mining companies are obliged by law to ensure that other economic activities are
promoted in the areas where mines are located. Hence, a biodiesel industry would not
only fulfill the sector’s need for fuel, but would also diversify the economic activity of
communities surrounding the mines by creating jobs in the agricultural sector. Based on
the analysis of this model, the best feedstock for B5 blend production at the mine level
are palm oil and jatropha. However, this model would be viable only if the prices for
palm oil are low and productivity is increased for Jatropha in order to reduce the farm
gate price.

The last model deviates from the production of biodiesel by identifying the potential for
Ghana to participate in the world market of biofuels as a supplier of raw materials
through the exportation of vegetable oils to Europe. This model can be used to increase
the supply of feedstock until capacity for biodiesel production is built in Ghana. This
model is based on the export of the vegetable oil and not on exporting the biodiesel itself,
because the largest markets for biodiesel consumption have excessive production
capacity and are not open to importing biodiesel. However, these nations are facing

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bottlenecks in the availability of feedstock and are seeking to import raw materials,
thereby providing a great opportunity for Ghana to become a potential supplier.

The results of analysis of the export model of vegetable oils produced in Ghana show that
there is definitely an opportunity for this country to participate in the export markets,
particularly in Europe. Aside from potential competitiveness in terms of production costs,
Ghana has a comparative advantage over other large vegetable oil producers, such as
Malaysia and Indonesia, to export to Western European markets due to close proximity
and favorable trade agreements, such as the Cotonou Agreement which provides import
tax exemptions for vegetable oils, like coconut and palm oil into Europe.

Developmental Impact
To asses the developmental impact of each model, the implications were analyzed based
using three indicators: agricultural income generated, total agricultural employment
generated and hectares required for biodiesel farming The total income generated in USD
was calculated by multiplying feedstock income per hectare times the number of hectares
needed to meet the biodiesel demand in each model. The only exception is the export
model, for which the export price per metric ton of oil was multiplied times the number
of tons that would be consumed in the national model (this is an estimate however,
because the potential for exports is much larger and is limited mainly by the ability of
producers to increase production volumes and compete in price). The second indicator
measures the employment created in the agricultural sector. However, this estimate is
conservative as it does not include other jobs created throughout the biodiesel supply
chain. Lastly, the number of hectares needed for feedstock was used to measure the
environmental impact. It is assumed that the higher the requirement of land the more
negative impact on the environment, as more wild forest would have to be allocated to
agricultural production.

As will be evident in the report, palm oil generates the largest agricultural income, but
jatropha has the highest number in employment creation and the lowest amount of land
required. Other aspects of the developmental impact that must be considered,
independently of the selected model, are the positive impacts on the foreign reserves, as
the country will import less crude oil, and the reduction on CO2 emissions. Therefore it is
determined that overall, the outcomes of a new biofuel industry in Ghana can have a
positive impact on economic and social development in the country.

Conclusions and Recommendations

Based on the research and analysis carried out in this project, some major conclusions
and recommendations were proposed. Firstly, it was found that Ghana has the potential to
engage in the biofuel industry, for both the national and international markets, although
the country should initially focus on the biodiesel sector, particularly on utilizing jatropha
and palm oil as the primary feedstock. Secondly, in order to be competitive, it is
necessary for feedstock producers to realize high productivity gains, in terms of
production yields and oil extraction rates. A third conclusion suggests for further research
on the cost of Methanol, a major ingredient in the production of biodiesel, that is oddly
very expensive in comparison to other African countries, and that currently generates up

7
to 30 percent of the overall cost of biodiesel production in Ghana. A fourth conclusion is
that all the models that ware identified to be competitive in the creation of a biofuels
industry in Ghana, offer positive developmental impacts in terms of income and labor
generation, to different degrees, and the choice of the best model to develop this industry
will depend on compromises and tradeoffs among the different players in the industry.
Finally, it is suggested that ethanol should not be considered in the short term in the
biofuels industry in Ghana, since the there is no expected government support for this
sector, and if sugarcane is to be used for production, very low production costs would
have to be achieved in order to compete with the largest producers like Brazil and the
United States.

Therefore, the main recommendations in this report indicate that in order for Ghana to be
competitive in the biofuel industry, it needs to jumpstart the biodiesel production using
jatropha; however this crop requires much more extensive research and development.
Nevertheless the production of biodiesel can not be successful without government
support. Another recommendation is that the palm oil industry should be expanded, and
based on the international prices trends, palm oil could directed successfully towards both
the export or the local industrial markets. Finally, additional uses for jatropha biodiesel
should be further investigated to see if this fuel can used for rural electrification.

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INTRODUCTION

In the world of development, there are many theories and practices that attempt to end
world poverty and encourage growth. One approach is to develop sustainable industries
through private sector development to encourage entrepreneurship, GDP growth and
employment generation. The possibility of developing a biofuel industry in Ghana would
ensure the creation of these factors in the rural area, decreasing the poverty that afflicts
thousands of subsistence farmers while providing renewable sources of energies for the
country.

The origin of this project took place in October of 2006. Our team of graduate students at
George Washington University met with the director of Technoserve’s Ghana office. It
was in that meeting where the director outlined a vision of helping the poor not through
government programs or civil society, but investment. It was the desire of Technoserve-
Ghana to determine whether it was advisable to initiate a large biofuels project in the
Republic of Ghana as a means of alleviating poverty through business
development. Intrigued by this opportunity, the team agreed to the terms of reference and
began the Biofuels in Ghana project.

The Project

The purpose of the project was to assess the feasibility of developing a biofuel industry in
Ghana by conducting a preliminary analysis on the industry’s value chain. The main
objectives were to: assess the industry’s competitiveness in the global and national
market; identify major players in the supply chain; and estimate the developmental
impact in the Ghanaian agricultural sector.

In order to attain the project objectives, the research was broken down into three areas of
study that included the following tasks .

1. The World Environment and Value Chain

a) an industry overview and analysis of worldwide

biofuels markets
b) a world demand and supply analysis
c) assessment of the political climate in key nations
concerning the use of biofuels
d) a review of taxation incentives, subsidies, and
tariffs being provided concerning biofuels
e) a brief examination of other nation’s practices
regarding promoting the biofuels industry

2. An Analysis of the Opportunities in Relation to Ghana

a) examination of the potential for target domestic and

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 export markets
b) assessment of competitive advantages specific to Ghana
c) examination of the potential capacity for both agricultural
production as well as refinement
d) assessment of the infrastructure challenges faced
throughout the country
e) identification of top 4 feedstock for ethanol and biodiesel
production

3. Value Chain Analysis within Ghana

a) costing value chain at point of export for the

top biodiesel and ethanol feedstock including farm
level attractiveness of growing the crop, extraction of
vegetable oil, manufacture of biodiesel and transport
to wholesaler / retailer
b) costing benchmarks (cost value chain of biofuel
competitors)
c) determining productivity threshold to be competitive
and gap analysis
d) providing a map of the value chain
e) quantifying the tangible benefits in terms of
development (employment, growth, etc.)

Given the research and analysis carried, it can be concluded that there is potential for a
biofuel industry in Ghana. The industry should initially focus on the production of
biodiesel, until a competitive sugar industry is developed for the production of ethanol.
At the same time, the competitiveness of the biodiesel industry is dependent on stable
national and international prices for oil palm, and increased productivity of jatropha
obtained through R&D.

Methodology

The project utilized a value chain approach in order to research the market; transportation
and distribution; bio-fuel production and refining; and biofuel feedstock production at
farm level. The research was divided into three phases. The first phase began with the
review of academic literature, business reports and available statistics on the biofuel
global environment. This was followed by the second phase composed of a two-week
intensive on-the ground assessment in Ghana designed to understand the national
enabling environment and the industry’s supply chain. Tools utilized on the field study
included: site visits, interviews and surveys of local producers, entrepreneurs,
intermediaries, service providers, export agencies, TechnoServe staff and Ghanaian
government officials to determine the capacity of Ghana to participate in a potential
biofuel industry.

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Once the global and national enabling environments were identified, all data collected
regarding the supply chain in Ghana was analyzed. Production models were built in
order to determine the competitiveness of the industry.

Limitations

As with any research undertaken, certain limitations of methodology exist. Due to time
constraints, research on-the ground was only carried for a period of two weeks, limiting
the information that could be obtained from other regions of the country. Moreover, lack
of current information on crop production was encountered when meeting with the
Ministry of Agriculture, Ministry of Energy, and other stakeholders. This is particularly
true for the case of jatropha and sugarcane, industries that are not developed in Ghana.

Another major limitation is the lack of production costs for ethanol given that no industry
currently exists in the country. This required the use of production costs from the US and
Mozambique as estimates. Additionally, production costs for biodiesel obtained were
based on current small-scale production and can hence vary from large-scale production.
Furthermore, all models of production are made based on assumptions and do not include
an extensive list of costs incurred in a business such as land, and overhead expenditures.
Therefore, the analysis made is to be used only as an indicative of the potential for a
biofuel industry and not exact costs of production.

This report is designed to outline both the research taken prior and after the on-ground
assessment of Ghana, as well as final conclusions and recommendations. The paper
begins by outlining the global market of biofuels, and it is followed by an overview of the
national enabling environment in Ghana. It continues with an analysis of the potential
ethanol and biodiesel industries, and presents possible production scenarios. The paper
concludes with recommendations and conclusions based on research and findings which
include: the analysis of the world markets, the biodiesel models created, and
developmental implications of this industry.

BIOFUELS: THE GLOBAL MARKET AND ENVIRONMENT

Biofuels, in this case ethanol and biodiesel, are renewable energies derived from biomass
or solar energy captured in plants through the process of photosynthesis. They are heavily
utilized in Europe and America for the replacement of fossil fuels due to environmental
and national security concerns. On one hand, ethanol, which is produced from crops that
are sugar based and fermented into alcohol, is used as an additive or replacement of
gasoline. It can be mixed with gasoline up to a 20 percent blend without the need of
modification of motor engines. The main crops utilized for its production are sugar and
maize, feedstock that are produced in large quantities in Brazil and the United States
respectively. On the other hand, biodiesel, made by transesterification, a chemical
process that reacts vegetable oil or fat with methanol and a potassium hydroxide catalyst,
is used to replace diesel. It can be used in compression ignition diesel systems, either in
its 100% “neat” form or more commonly as a 5%, 10% or 20% blend with petroleum
diesel. At this time, rapeseed and sunflower are the most commonly used feedstock to

11
produce biodiesel in Western Europe, the world’s largest producer and consumer of
biodiesel.

The world market of biofuels has been steadily growing in the last years, with an
increasing number of countries participating in it for environmental and security reasons.
In 2002 world production of ethanol reached 21,841 million liters, while biodiesel
production was 1,503 million liters. This production not only provided an alternative to
fossil fuel, but it is also generated large number of employment since biofuel production
requires 100 times more workers per unit of energy produced than fossil fuels. In 2002,
the ethanol industry provided more than 200,000 jobs in the US and ½ million direct jobs
in Brazil (IEA, 2004).

In regards to methods of ethanol production, most producers utilize first and second
technologies to turn sugar or starch (that is converted into sugar) into ethanol. However,
research is being carried on utilizing cellulosic material for the production of ethanol.
This method would focus on utilizing cellulosic waste materials to create fermentable
sugars, ultimately leading to more efficient production of ethanol. The process, however,
is more complicated than converting starch into sugars and then to alcohol. Currently,
there is no commercially viable production of ethanol from cellulosic biomass, but there
is substantial ongoing research in this area in IEA countries, particularly the US and
Canada. It is important to note that there are several potential benefits from developing a
viable and commercial cellulosic ethanol process which include:

• Access to a much wider array of potential feedstock (including waste cellulosic

materials and dedicated cellulosic crops such as grasses and trees), opening the
door to greater ethanol production levels.
• Greater avoidance of conflicts with land use for food and feed production.
• A much greater displacement of fossil energy per liter of fuel, due to nearly
completely biomass-powered systems.
• Much lower net well-to-wheels greenhouse gas emissions than with grain to-
ethanol processes powered primarily by fossil energy.

A number of research organizations and companies are exploring combinations of

thermal, chemical and biological saccharification processes to develop the most efficient
and economical route for the commercial production of cellulosic ethanol. These
programs have substantial government support, particularly in the United States and
Canada. None of the approaches, however, has as yet been demonstrated on a large-scale,
but if developed, it can drastically alter the world ethanol market.

In comparison with some of the technologies being developed to produce ethanol and
other biofuels, the biodiesel production process involves well-established technologies
that are not likely to change significantly in the future. However, some organizations and
companies are trying to develop technology to extract biodiesel from algae.

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Ethanol: Current and Future Trends

The world market size of Ethanol reached 55,000 million liters in 2005 (Hunt 2006).
Brazil and the US dominated the world market taking a share of 19,000 million liters
each, however the EU ethanol share was lower due to difficulties in competing with
cheap imports (USDA, 2006). Its market size in 2005 only reached 3700 Million liters
(Hunt 2006), nevertheless, production in the EU is expected to increase during the
coming years.

According to research from the Chicago board of trade, prices of Ethanol have fluctuated
from 1.73 $ / GAL in 2003 to more than 3.20 $/ GAL in 2005 (Chicago Board of Trade,
2006). Prices are normally influenced by several factors: production costs, feedstock
prices, countries legislations and oil prices among the most important ones. In Brazil
costs are lower than any country and e close to the cost of producing petroleum fuel.

The estimated size of the Ethanol market in 2010 is expected to be around 70,000 Million
liters (Berg 2004). It is forecasted that by 2020 the market will grow to 120,000 Million
liters (IEA 2004). If historical trends were to continue, annual growth rates in the future
would be about 7% for Europe, 2.5% for North America and Brazil, and 2.3% for the rest
of the world. However, given recent global policy initiatives and changes in trends, a
different picture might emerge: a quadrupling of world production by 2020. For example,
Japan is expected to become the largest importer of Ethanol (6000 Million liters/year) by
2012, followed by the US (1000 million liters) and EU (800 million liters) by the same
period (Berg 2004).

Biodiesel: Current and Future Trends

There are many crops that can be used for producing biodiesel, but the choice normally
depends on local availability, affordability and government incentives. For example,
rapeseed oil is preferred in Western Europe, while the United States favors refined
soybean oil as a feedstock. Although Brazil is the world’s second-largest producer of
soybeans, its government is fostering a castor oil–based biodiesel industry. The big palm
oil producing countries in Southeast Asia are Malaysia and Indonesia. They are currently
focusing on palm kernel and palm seed oil. Both India and China have large jatropha
(physic nut) plantations under development. In addition, China is investigating recycled
cooking oil as an option. The most important feedstocks by 2010 are expected to be
soybean, rapeseed and palm oil, in descending order (CITE). Nevertheless, Jatropha and
cottonseed oils will show the highest growth rates.

In terms of the market size, the biodiesel industry reached 3,524 million liters in 2005
(Hunt, 2006), with Western Europe having the largest share of the market. Although it is
still the largest producer, market fragmentation has decreased Western Europe’s
monopoly in the biodiesel market. Its share which represented 95% of the market in
2000(Gubler 2006), had been reduced to approximately 80% by 2005. This is accounted
by new players, such as Asia, entering into the market.

13
The forecasted growth for the Biodiesel Market expects that it will reach a size of 11,000
million liters by 2010 and continue to grow to reach 24,000 million liters by 2020.
Furthermore, the total EU biodiesel production is estimated to grow from 2.98 million
tons in 2005 to 6.1 million tons in 2007. Sixty one percent of the world consumption in
2005 was accounted for by Germany. The United States is expected to be largest single
biodiesel consumer and market (18% of world consumption). All other countries
combined account for only 11% of world consumption.

By 2010, further fragmentation of the market is expected. Nevertheless, China and India
are two new large single markets that are expected to emerge. The share of other
countries will also increase to 44%; Africa also has an opportunity to emerge. (Gubler,
2006). With capacity growing at 115% per year, the world is expected to run into an
overcapacity situation during 2007 (Gubler, 2006). Capacity worldwide will far exceed
expected consumption growth rates. The results will be intensified competition, lower
capacity utilization rates, squeezed profit margins, a war for raw materials, and, probably,
closure of small-scale producers and those in less strategically important regions.

GHANAIAN ENVIRONMENT

As previously seen, the biofuel market is continuously growing and will be fragmenting
in the years to come allowing new players in Africa, such as Ghana, to have an
opportunity to enter the industry. This section seeks to present information on the
country’s background, the enabling environment and feedstock production for the biofuel
industry.

Country Background: Economy, Politics and Society

The Republic of Ghana is located on the West Coast of Africa and has an estimated
population of 22 million. Among this population there are six major ethnic groups which
are: Akan 44%, Moshi-Dagomba 16%, Ewe 13%, Ga 8%, Gurma 3%, and Yoruba 1%.
Although there is ethnic diversity, Ghana does not suffer from tension among ethnic lines.
Moreover, religion plays an important role in the lives of Ghanaians. There are 63%
Christians, 21% that have indigeneous beliefs and 16% that are Muslim
(http://www.infoplease.com/ipa/A0107584.html).

Ghana's industrial base is relatively advanced compared to many other African countries.
Industries include textiles, steel (using scrap), tires, oil refining, flour milling, beverages,
tobacco, simple consumer goods, and car, truck, and bus assembly. Tourism has become
one of Ghana's largest foreign income earners (ranking third in 2003 at $600 million),
and the Ghanaian Government has placed great emphasis on further tourism support and
development (www.state.gov).

The domestic economy in Ghana continues to revolve around subsistence agriculture,

which accounts for 34% of GDP and employs 60% of the work force, mainly small
landholders. In 1995-97, Ghana made mixed progress under a three-year structural
adjustment program in cooperation with the IMF. Public sector wage increases and

14
regional peacekeeping commitments have led to continued inflationary deficit financing,
depreciation of the cedi, and rising public discontent with Ghana's austerity measures.
Nonetheless, Ghana remains one of the more economically sound countries in the west of
Africa

By West African standards, Ghana has a diverse and rich resource base. The country is
mainly agricultural, however, with a majority of its workers engaged in farming. Cash
crops consist primarily of cocoa and cocoa products, which typically provide about two-
thirds of export revenue, timber products, coconuts and other palm products, shea nuts
(which produce an edible fat), and coffee. Ghana also has established a successful
program of nontraditional agricultural products for export including pineapples, cashews,
and pepper. Cassava, yams, plantains, corn, rice, peanuts, millet, and sorghum are the
basic foodstuffs. Fish, poultry, and meat also are important dietary staples. Minerals--
principally gold, diamonds, manganese ore, and bauxite--are produced and exported. In
addition, exploration for oil and gas resources is ongoing (www.state.gov).

Despite being rich in mineral resources, and endowed with a good education system and
efficient civil service, Ghana fell victim to corruption and mismanagement soon after
independence in 1957. However, John Kufuor, the current president of Ghana won a
second term in December 2004. Known as the "Gentle Giant", Mr Kufuor has made
economic growth a priority. During his first term, inflation and borrowing costs fell. He
has also taken a leading role in mediating in regional conflicts, including those in Liberia
and Ivory Coast

Moreover, Ghana’s stated goals are to accelerate economic growth, improve the quality
of life for all Ghanaians, and reduce poverty through macroeconomic stability, higher
private investment, broad-based social and rural development, as well as direct poverty-
alleviation efforts. Other reforms adopted under the government's structural adjustment
program include the elimination of exchange rate controls and the lifting of virtually all
restrictions on imports. Therefore, Ghana’s economy is inviting of new industries and
investments.

Fuel sector

In Ghana, the importation, refining, and distributing of fuel is run by Government

agencies. The Tema Oil Refinery, a para-statal, processes roughly 45,000 barrels of
Nigerian oil per day, representing full capacity of the plant. This oil supplies about 70-
75% of the market, with imports making up the remainder of Ghana’s fuel needs. Of that
production, roughly 11,000 tons of petrol is produced in a week, along with 13,000 tons
of diesel, and 2,000 tons of LPG (Adamako 2007). This corresponds to projected
consumption in 2005 of roughly 574,242 MT of gasoline and 895,576 MT of petroleum
diesel (GEC 2007). The finished products are then stored and shipped by BOST to be
distributed throughout the country. Although BOST is registered as a private company it
is solely owned by the government (Ohene-Amoah 2007).

15
Crop Suitability

Given the wide variety of feedstock from which biofuels can be made, it is important to
identify crops that are most suitable for production in Ghana. By applying a set of criteria,
which takes into account current yields and production, six different crops were selected
for further research on the ground2. These were:
▬ Biodiesel: Jatropha curcas, oil palm, coconuts
▬ Ethanol: Sweet potatoes, cassava, and sugar cane

Limitations on information obtained in Ghana prevent a full analysis on some of these

crops. In the case of sweet potatoes, the added costs in preserving and transporting the
feedstock as well as in the actual processing it into ethanol is unknown and believed to be
too high. In the case of sugar cane there is currently no significant production of this
feedstock in country, however efforts are being made to revitalize the industry that
existed in the past. Given that the returns on creating ethanol from this feedstock are
much higher than any comparable crop an analysis was made using estimates from US
and Brazil. Due to these limitations the models presented in the next sections focus only
on sugarcane and cassava for ethanol production and coconut, palm, and jatropha oil for
biodiesel production.

National Enabling Environment

National Policy
Given that the fuel industry in Ghana is state-run, the policy environment is of particular
importance when looking at the potential for the biofuel industry. Over the course of
several discussions with government officials, it became obvious that there appears to be
substantial excitement over the development of a biofuels program. Many individuals
from the Energy Commission to the Ministry of Food and Agriculture had already
discussed the potential for developing the sector and a draft of policy recommendations
has already been put in place.

However it must also be stressed that while the officials were very enthusiastic, there
remains doubt as to how much of the policy will be put into effect. Discussions revealed
that the draft policy had been in place since November of 2005 yet at the time of
interviews (March 2007) the policy had not been put before Parliament nor was there any
discernable timetable to do so (Ahenkorah 2007). This is of particular concern in that
many of the policies recommended are on timetables that may be unrealistic if not
implemented within the next few months (Amoah 2007). Therefore there is some
question as to the level of commitment behind these recommendations and potential
policies. Given the uncertainty, these policies (and their subsequent consequences) must
be taken as no more than “best guesses” at this point in time.

That being said, there are some measures that the Ghanaian government is considering to
promote the use of biofuels. There is particular interest in the creation of a domestic

2
See Appendix I for a detailed list of all relevant crop selection criteria and weights

16
biodiesel industry. The primary reasons for this policy include a desire for economic
growth, fuel security, and a potential increase in employment (Ahenkorah 2007).
Therefore biofuels is seen as a vehicle for economic development rather than a policy to
be pursued based on environmental grounds.

In terms of feedstock, the government is most interested in promoting the use of jatropha
and palm oil, with a particular emphasis on the former. The reasons for this preference
seems to be rooted in the idea that jatropha can grow in a wide variety of places and has
the potential to employ a larger number of individuals (Amoah 2007). The policy covers
a great deal of ground but the most important measure being considered is the mandated
use of biodiesel; approximately 5% of the countries total consumption by 2010 and a
further 20% by 2015 (GEC 2005). However, these goals are increasingly dubious as
Ghana has yet to act on these recommendations and there is no large scale production of
biodiesel currently being undertaken anywhere in the country. Other policies include: the
provision of tax breaks for producers (tax holidays); waiving of duties on machinery used
to produce biodiesel (Ahenkorah 2007); mandating government vehicles to use at least
B20 and encouraging other mass transportation fleets to do the same; and requiring all
existing commercial gas stations to offer both blends of B20 and B100 (GEC 2005).
There is also a recommendation towards the subsidization of biodiesel by means of
removing various levies and BOST margins from biodiesel (GEC 2005); however the
Energy Commission has also stated that it will not offer such subsidies at the cost of
revenue (Ahenkorah 2007). How these two viewpoints are to be reconciled remains to be
seen.

It should be noted that ethanol production has been all but left out of these policy
recommendations. Both the draft policy as well as government officials have largely
dismissed the production of ethanol as a viable alternative. There have been failed
attempts in the 1970s to create an ethanol industry; however this initiative was not
successful due to subsequently lower oil prices as well as a lack of implementation on the
part of the Ghanaian government (GEC 2005).

Trade
In addition to the various domestic policies there are several thoughts as to the actual
exportation of biofuels. According to the draft policy, there are policies proposed to look
to export biodiesel along the same lines as cocoa is exported today. Cocoa is currently
bought by the government at set prices and then subsequently sold on the world market.
It is also recommended that biodiesel exports be regulated and taxed as a source of
revenue (GEC 2005). Government officials have expressed generally a protectionist
stance, perhaps even seeking import taxes on biodiesel (Ahenkorah 2007). Additionally,
some officials have expressed the possibility of imposing a ban on the export of jatropha
seeds (Kufuor 2007).

Finance for biofuel industry

The government of Ghana is also trying to promote the funding of biodiesel production,
and might have access to a special fund set up by the Indian government of
approximately $35 million to further the use of jatropha as a biodiesel feedstock. In

17
addition to this funding, the Merchant Bank of Ghana has determined to seek government
support, which they have accomplished by gaining a sovereign guarantee from the
government to provide funding for biofuel production. In regards to financing for
feedstock production, the Bank is relying on existing microfinance schemes for the
provision of credit to farmers.

Additionally, the National Microfinance and Small Loan Center is willing to give smaller
loans for the cultivation of jatropha, focusing on youths and using set prices for the seed
to be sold to the producer (Kufuor 2007). Finally, the Agricultural Development Bank
(AGDB) expressed no preference for the crop to be cultivated since they provide support
to all crops in Ghana. The Bank, will finance these crops through its own budget, and has
the liberty to finance a variety of crops. The government on the other hand will only
provide funding for its jatropha initiative. AGDB will also use some of its fund to
support this crop, however further information on the costs of production still have to be
shared with them to determine feasibility and price (AGDB 2007).

Analysis
While the enthusiasm and spirit to promote biofuels is there, the actual policies of the
Ghanaian government in both promotion and trade leave room for improvement. First,
some of the policies tend to conflict both with various parts of the draft plan as well as
various interviews that were completed. There also appears to be a swift push for
jatropha cultivation despite the lack of established scientific evidence as to its yields. This
is coupled with what seems a great misunderstanding as to the effect cultivation may
have on land use: e.g. “unlike most of the other crops, the oil produced from jatroph [sic]
is not edible and thus its cultivation for energy purposes will not deprive the use of arable
land for purposes of growing food crops.” (GEC 2007:11) This raises several questions
as to the government’s ability to play an effective role in the promotion of jatropha
cultivation or even biodiesel promotion. The reported desire to limit the export of
jatropha seeds and tax imports of biodiesel also point to policies that may hinder the
promotion of this infant industry.

CO2 credits
Biofuel projects are in principle eligible under the Clean Development Mechanism (CDM)
under the Kyoto Protocol. However no current project has been able to obtain
certification because baseline and monitoring methodologies have not been approved by
the CDM Executive Board. This is the main constraint for the application of CDM as a
financing tool for biofuel projects. As of February of 2007, five methodologies have
been submitted and are under review. Approval of one or more of these would improve
chances for biofuel CDM projects significantly. However, it must also be pointed out
that if credit emission reductions are approved, it would only apply for domestic
consumption of biofuels and not for exports. Only when these barriers are cleared, will
certified emission reduction revenues in most cases be able to help cover part of the
capital costs of biofuel production and increase the project’s IRR.

18
ETHANOL POTENTIAL

Demand in Ghana and the EU

National Market
Given that no policy to drive ethanol usage is in place, the potential for developing the
ethanol sector in Ghana is actually quite small. The most realistic possibility given these
circumstances lay in the potential use of ethanol as a gasoline oxygenate. Ghana has
phased out the use of lead in gasoline and is currently using the additive MMT
(methylcyclopentadienyl manganese tricarbonyl) as oxygenate in place of the more
harmful MBTE (methyl tertiary-butyl ether). However MMT may present some health
concerns since high levels of manganese inhalation can cause irreversible neurological
disease. Hence, the use of manganese additives in gasoline could increase inhalation
manganese exposures (EPA). This concern could present an opportunity for ethanol to
substitute MMT as a blend of 2.0% with gasoline (EPA 1999). Given a projected
usage gasoline usage of 632,622 MT in 2010 and 696,938 MT in 2015 (GEC 2005) this
would mean an ethanol demand of 12,652 MT and 13,939 MT in their respective years
(Figure 1). While not insubstantial numbers, this would be equivalent to the production
capacity of one large or two smaller ethanol production plants. Hence the potential
national market for ethanol is relatively small unless the government implements policies
that mandate further use.

Figure 1: Projected Ethanol Demand in Ghana (MT)

696,938
632,622
574,242

0 12,652 13,939

2005 2010 2015

Petrol Usage Ethanol Demand

International Market
The EU current stance on biofuels has been driven in large part by environmental
concerns. While energy independence is a concern, the prevailing focus is that of
reducing CO2 emissions and creating an environment for “sustainable energy flows.”
This is evidenced in the Green Paper, "Towards a European strategy for the security of
energy supply," which sets the objective of 20 % substitution of conventional fuels by
alternative fuels in the road transport sector by the year 2020 (EU 2003).

Given current legislation as well as trends in gasoline consumption, the EU market

demonstrates higher potential demand for ethanol and a possible outlet for production in
Ghana. The EU is projected to consume roughly 116 Million Metric Tonnes (MMT) of

19
gasoline in 2010 and a further 120 MMT in 2015 (Eurostat 2006). This would imply an
ethanol demand of 6.6 MMT and 12.0 MMT according to current proposals (Figure 2).
Europe is currently a net importer of ethanol, primarily supplied from Brazil and can
continue increasing its imports until it builds enough production capacity. Once this
capacity is reached, there will be a potential market for feedstock supply since land
suitable for ethanol crops is largely being used for biodiesel feedstock production or more
traditional forms of agriculture.

Figure 2: Projected Ethanol Demand in the EU (MMT)

120.0 124.0
112.0 116.0

25.7
6.6 12.0
2.1

2005 2010 2015 2020

Gasoline Demand (MMT)

Ethanol Demand (MMT)

While there may be a need in Europe to make up for shortfalls in ethanol production in
the short-term, it is uncertain whether it the demand for imports will continue in the long-
term. Some nations have seemed content to import ethanol from Brazil, particularly
Sweden and Denmark, while there are large initiatives in both Spain and France to
increase production of biofuels (USDA 2006a). What is certain is the EU’s intention to
continue producing biofuels which will in turn increase the need for feedstock.

Sugarcane

Background
Sugarcane is the single largest source of ethanol production in the world. The fact that
sugarcane requires little in the way of processing before it can be turned into alcohol,
make it a natural feedstock for production. It has also proven to be the most efficient
feedstock in terms of using its own waste, in the form of bagasse, as a major source of
energy to convert the sugars into ethanol. In fact, ethanol produced from sugarcane is the
most efficient in terms of energy input/output ratio at roughly 8.1 compared with a ratio
of 1.3 for maize (corn) and lower ratios for most biodiesel crops (USDA 2002).

Brazil is arguably the biggest success story in terms of biofuel production and it is in
large part due to the country’s ability to grow massive quantities of sugar at very low cost,
nearly at half the price of its nearest competitors (World Bank 2005). As the leading
producer and consumer of ethanol in the world, Brazil has managed to make its programs
profitable without government subsidies. However, it must be noted that this has not

20
always been the case and that Brazil’s current status as a net exporter of ethanol is a
recent development.

Currently, there is no real discussion in Ghana on introducing the use of sugar for ethanol
production. This lack of interest is largely due to reluctance on making investments in an
industry that collapsed several years ago, forcing the country to import all of its sugar
crop. However, at the time of this report there was news of private initiatives being
developed to revitalize the sugarcane industry in Ghana (Ghanaweb 2007).

Table 2: ex-Refinery Price

Production Model Current price of petrol (ex
pump) (per liter) $0.8603
Calculations were made to determine the
Gross margin (distributors) $0.0722
approximate price of ethanol production in Transport margin (oil
Ghana and to identify the cost of feedstock marketers) $0.0340
necessary for a competitive industry. The model BOST Margin $0.0111
was created by using the current price of petrol Distribution Margin $0.0056
gasoline ($0.86/liter 4 ) and subtracting -
transportation costs, distribution margins, taxes Government subsidy $0.0325
and levies to determine the ex-refinery price of Taxes and Levies $0.2435
petroleum gasoline ($0.53/liter) Once this price
Current ex Refinery Price $0.5264
was obtained estimated ethanol production costs
were subtracted to determine the maximum cost Table 1: Maximum Feedstock Price3
for sugarcane (Table 1: Maximum Feedstock ). Current ex Refinery Price (per
Since there is no current ethanol production in liter) $0.5264
Ghana, the model utilized production costs from Production Costs
the United States to obtain an estimated Administrative Labor $0.0152
maximum cost of feedstock of approximately Administrative Non-Labor $0.0245
USD 0.28 per liter of ethanol (Figure 3). Total Administrative Costs $0.0397
However, this figure might be lower since Repairs and Maintenance $0.0654
production costs in Ghana are likely to be Processing
Labor $0.0478
initially higher than that of the US due to high
Fuel $0.0085
infrastructure and utility costs. Nevertheless, if
Chemicals $0.0054
Ghana were to produce sugarcane for less than Electricity $0.0057
USD 0.28 per liter it would be positioned to be Materials and Supplies $0.0216
competitive vis-à-vis gasoline in the national Total Processing Costs $0.1544
market. Cane Transportation $0.0518

Analysis5 Maximum Feedstock Cost $0.2805

Given that Ghana has no current sugarcane production, it is useful to identify
international costs of production to be used as benchmark. In the case of sugarcane it is
useful to look at production costs for Brazil, the world leader, and the United States, the
scenario for which best data is available.

3
All production costs from USDA 2006b
4
Unless otherwise noted all costs are taken from March 14th 2007
5
See Appendix II for detailed cost information on ethanol production from sugarcane

21
 There is some debate regarding the exact cost of sugarcane production in Brazil. Some
estimates indicate costs as low as USD 0.14/liter (World Bank 2005) but others estimate
the cost around USD 0.24 and up to USD 0.27 per liter (USDA 2006b). In the case of the
US, the Department of Agriculture estimates that large-scale ethanol production from
sugarcane is likely to cost approximately USD 0.39 per liter (USDA 2006b). Given the
limitations of USD 0.28 per liter, Ghana would have to produce sugarcane at a cost three
times less than that of the United States and achieve costs of production comparable to
those of Brazil.

Reaching these production targets might not be a reasonable goal for Ghana in the short-
term. Significant developments in sugarcane production must occur if there is to be an
adequate supply of feedstock to meet Ghana’s relatively small demand. Moreover, the
initial costs of production could be higher than assumed and further research is required
to ensure that it would not be too high so as to make ethanol production not viable.
Additionally, significant reduction in taxes and levies, or substantial increase in subsidies,
will likely be necessary to offset higher production or feedstock costs and to make
Ghana’s ethanol industry viable in the short-term. Barring these developments the

Figure 3: Cost Breakdown for Estimated Maximum Feedstock Cost of Sugarcane-based

Ethanol

prospects for developing the Ghanaian ethanol industry in the long-term are low.

The experiences from Brazil might provide an indication on the type of policies required
for the creation of a viable industry. First, it was necessary for the Brazilian government
to subsidize ethanol production, particularly the construction of refineries for a long
period before government price-setting was removed in the mid-1990s. A long period of
time was needed to put infrastructure in place and to refine production processes.
Additionally, Brazil had a large domestic market which allowed for economies of scale
while mandating domestic consumption. This is not to say that a country such as Ghana

22
would have to have an equivalent domestic market today, but only that in lieu of a
competitive product, a ready market that is required to purchase biofuel is a pre-requisite
to develop the sector. However, this is not the case in Ghana.

Cassava

Background
Cassava is the largest staple crop in Ghana with an estimated production of over 10
million MT a year. The amount of land cultivated is estimated to be 800,000 ha with an
average yield of just under 12 tons per ha (RTIP 2004). Cassava is mostly utilized in the
food market or as a subsistence crop, however cassava is also grown for the production of
industrial starch, an industry that has been initiated with poor results in Ghana (Bonsu
2007).While there is no established large scale cassava cultivation for the sole purpose of
ethanol production in Ghana, there are efforts in other parts of the world, notably
Thailand, to create a market for cassava based ethanol.

Despite the large production of cassava, industries based on this crop have encountered
difficulties in Ghana, Ayensu, a commercial starch factory backed by the President’s
Special Initiative (PSI), began operations with 10 percent of its installed capacity (22,000
tons/year) producing 1700 tons per year for the export market, The factory soon ran into
cash flow problems due to lower demand and reduced global prices. Because the plant
runs under capacity the average cost of production is 250 USD per ton, a cost too high to
compete with global market prices around 200 USD/ton. These problems were further
exacerbated by the lack of a steady supply of feedstock. The plant was being supplied
almost exclusively by small-holder farmers who had become disillusioned with the
project and who were able to find better prices for their wares on the open market (Bonsu
2007).

The Ayensu experience highlights some of the issues of establishing a cassava-based

industry in Ghana, the most important being obtaining a steady supply stream. Particular
attention must be paid to maintaining steady incentives for small-holders before any
cassava based ethanol project can move forward.

Despite issues with supply, Ghana has a great potential to improve its production of
cassava. The Root and Tuber Improvement Program (RTIP) has been able to improve
yields by up to 300% (RTIP 2004). While some of the test cases may be hard to
duplicate, the opportunity for higher yields exists. Furthermore newer high-starch
varieties of cassava may be able to increase the yield of ethanol per kilogram of cassava.
These opportunities improve the potential for an ethanol market to be competitive in the
future.

Model
As opposed to the sugarcane model, information on production costs for cassava is
widely available, however there is doubt as to the costs involved in processing cassava
chips. Unlike sugarcane, cassava must be broken down into its component starches and
sugars before it can be converted into ethanol. This added expense increases costs of

23
ethanol production. The following model utilizes estimated cost of production from a
cassava-ethanol program in another sub-Saharan African Country. By adapting these
figures and utilizing average costs of cassava production in Ghana, an approximate value
of producing ethanol-mixed gasoline can be determined.

Figure 4: Minimum Blended Gasoline Price

Although RTIP has demonstrated that cassava may potentially be grown for half of the
cost, this model uses conservative estimates for production costs and farm gate prices for
cassava. The farm gate price for cassava is estimated to be USD 0.026/ per liter of
ethanol. Given that the ethanol must be blended with petroleum gasoline to be
commercially available, we factor in a percentage difference to determine the change in
price. After the ex-refinery price is determined, regular taxes and transportation margins
are added to calculate the minimum price for ethanol (Figure 4).

Analysis6
Using these assumptions it was determined that ethanol derived from cassava may have a
cost of just over USD 0.862. It should be pointed out that the price of petroleum gasoline
in Ghana is currently USD 0.860, making ethanol from cassava very close to being
competitive. While there is a question regarding the production costs as they are taken
from a different context, a market could exist if production costs are reduced or if there is
an increase in the price of gasoline. Additionally, the model fails to include a margin for
the ethanol producer and therefore must be factored into future cost analysis. However,
despite these caveats, if cost assumptions are met the cassava-based ethanol industry is
close to being a commercially viable form of biofuel.

6
For a full analysis of the Cassava to ethanol production costs see Appendix III

24
In order to take advantage of this opportunity, Ghana must first reduce some of the
production costs that may prevent it being competitive. Additionally, it would need to
successfully introduce newer high-starch varieties and increase the average yield of small
farmers. However, these improvements do not take into account the fact that cassava,
unlike sugarcane, is a major food crop in Ghana. An increase in the demand for cassava
could potentially raise its price, adversely affecting the population that depends on the
crop for daily consumption. Additionally, the feedstock is highly susceptible to
fluctuations in prices within the food and industrial starch market, Thereby, if the market
food price, or starch price substantially increases, the number of small-holders willing to
sell to ethanol producers is likely to fall unless the price is matched.

While there is inherent potential for a cassava-based ethanol industry, factors previously
mentioned prevent cassava from being a suitable feedstock for biofuel production. There
is need for wide-spread improvements on yields, reduction of production costs, and
further research regarding food security issues. Moreover, the experience of the Ayensu
starch factory indicates the need for better market coordination to ensure sustainable and
steady supply.

Conclusions

Based on the models presented neither cassava nor sugarcane is capable of being
economically viable at this stage. This is the case unless significant improvements in
yields and costs of production are made. Additionally, government support in the form of
direct tax breaks might be required if the industry is to be started.. However this is
unlikely given the lack of government interest in this industry,.

It is important to note that there is no established domestic market for ethanol. The
assumption in the models identify a need for 2% blend of ethanol to be used as gasoline
additive. However the government does not currently have plans to implement a
regulation to change the use of MMT.

Nevertheless, a breakthrough on the cellulosic research could potentially threaten the

economic viability of the industry. If cellulosic technology is made available for
commercial use the cost and efficiency of sugarcane and cassava-based ethanol is no
longer competitive. Hence Ghana should focus its efforts on developing the biodiesel
industry which is subject to less volatility.

BIODIESEL POTENTIAL

Unlike the ethanol industry, there is a potential to develop a biodiesel industry in Ghana
given the support and interest of the government and small entrepreneurs. This section
analyses the possibility of a biodiesel industry based on three identified crops: jatropha,
coconut, and oil palm and three potential models of production. The first model is based
on the government’s policy draft for the biodiesel industry and identifies all of Ghana as
the potential market. The second model takes a sectoral approach, targeting the mining
sector as the market for biodiesel. The last model deviates from the production of

25
biodiesel by identifying the potential of the export of vegetable oils to Europe. This
model can be used to increase the supply of feedstock until capacity for biodiesel
production is built in the country.

National Model

Biodiesel Demand
The demand for biodiesel will be created by legislation which mandates a B5 blend for
the year 2010 and B20 for the year 2015 for all diesel fuel in the country (Energy
Commission of Ghana). Assuming fuel consumption expands in line with GDP growth
expectations of 5%, it is expected that demand for biodiesel in the year 2010 will reach
63,204 metric tones (Figure 5). Such demand will increase fivefold for the year 2015, to
approximately 330,431 metric tones. As mentioned before, it is imperative that current
biofuel policy draft is approved by parliament for these assumptions to hold.

Figure 5 Projected Demand for Biodiesel

Projected Demand (MT)

330,431
63,204
0

1,111,930 1,223,818
895,576

2005 2010 2015

Consumption BioDiesel Need

Assumes diesel consumption growth in line with expected 5% GDP growth

Supply Chain
As seen in Figure 6, the biodiesel supply chain for this model begins with the production
of the feedstock by small farmers. This is due to the government’s interest in supporting
an industry that employs a large number of farmers. However, since yields tend to be
lower with small scale production, it is likely that feedstock will also be bought from
bigger plantations in order to meet the large demand for vegetable oil. This could be the
case for coconut and oil palm, which are grown at a large and small scale in Ghana,
however, no current large production of Jatropha exists today. Nonetheless, the
government has plans to increase small scale cultivation of jatropha by providing land to
young farmers for the production of jatropha seeds for the biodiesel industry (Kufuor
2007).

Once the feedstock has been bought, the next step in the supply chain is the transportation
to an oil production facility. It is likely that oil will be extracted by the biodiesel
entrepreneur in order to reduce the final cost of the oil. This is achieved by eliminating
the margin of a third-party oil extractor. It is particularly true for the case jatropha seeds

26
since no current large facilities are dedicated to the commercial extraction of its oil.
However, it is likely that current coconut and palm oil producers can supply the oil
directly to the biodiesel producer if the price is competitive enough.

Figure 6 - Biodiesel Supply Chain: National Model

Biodiesel Feedstock Transport to Oil

Supply Chain Production Producers

Vegetable Oil Transport Oil to Biodiesel

Extraction Plant Production Plant

Transport to Blending Transport to

Blending Facility Plant storage depot

Storage Transport by Retailers

Facility Oil Marketers (Gas stations)

Once the oil is obtained, it will be turned into biodiesel through a transesterification
process by which a catalyst, methanol and water, are added to the oil. The biodiesel
obtained will then be transported to Tema Oil Refinery for blending with diesel.
Subsequently, the blended fuel will be transported to BOST storage depots across Ghana
to be distributed to local gas station or retailers by oil marketers. Alternatively, the
biodiesel can be transported directly to BOST depots and blended with diesel there before
it is distributed by oil marketers. The task of blending could fall under the responsibility
of BOST or Tema Oil Refinery depending on the legislation to be approved by
Parliament.

Maximum Feedstock price for Biodiesel B100

After the biodiesel supply chain has been identified, estimated costs of production are
assigned to all of production and distribution steps. In order to determine the maximum
price for vegetable oil required for competitive B100 biodiesel, production and
distribution costs are deducted from the price of diesel at the pump (USD 0.8201 on
March 16, 2007).

27
Figure 7

Biodiesel competitive price analysis

for Ghana (US Cents / lt)

Methanol cost twice Implies

12.29 than Mozambique’s
3.00 $142.89/ ton

82.01 22.50
30.62
50.22 4.22 2.24 13.15
price

Distribution margin
Current Fossil diesel

Subsidy

Methanol/ Catalyst

Implied max cost of veg oil

Ex-Refinery price

Other

Transport of vegetable oil

Taxes

Source: BOST, TechnoServe, and GWU Analysis

As observed in Figure 7, the estimated ex-refinery cost of diesel in Ghana is equivalent to

USD 0.5022 per liter. This implies that biodiesel ex-production plant price has to be
equivalent to USD 0.5022 if it were to be competitive with diesel. Because production
and transportation costs are approximately USD 0.3707 per liter of biodiesel, the
maximum cost of vegetable oil is roughly USD 0.1315 per liter or USD 142.89 per ton.
It is important to mention that the cost of methanol (used with the catalyst) is much
higher in Ghana than in other countries such as Mozambique, increasing the overall cost
of biodiesel production (correspond to 21-37% of costs). If the price were to be reduced
to the level of Mozambique’s, the implied maximum cost of vegetable oil would rise by
USD 0.15 per liter. It should be clarified that this paper utilizes the current cost of
methanol in order to produce models that reflect the environment in Ghana today.
However, it should also be mentioned that costs utilized in this model are only indicatives
and do not include other costs such as land, administrative personnel, and overhead costs
associated with biodiesel production.

Current Feedstock Price Analysis

Current prices of vegetable oil in Ghana are higher than the implied maximum cost of
USD 13.15 per liter. As observed in Table 3, estimated prices in Ghana for jatropha oil,
palm oil and coconut oil range from USD 0.4183 to USD 0.9776 per liter. The reason
behind the high cost of oil is that either the farm gate price for jatropha seed is too high,
or the commercial value of palm oil and coconut oil is high in the food market.
Table 3 Estimated current cost of oil in Ghana
Jatropha Coconut Oil Palm
Price per liter of oil $ 0.7141 $ 0.9776 $ 0.4183

28
The price of palm oil per liter is about USD 0.4183, and reflects the international price of
USD 470 per metric ton. This price has built-in margins for oil extraction, allowing a
third-party to extract the oil instead of the biodiesel producer. Although production costs
for palm oil are lower than USD 470, it is unlikely that the oil extractor would sell it for a
lower price in order to produce biodiesel at a competitive. It is assumed that the oil
extractor and biodiesel producers would maximize their profits by selling the oil to the
food industry for USD 470. Therefore, the price of the oil for biodiesel production is tied
to the price of palm oil in the food market.

The case is similar for coconut oil which is the most expensive vegetable oil of the
selected crops. The local market price for one liter of coconut oil is equivalent to USD
0.9776. Although the production cost is lower, competition with the food market does
not allow reduced prices for the biodiesel industry. It is assumed that 17 nuts are needed
to make one liter of oil, and the price per nut is equivalent to USD 0.04 (Rayford). Since
no current price per kg of copra was available during data collection, it is assumed that
the oil producer buys the entire nut for production. This increases the final price for the
oil, since the total cost for nuts equivalent to one liter of oil is USD 0.7556.
Transportation and extraction costs make up the remainder, USD 0.222.

In the case of jatropha, an approximate cost of oil production was calculated since no
official price of jatropha oil exists. In this instance, the price per kg of jatropha seed is
about USD 0.11 (GoldrayBiodiesel). Assuming a conservative extraction rate of 20
percent, 4.6 kg of seeds are needed to produce one liter of oil, bringing the total cost of
the feedstock to about USD 0.51 per liter of oil. Transportation and oil extraction costs
make up the rest of the costs, equivalent to USD 0.203 per liter. In this case, the oil
extraction is done by the biodiesel producer in order to eliminate the margin of a third-
party producer. The final cost for a liter of oil is approximately USD 0.7141, or about
USD 776.21 per metric ton.

As observed in Table 4, if current prices for jatropha, coconut, and palm oil were to be
utilized to make biodiesel, the estimated price at the pump per liter of B100 would be of
USD 1.4396, USD 1.7162, and USD 1.1290 respectively. These values are not
competitive with the current price of diesel (USD 0.8201 as of March 16th, 2007). Please
refer to Appendix IV for more detailed costs

Table 4 Estimated B100 Production Costs

Cost per Liter Jatropha Coconut Oil Palm
Feedstock Cost – small farmers $0.5111 $0.7556 $0.2361
Cost of oil extraction (includes $0.2030* $0.2220 $0.1822
transport of feedstock and margin)
Biodiesel production cost (includes $0.4076 $0.4207 $0.3928
transport to biodiesel plant)**
Biodiesel Ex-Production Plant Price $1.1217 $1.3983 $0.8111
Gov taxes and Distribution margins $0.3179 $0.3179 $0.3179
Estimated Max Pump Price B100 $1.4396 $1.7162 $1.1290
*No margin for jatropha oil extraction
**5% Biodiesel production margin

29
B5 Production Costs
Estimated production costs for B5 blend vary for the three selected crops. As was shown
before, high prices for the vegetable oil make the B100 blend uncompetitive with diesel
by a range between USD 0.31 and USD 0.62 per liter. However, this difference is
decreased when utilizing a B5 blend since only five percent of the cost is attributed to
biodiesel.

Table 5 - B5 Production Costs

Jatropha Coconut Oil Palm
US$/L US$/L US$/L
Biodiesel Ex-Production Plant Price $1.1217 $1.3983 $0.8111
Distribution Margin (from plant to blending) $0.0056 $0.0056 $0.0056
Blending $0.0017 $0.0017 $0.0017
Biodiesel Ex-Refinery cost $1.1289 $1.4056 $0.8183
Diesel Ex-refinery cost $0.5022 $0.5022 $0.5022
Blended B5 Ex-Refinery cost $0.5335 $0.5474 0.5180
Taxes and Levies $0.2250 $0.2250 0.2250
Government subsidy ($0.0300) ($0.0300) (0.0300)
Distribution Margin (from Tema to BOST) $0.0056 $0.0056 0.0056
BOST margin $0.0111 $0.0111 0.0111
Transport margin (Oil marketers) $0.0340 $0.0340 0.0340
gross margin (distributor) $0.0722 $0.0722 0.0722
Estimated Maximum B5 Pump Price $0.8514 $0.8653 0.8360

As observed in Table 5, the biodiesel ex-refinery cost is calculated by adding

transportation and blending costs to the biodiesel ex-production plant cost. Because the
cost of biodiesel is higher than that of diesel, the blended B5 cost will be slightly higher
than diesel alone by a range between USD 0.0166 and USD 0.0452 per liter. This
implies that with current costs of production and local prices for vegetable oil, biodiesel
cannot be competitive with fossil fuels without some form of subsidy (less than five US
cents per liter). However, this scenario could change if vegetable oil costs were reduced,
or if diesel prices were to increase significantly.

Best Case Scenario

It has been observed that current prices for vegetable oil are too high if biodiesel is to be
competitive with current diesel pump prices. Hence, it is important to understand the
potential impact that lower priced vegetable oils have on the production of biodiesel. The
following table introduces estimated costs/prices for vegetable oil under a best case
scenario.

Table 6 Estimated best case scenario cost of oil in Ghana

Jatropha Coconut Oil Palm
Feedstock Cost $0.1574 $0.2576 $0.1759*
Cost of oil extraction (includes $0.1987 $0.1801
transport of feedstock and margin) $0.1867
Price per liter of oil $0.3451 $0.4563 $0.3560
* Combined supply from small farmers and plantation

30
The best case scenario for oil palm reflects a lower price for palm oil at USD 400 per
metric ton (instead of USD 470 per MT). Since small farmers have costs that are higher
than USD 400, it is assumed that the supply of feedstock will include larger plantations,
which tend to have lower costs of production.

In the case of Coconut, the new price for the feedstock would reflect only the cost of
copra and not the entire nut. It is assumed that because the oil extractor would buy in
bulk it will be able to obtain a lower price. By only buying the copra, the producer can
save close to 70 percent in feedstock costs. After adding transportation and extraction
costs, the final cost for coconut oil is estimated to be USD 0.4563 per liter or USD 495.93
per metric ton. However, since the oil extractor will seek to maximize profits reducing
production costs is not enough, hence national coconut oil prices will need to decrease as
well.

The situation is different for jatropha oil, since this product has no competition in the
food market. Prices are likely to be established between producers and buyers and will
reflect the productivity of the farmer. Since the current price of USD 0.11 per kg of seed
is too high for a competitive biodiesel industry, the marginal cost of production needs to
be reduced, and the oil extraction rate increased. In the previous assumption, it was
estimated that a jatropha tree would yield 2 kg of seeds per tree (conservative yield based
on observations by ADRA). The model built, assumed 1089 trees could be planted in
one hectare (3 by 3 meters space).

The assumptions for the best case scenario would require significant R&D to obtain an
improved variety to yield, as a minimum 5 kilograms of seed per tree. Furthermore, it is
assumed that 1650 trees are planted per hectare (2 by 3 meters), and that the oil extraction
rate is 30 percent (obtained by GoldrayBiodiesel). This would mean that only 3.07 kg of
seeds are needed per liter of oil (compared to 4.6 kg). Because productivity will be
increased, and no competition with the food market exists, the price of jatropha seeds
could potentially be lowered. This scenario assumes that the price per kg is reduced by
55 percent to approximately USD 0.052. With lower feedstock costs, the price of
jatropha oil decreases to USD 0.3451 per liter.

B5 Production Costs- Best Case Scenario

Since the best case scenario present lower costs for vegetable oil, the production costs for
biodiesel and the final pump price for B5 fuel will also be lower.

As observed in Table 7, the estimated B5 pump price for the best case scenario would
range between USD 0.8312 and USD 0.8379 per liter depending on the feedstock. This
price would still be higher than the observed cost of diesel at the pump (USD 0.8201 per
liter – March 16, 2007); however, the government could artificially make the B5 blend
competitive by using a subsidy of less than two US cents per liter. Alternatively, the
government could also put in place a tax break for the biodiesel percentage in the blend.
In this case, it would imply a five percent tax break, equivalent to USD 0.0112. Table 8,
shows the outcome of such measure.

31
Table 7 - B5 Production Costs for Best Case Scenario
Jatropha Coconut Oil Palm
US$/L US$/L US$/L
Cost of vegetable oil $0.3451 $0.4563 $0.3560
Biodiesel production cost (includes transport of oil to $0.3707 $0.3947 $0.3897
biodiesel plant, 5% producer margin)
Biodiesel Ex-Production Plant Price $0.7159 $0.8509 $0.7457
Distribution Margin (from plant to blending) $0.0056 $0.0056 $0.0056
Blending $0.0017 $0.0017 $0.0017
Biodiesel Ex-Refinery cost $0.7231 $0.8582 $0.7529
Diesel Ex-refinery cost $0.5022 $0.5022 $0.5022
Blended B5 Ex-Refinery cost $0.5133 $0.5200 $0.5147
Taxes and Levies $0.2250 $0.2250 $0.2250
Government subsidy ($0.0300) ($0.0300) ($0.0300)
Distribution Margin (from Tema to BOST) $0.0056 $0.0056 $0.0056
BOST margin $0.0111 $0.0111 $0.0111
Transport margin (Oil marketers) $0.0340 $0.0340 $0.0340
gross margin (distributor) $0.0722 $0.0722 $0.0722
Estimated B5 Pump Price $0.8312 $0.8379 $ 0.8327

Table 8 - B5 Pump Price - 5% tax break – best case scenario

Blended B5 Ex-Refinery cost $0.5133 $0.5200 $0.5147
Taxes and Levies $0.2138 $0.2250 $0.2250
Government subsidy ($0.0300) ($0.0300) ($0.0300)
Distribution Margin (from Tema to BOST) $0.0056 $0.0056 $0.0056
BOST margin $0.0111 $0.0111 $0.0111
Transport margin (Oil marketers) $0.0340 $0.0340 $0.0340
gross margin (distributor) $0.0722 $0.0722 $0.0722
Estimated Maximum B5 Pump Price $0.8199 $0.8267 $ 0.8214

Because the amount reduced in taxation is higher than the increase in the cost of ex-
refinery fuel, biodiesel made from jatropha oil has the potential of being competitive..
However, it is important to stress that this is only attained with higher productivity and
lower prices for the seed. Additionally, oil palm could be a potential feedstock to be used
with marginal subsidies, but only if the international price of palm oil is low.

Crude Oil Sensitivity Analysis

It has been shown that with current prices of vegetable oil, the production of biodiesel
(B100 and B5) is not competitive with the current price of diesel. The following graph,
indicates the price of crude oil at which, each feedstock is competitive for the production
of biodiesel B5 blend (keeping feedstock and biodiesel costs fixed). Please refer to
Appendix VI for further information

32
 Figure 8
Crude Oil Senstivity Analysis - B5 Biodiesel Crude Oil Senstivity Analysis - B5 Biodiesel Tax Break

$200.00 $200.00
$180.00 $180.00
$173.24
$160.00 $160.00
Price per Barrel of Oil

$136.85 $145.97

Price per Barrel of Oil

$140.00 $140.00
$120.00 $120.00
$104.04 $99.20 $109.58
$91.27
$100.00 $100.00
$87.66 $76.76 $71.92
$80.00 $80.00
$60.88 $64.00
$60.88 $60.38
$60.00 $60.00

$40.00 $40.00

$20.00 $20.00

$- $-
Jatropha Best Case Coconut Best Case Palm Oil Best Case Jatropha Best Case Coconut Best Case Palm Oil Best Case
Jatropha Coconut Palm Oil Jatropha Coconut Palm Oil

Estimated Price of Oil needed for competitiveness Price of oil (barrel) 03/16/07 Estimated Price of Oil needed for competitiveness Price of oil (barrel) 03/16/07

The first graph provides the estimated value of a barrel of crude oil needed for the price
of B5 to be competitive for each scenario. The price of crude oil would need to increase
between 60 and 190 percent for biodiesel produced with current vegetable oil to be
competitive. However, if we take into account the best case scenario, prices of oil would
need to increase by 40 to 70 percent. That means, that for jatropha to be competitive
crude oil should have an average price of USD 88 per barrel, and in the case of palm oil,
the price would have to be of USD 91 per barrel (assuming national price of palm oil is
USD 400 per metric ton).

The second graph illustrates the effect of a five percent tax break in the price of B5 fuel.
As previously demonstrated, biodiesel made from jatropha (under a best case scenario)
would be competitive with the current price of oil (USD 60.88 per barrel) if a tax break
were given. For palm oil biodiesel to be competitive, prices of crude oil would only need
to increase by 5 to 18 percent (current and best case scenarios). However, for the case of
coconut, crude oil prices would need to increase significantly, about 140 percent for
current costs to be competitive, or 26 percent for the best case scenario. It is important
then, for the government to be prepared to provide some type of tax incentive if biodiesel
is to become competitive in the near future.

It can be concluded that if Ghana were to seek a biodiesel industry competitive with
current diesel prices, it would have to increase productivity of jatropha, reduce the seed
price by 55 percent, and provide a tax break of 5 percent on the total blended fuel. If this
is not met, the best next alternative is palm oil, which would require further subsidies or
tax breaks on the blended fuel if it were to be competitive. However, the price of palm
oil is subject to volatility due to its demand in the food market, which can in turn
influence the competitiveness of the biofuel industry.

33
Mining Model

The second model moves the focus away from the national market and concentrates on a
particular sector in the economy as the potential market. The most promising sector in
Ghana would be the mining sector since it consumes approximately 40 percent of the
national production of diesel (BOST). Furthermore, diesel represents around 42 percent
of operational costs for the mining industry, and mining companies are obliged by law to
ensure other economic activities are promoted in the areas where mines are located.
Hence, a biodiesel industry would not only fulfill the sector’s need for fuel, but would
also diversify the economic activity of surrounding communities by creating jobs in the
agricultural sector.

Biodiesel Demand
The demand for biodiesel is significant in this model due to large consumption of diesel
by the mining equipment. It is assumed that the sector would initially utilize a B5 fuel
blend for its vehicles and can later increase to B10 if needed, and if reliable supply of
feedstock exists.

Figure 9 - Projected Demand for Biodiesel for Mining Sector

Projected Demand (MT)

61,436
23,503
0

552,921
446,551
358,230

2005 2010 2015

Consumption BioDiesel Need

Assumes growth in diesel consumption in line with 5% expected GDP growth

As seen in Figure 9, biodiesel demand for the year 2010 is expected to be 23,503 metric
tons. This demand nearly triplicates for the year 2015 if the blended percentage is
increased to B10.

Supply Chain
As observed in Figure 10, the biodiesel supply chain for the mining sector would begin
with the production of feedstock by small holders and plantations owned by the mines.
This is to ensure that feedstock costs are minimized since best practices tend to be
developed by plantations and then transferred to small holders and small out-growers.
The next step in the chain is the transportation of the feedstock to the oil extraction plant
that would be located on-site (near plantation). Once the oil is extracted, it will be
transported to the biodiesel production plant also located near the plantation. Once the
biodiesel is produced, it will be transported to the diesel storage depot located at the mine
where it will be blended with regular diesel and stored for later consumption.

34
In this model the mining companies would outsource the biodiesel and oil extraction on-
site in order to reduce transportation costs.

Figure 10 - Biodiesel Supply Chain: Mining Model

Biodiesel Feedstock Transport to Oil

Supply Chain Production Production

Vegetable Oil Transport Oil to Biodiesel

Extraction Plant Production Plant

Transport to Blending and

Storage Depot storage in depot

Maximum Feedstock price for Biodiesel B100

In order to determine the maximum feedstock price for the production of biodiesel B100,
production and distribution costs are subtracted from the estimated price of fossil diesel
at the mine. Because the mining sector buys in bulk, it receives a price lower than the
national diesel pump price. This model estimates that the margin of the gas stations is
eliminated due to direct distribution by oil marketers, therefore the estimated price for the
mining sector is equivalent to USD 0.7479 per liter of diesel (USD 0.8201 – USD
0.0722). If biodiesel were to be competitive its mine pump price needs to be equal or
lower than USD 0.7479. Subtracting the price of transportation to the mine, the ex-
production plant price should be USD 0.7423 per liter. This would imply a maximum
vegetable oil cost of USD 0.3770 per liter, or USD 409.82 per metric ton (Figure 11).

Because biodiesel will be produced at the mine for internal consumption it is assumed
that it will not be subject to taxation. The elimination of tax and distribution expenses
that would occur if biodiesel were to be blended at BOST or Tema Oil Refinery (as in the
national model) increases the maximum feedstock price by USD 0.2455 per liter.

35
 Figure 11 - Maximum Feedstock Price: Mining Sector B100

Biodiesel Competitive Price Analysis - Ghana

(No Taxes) US cents/Lt
Implies
$409.82 MT
0.6 0.0 0.0
30.6
74.8 74.2 3.7 2.2
37.7
Distribution margin
price
Current Fossil diesel

Subsidy

Catalyst

Implied max cost of veg oil

Ex-Refinery price

Other

Transport of vegetable oil

Taxes

Source: BOST, TechnoServe, and GWU Analysis

B5 Production Costs- Current costs for vegetable oil7

Given that the price of diesel and distribution are lower than in the national model, the
price for a B5 fuel at the mine will also be lower. Table 9 presents the estimated price of
B5 utilizing current estimated costs for vegetable oil in Ghana. The price for coconut oil
and palm oil are the same as the national model, however, jatropha costs are lower since
it assumes 50 percent of the feedstock will come from mine-owned plantations which
have higher yields and only charges for the cost of production (plantation seed cost
$0.226 vs. small farmer farm gate seed price $0.5111 per liter)

Table 9 - B5 Production Costs – Current Estimated Costs

Jatropha Coconut Oil Palm
US$/L US$/L US$/L
Cost of vegetable oil $0.5646* $0.9542 $0.4183
Biodiesel production cost (includes transport of oil to $0.3708 $0.3653 $0.3653
biodiesel plant, 5% producer margin)
Biodiesel Ex-Production Plant Price $0.9354 $1.3195 $0.7906
Distribution Margin (from plant to blending) $0.0056 $0.0056 $0.0056
Blending $0.0017 $0.0017 $0.0017
Biodiesel Ex-Refinery cost $0.9427 $1.3268 $0.7977
Diesel Mine pump price (including tax) $0.7479 $0.7479 $0.7479
Estimated B5 Mine Pump Price $0.7576 $0.7768 $0.7504
* Assumes 50% feedstock from plantation

Similar to the national model, none of the crops are competitive with the estimated price
of diesel equivalent to USD 0.7479 per liter. The B5 mine pump price is higher than
7
For details production costs please refer to Appedix V

36
diesel by a range between USD 0.0025 and USD 0.0289. Palm oil at a price of USD 470
per metric ton is the closest feedstock to being competitive.

B5 Production Costs- Best Case Scenario

By utilizing the best case scenarios for vegetable oil costs described in the national model,
the B5 production scenario for the mining sector looks more promising (Table 10).

Table 10 - B5 Production Costs – Current Estimated Costs

Jatropha Coconut Oil Palm
US$/L US$/L US$/L
Cost of vegetable oil $0.3451 $0.4563 $0.3560
Biodiesel production cost (includes transport of oil to $0.3707 $0.3653 $0.3653
biodiesel plant, 5% producer margin)
Biodiesel Ex-Production Plant Price $0.7159 $0.8215 $0.7283
Distribution Margin (from plant to blending) $0.0056 $0.0056 $0.0056
Blending $0.0017 $0.0017 $0.0017
Biodiesel Ex-Refinery cost $0.7231 $0.8288 $0.7354
Diesel Mine pump price (including tax) $0.7479 $0.7479 $0.7479
Estimated B5 Mine Pump Price $0.7467 $0.7519 $0.7473

When comparing the B5 price with diesel pump price it can be observed that under a best
case scenario both, jatropha and oil palm have the potential of being competitive. On one
hand, utilizing jatropha seeds with a price equivalent to production costs (55 percent
lower than current farm gate price), will result in a B5 blend that is cheaper than diesel by
USD 0.0012. On the other hand, if local prices of palm oil are equivalent to USD 400
per metric ton, it is possible that the biodiesel produced will be competitive with diesel.

Crude Oil Sensitivity Analysis

Crude Oil Senstivity Analysis - B5 Biodiesel Mining Model

$160.00

$140.00
$137.64
$120.00
Price per Barrel of Oil

$102.61
$100.00

$80.00 $74.25
$66.92
$59.36
$60.88
$60.00 $57.87

$40.00

$20.00

$-
Jatropha Best Case Coconut Best Case Palm Oil Best Case
Jatropha Coconut Palm Oil

Estimated Price of Oil needed for competitiveness Price of oil (barrel) 03/16/07

As previously demonstrated, only the best case scenarios for jatropha and palm oil could
be competitive with current prices of crude oil (USD 60.88 as of 03/16/07). However,

37
palm oil could also be competitive (with current production costs reflecting USD 470 per
MT) if crude oil if prices were to increase by less than 10 percent.

If current farm gate price for jatropha seed were to be used (with 20 percent extraction
rate), prices of crude oil would have to increase 69 percent, while in the case of coconut it
would need to rise by 126 percent. Although the price of petroleum fluctuates throughout
the year, it is highly unlikely that such sustained increase in cost occurs any time soon.
This means that if best case scenarios are not met, the best feedstock for B5 production at
the mine level is palm oil, but only if the prices are not too volatile.

Biodiesel Export Model

The third model is based on the export of the vegetable oil and not on the export of
biodiesel. This is because the largest markets for biodiesel consumption have excessive
production capacity and currently do not favor importation of the fuel. Nevertheless,
these countries are facing bottlenecks in the availability of feedstock and are seeking to
import raw materials, thereby providing a great opportunity for Ghana to become a
potential supplier. This section explores such opportunity by analyzing the
competitiveness of the export price of vegetable oils produced in Ghana vis-à-vis prices
of vegetable oil produced in select countries.

Demand:

Potential Export Markets for Vegetable Oil

The largest producers and consumers of biodiesel are Europe and the United States, with
consumptions of 1,433 millions of liters and 70 million liters respectively in 2002. Both
have plans to increase production capacity and use onerous taxes to deter imports of
biodiesel . Import duties for biodiesel in the United States are slightly less than USD 23
per barrel (USITC 2007), while the European Union applies a 6.5% import tax (USDA
2006).

Despite large production capacity, both are confronted with the challenge of obtaining
sufficient feedstock to reach aggressive production targets. Estimates from the
International Energy Agency indicate that about 60% of US soy production, and over
100% of projected EU oil-seed (rape and sunflower) production would be required to
displace 5 percent of fossil fuels by 2010. For the year 2020 these figures increase
dramatically, requiring an increase in US production of more than 120 percent, and in the
case of Europe of more than 230 percent (EIA, 2004). Thus by the year 2020, more
biodiesel crops would be needed than are expected to be available. Total cropland
required for feedstock production in 2010 would be of 13% to 15%,, and of 30% in 2020
(IEA 2004). Clearly, the amount of cropland required to displace 10% of diesel fuel
would be larger and would require major cropland reallocations towards oil-seed crops,
which is a highly improbable scenario. Consequently both, the US and Europe, will be
open to imports of vegetable oils for biodiesel production

38
 Figure 12

Percentage increase of biofuels crop rpoduction

necessary to meet projected demand

250%

200%

150%

100%

50%

0%
US 2010 US 2020 EU 2010 EU 2020

The European Union: a natural market for Ghanaian exports of vegetable oils
As previously mentioned, the European Union is the biggest producer and consumer of
biodiesel in the world. Biodiesel represents about 80 percent of the EU biofuel market.
This is because the car fleet in the EU is made up primarily of diesel cars.

The EU target of 5.75 percent biofuels is equivalent to around 24 million tons of biofuel.
Currently, less than 2 percent of the European farmland is cultivated with crops used for
biofuel production. If the EU tried to domestically grow crops to reach the established
target, it would require approximately 15 to 18 million hectares of farmland. This
represents roughly 15 to 17 percent of the total 103.6 million hectares of arable land in
the EU25. The utilization of such a large amount of land for energy crops have been
deemed undesirable by the European Commission. However, it has been proposed to
produce half the biofuel from domestically grown crops and to import the other half,
equivalent to 12 million tons (USDA 2006). This makes Europe a very attractive market
for vegetable oil exports from Ghana.

Analysis of the Export Supply Chain Model

Figure 13: Supply Chain for Export of Ghanaian Vegetable Oil to Western Europe

Vegetable Oil Feedstock Transport to Oil

Supply Chain Production Production

Vegetable Oil Transport Oil to Export to

Extraction Port of Export Western Europe

39
 Figure 13
The prospective supply chain for this model is presented in figure 13. The producers of
feedstock will be small farmers and large plantations, while the oil extraction will be
done by and independent (medium to large size) producer which will also be in charge of
selling the oil in the export markets. The oil will be transported to the port of export,
assumed to be Tema, and shipped in containers to Rotterdam.

Competitiveness Analysis for Exports of Ghanaian Vegetable Oils to West

European Markets
After identifying Europe as a potential export market for Ghana, the competitiveness of
Ghanaian vegetable oils were analyzed. For this analysis, costs of production were
calculated to obtain the CIF (Cost Insurance and Freight) price in Rotterdam. This was
compared with export prices of similar vegetable oils produced in other countries.
According to the Malaysian Palm Oil Board, which tracks the prices of selected oils and
fats, in the month of January 2007, the price of Palm oil, CIF North West Europe was
USD 599 per metric ton, while coconut reached USD 731 per MT. These prices were
used as a benchmark for the oils produced in Ghana; it is important to clarify that there
are currently no international prices for jatropha oil; therefore rapeseed oil prices were
utilized as the benchmark.

The CIF price for Ghana can be obtained by adding export brokerage costs
(approximately 5 percent of the value of the vegetable oil) and shipping cost (Tema to
Rotteram) to the current cost of vegetable oil (described in the previous two models). As
seen in Table 11, jatropha and coconut are not competitive against international
benchmark costs. This is due to high production cost for jatropha and high local market
prices for coconut.

Table 11: Cost structure for Ghanaian oils for export with current costs and feedstock farm
gate prices
Ghanaian Vegetable Oils Sales Price CIF Rotterdam in
USD/MT (using current costs and farm gate prices)
Feedstock/Oil Jatropha Oil Concount Oil Palm Oil
Cost of Feedstock 439 53% 821 68% 50 9%
Cost of transport fruit to oil extraction plant 45 5% 181 15% 62 10%
Cost of oil extraction 170 20% 35 3% 74 13%
Oil cost 653 1037 185
Oil producer margin 46 6% 25 2% 285 48%
Estimated sales price in national market 699 1063 470
Transport oil to export port (Takoradi - Tema) 24 3% 24 2% 24 4%
Broker costs 35 4% 54 4% 24 4%
Export Taxes 0 0% 0 0% 0 0%
Export Price FOB Tema 759 1141 518
Export Transport Tema - Rotterdam 70 8% 70 6% 70 12%
Sales Price CIF Rotterdam 829 100% 1211 100% 588 100%
In contrast to jatropha and coconut, results for palm oil are favorable. The export price of
USD 597 per MT is highly competitive when compared to our benchmark prices. This is
a conservative calculation because the assumptions made were based on a farm gate price

40
for the vegetable oil of USD 470 per MT. However, the price can fluctuate based on
seasonality effects and international prices. At the time of the on ground assessment,
research, the market price of palm oil was approximately 400 USD/MT (BOPP),
providing an opportunity for Ghanaian farmers and oil producers to capture higher
revenues in the export market.

The best case scenario for the export model, utilizes assumptions based on lower
production costs and lower farm gate prices obtained through productivity gains in yields
and oil extraction rates, and/or lower international market prices (same as in previous
models). The results of the analysis, presented in Table 12 show that with the best case
scenario, jatropha and oil palm become competitive with prices of USD 515 per MT and
USD 322 per MT respectively. This is in comparison to the lowest benchmark price of
palm oil of USD 599 per MT. This makes the export market of vegetable oil an attractive
option for Ghana.

Table 12: Cost structure for Ghanaian oils for export markets using best case scenario costs
and vegetable oil prices
Ghanaian Vegetable Oils Salese Price CIF Rotterdam (USD/MT)
(using best case scenario costs and farm gate prices)
Feedstock/Oil Jatropha Oil Concount Oil Palm Oil
Cost of Feedstock 171 33% 50 16%
Cost of transport fruit to oil extraction plant 33 6% 62 19%
Cost of oil extraction 170 33% 74 23%
Oil cost 374 496 74% 185
Oil producer margin 26 5% 50 7% 33 10%
Estimated sales price in national market 400 546 218
Transport oil to export port (Takoradi - Tema) 24 5% 24 4% 24 7%
Broker costs 20 4% 27 4% 10 3%
Export Taxes 0% 0 0% 0 0%
Export Price FOB Tema 445 597 252
Export Transport Tema - Rotterdam 70 14% 70 10% 70 22%
Sales Price CIF Rotterdam 515 100% 667 100% 322 100%

It is important to reiterate the need to meet production assumptions for the case of
jatropha if exports of oil derived from this feedstock are to be competitive. However,
even if productivity gains are not achieved for the oil palm industry, Ghana will still be
competitive in the global market given the trend of steady increases in the international
market prices (Figure 14).

Aside from potential competitiveness in terms of production costs, Ghana has a

comparative advantage over main producers, such as Malaysia and Indonesia, to export to
Western European markets due to close proximity and favorable trade agreements, such
as the Cotonou Agreement8. This treaty between the European Union and the group of

8
The Cotonou Agreement was signed in June 2000 in Cotonou , the capital of Benin, by 79 ACP countries and the then
fifteen Member States of the European Union. It entered into force in 2002 and is the latest agreement in the history of
ACP-EU Development Cooperation.

41
Figure 14: Palm Oil Prices (2005 to 2006)

Source: FAO

African, Caribbean and Pacific states (ACP countries), provides import tax exemptions
for vegetable oils, like coconut and palm oil, into Europe under provision 15139.

Conclusions from Biodiesel Analysis

Three prospective models for the development of this industry have been presented. First,
the national model identifies all consumers of diesel in Ghana as a potential market for
biodiesel. The demand for the industry is created through mandatory replacement of
conventional diesel, and retail and distribution occur through existing channels for fossil
fuels (oil marketers and gas stations). The second model takes a sectoral approach and
targets the mining industry, which heavily depends on diesel for its operations, as the
initial market. Once switching to biodiesel is proven to be successful; other sectors such
as public transportation will follow. For the model to be successful, on-site production of
biodiesel is required to reduce transportation and distribution costs. Lastly, the export
model explores the potential of exporting vegetable oil, rather than biodiesel, to European
markets which face insufficient supply of raw materials. This model could initially be
utilized to build the supply of feedstock to be later used in domestic biodiesel production.

It is likely that biodiesel produced will be utilized in a B5, B10, or a B20 blend as
opposed to B100. This is because long term effects on efficiency and energy losses are
unknown for vehicles running on B100. Furthermore, consumers, such as mine
companies, have warranty and insurance restrictions that limit the type of fuels that can
be used in their heavy equipment.

The results of these analyses show that using current production costs and farm gate
prices palm oil is the only feedstock that can be competitive, but only in the case of

9
Jatropha oil is not currently traded in international markets and there fore is not yet included in the
Cotonou Treaty, however the expectation is that it will receive similar treatment to other vegetable oils.

42
export. Without improvements in productivity and reduction in prices, jatropha, has no
potential of being competitive in a biofuel industry. Nevertheless, if assumptions are
reached, jatropha has a potential of being competitive in all three models. The case is
different for coconut, since the feedstock is not competitive in any of the models. This is
mainly due to two reasons, first the ‘lethal yellowing disease’ which has already
exterminated 1/3 of the coconut palm stock in Ghana, but most importantly because the
market price of the coconuts are highly uncompetitive compared with the production
costs of jatropha and palm oil fruit.

DEVELOPMENTAL IMPACT

Through previous analyses four models were identified as having the potential of
building competitive industries. This section analyzes their developmental implications in
terms of agricultural income generated, total agricultural employment generated and
hectares required for biodiesel farming. The total income generated in USD was
calculated by multiplying feedstock income per hectare times the number of hectares
needed to meet the biodiesel demand in each model. The only exception is the export
model, for which the export price per metric ton of oil was multiplied times the number
of tons that would be consumed in the national model (this is an estimate, however the
potential is larger and is limited by the ability of producers to increase production
volumes and compete in price). The second indicator measures the employment created
in the agricultural sector. However, this estimate does not include other jobs created in
throughout the biodiesel supply chain. Lastly, the number of hectares needed for
feedstock was used to measure the environmental impact. It is assumed that the higher
the requirement of land the more negative impact on the environment, as more wild forest
would have to be allocated to agricultural production.

Table 13: Summary of Developmental impact for each value chain model
Model & Agriculture Income Labor Created in the Environmental
Crop Generated - USD Agricultural Sector Impact
(Hectares Needed)
Palm Oil
$ 9,401,080 12,773 17,031 Ha
Mining
Palm Oil
$ 23,502,700 31,933 42,577 Ha
Export
Jatropha 74,888
$ 11,917,233 27, 958 Ha
National (4 months harvesting)
Jatropha 29,955
$ 4,766,893 11, 183 Ha
Mining (4 months harvesting)

Table 13 summarizes the findings of the developmental impact analysis. In general, palm
oil generates higher income when compared to Jatropha in similar models. In the mining
model, palm oil generates an estimated $9,401,080 USD per year, while Jatropha
generates approximately half of that. When comparing the national model for jatropha
with the export model of palm oil (assume the consumption of the same volumes of
vegetable oil), it is observed that palm oil generates an income almost twice as large as
jatropha, with $ 23,502,700 USD and $11,917,233 USD respectively. Regarding the

43
impact on labor, Jatropha in general generates almost 3 times more employment than
palm oil. In the mining sector jatropha generates 11,183 permanent jobs, and 29,955 jobs
during the four months of harvesting season, while palm oil creates 12,773 permanent
jobs. In the national model jatropha creates around 27, 958 permanent jobs and 74,888
jobs during the harvesting season, while palm oil creates approximately 31,933
permanent jobs. Another advantage of using jatropha is that women can participate in the
harvesting; this is not the case for palm oil because harvesting is labor intensive and is
usually done by males. Regarding implications for the environment, Jatropha has the least
negative impact because it requires the least amount of land for both the mining and
national model, with 11183 and 27958 hectares respectively. Whereas palm oil requires
approximately one third more of land with 17,031 hectares for the mining model and
42,577 hectares for the export model.

Other aspects of the developmental impact that must be considered, independently of the
selected model, are the positive impact in the foreign reserves and the reduction on CO2
emissions. Although calculating these impacts was outside the scope of this project, it is
known that, by substituting fossil fuels with biodiesel produced locally, Ghana will
import less crude oil, which will have a positive impact on the country’s foreign reserves.
Debates in the scientific community remain on whether the total energy balance in the
use of biofuels is positive or not. However, scientists agree that the use of biofuels for
transport has a positive impact on the reduction of CO2 emissions. This not only improves
the environment in Ghana, but may also open the possibility to enter the carbon credits
market in the future.

CONCLUSIONS AND RECOMMENDATIONS

Based on the research and findings, six major conclusions were reached and are outlined
below.

1. There is no potential ethanol industry for Ghana in the short-term

Based on the models presented in the report neither cassava nor sugarcane is capable of
being economically viable at this stage. This is the case unless significant improvements
in yields and costs of production are made. The advancement of a sugarcane-based
ethanol industry in the short term is not likely, since there is no large-scale production of
sugarcane at this time. In order for the industry to be competitive in the long-term,
Ghana would need to achieve production cost on the same scale as Brazil.

In addition, a cassava-based ethanol industry might not be adequate in the short-term

because of unreliable supply that has negatively affected the starch industry. Moreover
it is important to consider the possible effects that an increase in demand of cassava
might have on food security (since higher demand tends to increase the price in the food
market).

It is important to note that there is no established domestic market for ethanol. The
assumption in the models identify a need for 2% blend of ethanol to be used as gasoline
additive. However the government does not currently have plans to implement a

44
regulation to change the use of MMT. Finally, a breakthrough on the cellulosic research
could potentially threaten the economic viability of the industry. The introduction of this
technology would eliminate any need for cassava or sugarcane, since cellulosic methods
are more efficient and cheaper

Recommendation:
If Ghana were to develop an ethanol industry it must make certain ethanol production
costs remain low to ensure competitiveness. Additionally, it would need to successfully
introduce newer high-starch cassava varieties and increase the average yield of small
farmers. This is also applicable to the sugarcane industry, which should aim to achieve
costs of production comparable to Brazil. Furthermore, government support in the form
of direct tax breaks might be required if the industry is to be started.

2. There is potential for a biodiesel industry to be developed in Ghana

Production models demonstrated that there is a potential for the biodiesel industry in
Ghana. With enough R&D jatropha can competitively meet both the national and the
mining sector demand for B5 fuel However, if productivity is not increased and prices
are not reduced, the crop will not be competitive unless the government provide subsidies
of under USD 0.05 per liter of B5. Palm oil however, can compete at an international
level and has the potential of being exported to European countries, or used for national
food consumption when the prices are higher. Nevertheless, when the price is low, palm
oil could potentially be utilized to meet the needs of biodiesel for the mining sector.

Recommendation:
In order for the industry to be successful, the productivity of jatropha needs significant
R&D to improve productivity in order to reduce average costs of production and farm
gate price. Without clear indications that these targets can be met, jatropha oil should
not be utilized for biodiesel production unless prices of crude oil are high enough, or the
government is prepared to subsidize the increase in cost. If improvements cannot be
made, further research is needed to develop other potential applications of the oil, which
can include its use in rural electrification schemes.

In the case of palm oil, the industry should continue to be expanded and be
developed. Given that the prices are subject to fluctuation, the oil might not be
recommended as the primary source of biodiesel production. However farmer could sell
their crops to national or international food markets when prices are higher, or
compliment the biodiesel industry when prices decline.

It is likely that for the industry to become competitive it will require initial support from
the government not only to create a demand for the product, but to provide financial
incentives (such as tax breaks), and if necessary subsidies like in the case of Brazil.

3. The cost of Methanol, an important component in the production of biodiesel, is

extremely high when compared to other African countries, thereby affecting the
production costs of biodiesel in Ghana.

45
The cost of methanol represent between 21 and 37 percent of total cost of biodiesel
production in Ghana . The price is higher than in Mozambique, increasing costs of
production and reducing the overall competitiveness of the industry. If the price were to
be reduced to the level of Mozambique's, the implied maximum cost of vegetable oil
would rise by USD 0.15 per liter.

Recommendation:
Further research is required to determine the cause for high prices of methanol in Ghana.
It is strongly encouraged that the Government aim to reduce the price of methanol by
providing tax incentives or eliminating any tariffs imposed on it.

4. The expansion and development of the biofuel industry will have positive
developmental impacts on the economy, the people and the environment in Ghana.
These impacts can be seen in the palm oil export model, where the highest level of
income is generated. In the jatropha national model the highest amount of labor can be
achieved. And in a jatropha mining model, the least amount of land is required. In
addition, the biofuel industry has the potential to positively impact foreign reserves,
because less oil will need to be imported. And finally, the use of biofuels decrease the
amount of CO2 emissions, thereby creating a sustainable industry that is friendly towards
the environment.

5. Jatropha is a good candidate for the main crop to be used in biodiesel

production because the farm gate price is not affected by the market volatility.

Recommendation:
Although Jatropha seems to be an ideal crop; intensive research and development needs
to be undertaken to increase potential yields, and decrease average production costs so as
to lower farm gate price for the seed.

46
REFERENCES

_________(2007),Agricultural Development Bank, Personal Interview, March 15th

Adamako, Samuel Y. (2007) Tema Oil Refinery, Personal Interview, March 15th

Ahenkorah, A. K. Ofosu (2007) Energy Commission, Personal Interview, March 14th

Amoah, Dan (2007), National Petroleum Authority, Personal Interview, March 14th

Bonsu, ____(2007), President’s Special Initiative, Personal Interview, March 13th

(BOPP) Benso Oil Palm Plantation. Personal Interview. March 2007

Environmental Protection Agency [EPA] (1999), “Achieving Clean Air and Clean Water:
The Report of the Blue Ribbon Panel on Oxygenates in Gasoline”, http://www.epa.gov
/otaq/consumer/fuels/oxypanel/r99021.pdf

Environmental Protection Agency (EPA) “Comments on the Gasoline Additive MMT”

http://www.epa.gov/otaq/regs/fuels/additive/mmt_cmts.htm . Consulted April 2007.

Eurostat (2006) “Fuel Consumption Statistics”, http://epp.eurostat.ec.europa.eu/

EU Parliament (2006), “Decision No 1639/2006/EC of the European Parliament and of

the Council of 24 October 2006 establishing a Competitiveness and Innovation
Framework Programme (2007 to 2013)”, EUR-Lex, European Communities

EU Parliament (2003), “Directive 2003/30/EC of the European Parliament and of the

Council of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels
for transport”, EUR-Lex, European Communities

Food and Agriculture Organization (FAO). Data and Statistics. Consulted April 29, 2007.
http://www.fao.org/es/esc/prices/PricesServlet.jsp?lang=en&ccode

Frimpong-Boateng, Jojo (2007), GoldRay Biodiesel, Personal Interview, March 13th.

Energy Commission [GEC] (2005), “National Bio-Fuels Policy Recommendations”

(Draft Copy)

Ghanaweb (2007), “Sugar Factory for Northern Ghana”,

http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=122516

International Energy Agency (IEA, 2004). Biofuels for Transport: An International

Perspective. OECD.

47
(IOI Group, 2006). Market Outlook 2006. Loders Crocklaan Information Service.

Kufuor, Kofi (2007), National Microfinance and Small Loan Center, Personal Interview
March 13th

Ohene-Amoah, Rex (2007), BOST, Personal Interview, March 15th

Reuters (2006), “Brazil Could Double Ethanol Output by 2014-Unica”,

http://www.reuters.com/article/economicNews/idUSL0447785720070205

Root and Tuber Improvement Programme [RTIP] (2004), “Interim Evaluation”, Republic
of Ghana, Root and Tuber Improvement Programme, Report # 1533-GH

United Nations Environmental Program [UNEP] (2006) “Report of the GEF-STAP

Workshop on Liquid Biofuels”, Nairobi

United States Department of Agriculture [USDA] (2006a) “GAIN Report on the EU

Biofuels industry”, USDA, Washington, DC

United States Department of Agriculture [USDA] (2006b) “The Economic Feasibility of

Ethanol Production from Sugarcane in the United States”, USDA, Washington, DC

United States Department of Agriculture [USDA] (2002) “The Energy Balance of Corn
Ethanol: An Update”, USDA, Washington, DC

United States Department of Agriculture (USDA 2006). EU-25 Biofuels Annual2006. US

Department Of Agriculture. GAIN Report Number: E36122

United States International Trade Commission. (USITC 2007) “Harmonized Tariff

Schedule” http://www.usitc.gov/tata/hts/bychapter/index.htm . Consulted January 2007.

World Bank (2005), “The Potential for Biofuels for Transport in Developing Countries”,
World Bank, Washington, DC

48
APPENDIXES

49
 APPENDIX I

Crop Selection Criteria

ETHANOL CROPS
Weight Criteria Maize Sugar Cane Cassava Cellulosicweet Sorghu
weet Potato Bananas Score
6 Yield compared to other producers mt/ha 3 18 3 18 9 54 3 18 3 18 3 18 3 18 9 above median, 6 close median, 3 below median
9 Yield litres per hectare gal/ha 3 27 9 81 3 27 9 81 6 54 9 81 3 27 9 above median, 6 close median, 3 below median
6 Is it massed produced in Ghana 9 54 3 18 9 54 3 18 9 54 6 36 9 54 9 mass produced, 6 some prod, 3 min prod
6 Is there potential for growth in Ghana? 6 36 9 54 6 36 9 54 6 36 6 36 6 36 9 high, 6 medium, 3 low
6 Time for first harvest 9 54 9 54 6 36 9 54 9 54 9 54 3 18 9 <= 1yr, 6 2-3 yr, 3 > 3 yr
3 Can it be intercropped 6 18 3 9 9 27 3 9 6 18 9 27 6 18 9 intercrop with cash crops, 6 non cash crop, 3 no
6 Need technology transfer? 3 18 6 36 9 54 3 18 6 36 6 36 9 54 9 minimal or no, 6 some , 3 a lot
9 High-low input (water, fertilizer, man power) 3 27 9 81 9 81 9 81 9 81 9 81 3 27 9 low, 6 medium, 3 high
3 by-product potential? 6 18 6 18 3 9 9 27 3 9 6 18 3 9 9 high, 6 medium, 3 low
6 potential applications? 3 18 3 18 3 18 6 36 3 18 3 18 3 18 9 fuel, 6 low value, 3 food and other)
6 Generation 6 36 9 54 6 36 3 18 9 54 6 36 9 54 (1st- sugar 9, 1st- starch, biodiesel 6, 2nd- 3)
3 Environmental impacts 6 18 3 9 6 18 9 27 6 18 6 18 6 18 9 positive, 6 neutral or low, 3 negative
6 Threats to crops 6 36 6 36 3 18 6 36 3 18 9 54 3 18 9 low, 6 medium, 3 high
Total 378 486 468 477 468 513 369

BIODIESEL CROPS
Weight Criteria Oil Palm Coconut Castor Oil Jatropha Peanut Soy Algae Score
6 Yield compared to other producers mt/ha 9 54 9 54 6 36 6 36 6 36 9 54 6 36 9 above median, 6 close median, 3 below median
9 Yield litres per hectare gal/ha 9 81 9 81 9 81 9 81 6 54 3 27 9 81 9 above median, 6 close median, 3 below median
6 Is it massed produced in Ghana 9 54 9 54 3 18 6 36 9 54 6 36 3 18 9 mass produced, 6 some prod, 3 min prod
6 Is there potential for growth in Ghana? 6 36 6 36 9 54 9 54 6 36 6 36 9 54 9 high, 6 medium, 3 low
6 Time for first harvest 3 18 6 36 9 54 6 36 9 54 9 54 9 54 9 <= 1yr, 6 2-3 yr, 3 > 3 yr
3 Can it be intercropped 6 18 6 18 6 18 6 18 6 18 6 18 3 9 9 intercrop with cash crops, 6 non cash crop, 3 no
6 Need technology transfer? 9 54 9 54 3 18 9 54 6 36 6 36 3 18 9 minimal or no, 6 some , 3 a lot
9 High-low input (water, fertilizer, man power) 3 27 9 81 9 81 9 81 9 81 3 27 9 81 9 low, 6 medium, 3 high
3 by-product potential? 3 9 6 18 6 18 9 27 3 9 6 18 3 9 9 high, 6 medium, 3 low
6 potential applications? 3 18 3 18 3 18 6 36 3 18 3 18 6 36 9 fuel, 6 low value, 3 food and other)
6 Generation 6 36 6 36 6 36 6 36 6 36 6 36 3 18 (1st- sugar 9, 1st- starch, biodiesel 6, 2nd- 3)
3 Environmental impacts 6 18 6 18 9 27 9 27 6 18 6 18 6 18 9 positive, 6 neutral or low, 3 negative
6 Threats to crops 9 54 3 18 9 54 6 36 3 18 9 54 9 54 9 low, 6 medium, 3 high
Total 477 522 513 558 468 432 486
 APPENDIX II

Ethanol from Sugarcane

Given the fact that there is currently no large scale production of sugarcane or ethanol
currently being undertaken in Ghana, one must look at other sources to at least come up
with some kind of approximation. This appendix will demonstrate how the conclusions
concerning Ghana were developed using costs for the United States (as taken from a
USDA study) and Brazil (as taken from the World Bank).

The United States Model

Currently, no U.S. plants are producing ethanol from sugar feedstocks. Corn is the
feedstock of choice in the United States primarily due to its low prices (kept artificially
so due to massive subsidies) and its relative abundance. However, the USDA has
estimated the potential costs involved with producing ethanol from sugar. This data was
used to estimate costs for Ghana not because the numbers would be similar, but rather
that without numbers for Ghana or any other African nation, there is need to use the data
which is most complete. In this instance it is the United States.

Table Gamma: US Production Costs of Sugar to Ethanol

Percent of
US$/lb raw Production
Cost Breakdown (US)* sugar US$/Liter US$/Gallon Costs
Cost of Feedstock Production $0.08 $0.3237 $1.2253 50.83%
Feedstock Producer Margin $0.02 $0.0673 $0.2547 10.56%
Farm Gate price $0.10 $0.3910 $1.4800 61.39%
Costs of Ethanol Production:
Cane Transportation $0.0133 $0.0518 $0.1961 8.14%
Processing
Labor $0.0123 $0.0478 $0.1809 7.51%
Fuel $0.0022 $0.0085 $0.0323 1.34%
Chemicals $0.0014 $0.0054 $0.0205 0.85%
Electricity $0.0015 $0.0057 $0.0214 0.89%
Materials and Supplies $0.0055 $0.0216 $0.0817 3.39%
Repairs and Maintenance $0.0168 $0.0654 $0.2474 10.26%
Total Variable Processing Costs $0.0528 $0.2062 $0.7804 32.37%
Administrative Labor $0.0039 $0.0152 $0.0575 2.38%
Administrative non-Labor $0.0063 $0.0245 $0.0929 3.85%
Total Administrative Costs $0.0630 $0.0397 $0.1504 6.24%
Total Costs for Ethanol Production $0.1632 $0.6369 $2.4108 100.00%
Producer Margin
Distribution Margins $0.0211 $0.0800
Taxes and Storage Fees (CA) $0.1110 $0.4200
Taxes (Federal) $0.0476 $0.1800
ex pump price of ethanol (no producer
margin) $0.8165 $3.0908

ex pump price of gasoline US (3/16/07)

Source: USDA 2006b $0.8137 $3.0800
As seen in the preceding chart, converting ethanol from sugar is costly in the United
States, largely due to the high price of the feedstock which is over 60% of the production
costs when including margins. These costs also point to the fact that production in the
United States is actually economically feasible under these circumstances. However corn
is a cheaper alternative in the US despite higher processing costs, and the margins for
sugarcane are rather low and therefore untrustworthy if the price of oil goes down.

The Brazil Model

While one may use much of the above to estimate costs for Ghana, Brazil is the
benchmark by which Ghana has to be judged. The reason to do this is because Brazil is
by far the best producer of ethanol from sugarcane in the world. However it must be
noted that any comparison of a sugar industry to Brazil is probably unfair. As the UNEP
has stated:

The uniqueness of the ethanol program in Brazil must be stressed, however. The price of
sugar-cane in Brazil is much lower than in other major sugar producing countries,
because of exceptionally favorable climate and soil conditions making irrigation hardly
necessary…To date, none of the leading sugar-cane producing countries have been able
to achieve the same low cost of production as the Center-South region of Brazil. More
than one-half of the total world sugar production occurs in areas where the cost of
production is close to three times that in Brazil. (UNEP 2006:23).
Yet even taking this into consideration, any effort to promote sugarcane based ethanol
will have to at some level compare with Brazil as they are the world leader and the
competitor Ghana will have to deal with in any exporting scheme.
Table Delta
The first thing to understand about Brazil Sugarcane Acreage & Production (2005)*
the level of production in Brazil is Brazil Sugarcane Acreage (Acres) 2,160,000
the sheer volume of it. As the Brazil Sugarcane Acreage (Ha) 5,400,000
world’s leading producer of ethanol, Total Production (L) 12,500,000,000
a substantial amount of acreage is Production (L/Ha) 2,315
dedicated for the ethanol fuel *Acerage indicates land used for ethanol production
industry (Table Delta). The most only
important number in this table is Source: USDA 2006b
ethanol produced per hectare. This points to the sheer productivity as Brazil has
managed to produce nearly twice the amount of ethanol per hectare than any other nation
(UNEP 2006).

Brazil has been relatively reluctant to give out its exact costs, but the figures estimate the
cost of sugarcane per liter of ethanol produced ranges around $0.14-$0.27 with the real
cost likely nearer the latter number. Brazil has also stated that it is constantly trying to
improve yields and that it will attempt to improve yields by 100% over the next 10 years
(Reuters 2006).

Using the high estimate of Brazil’s commodity price of $0.27, it can be demonstrated
why they are able to produce ethanol at such a reduced cost. We can even compare the
costs for both hydrous ethanol, a fuel derived almost exclusively from feedstock, and E25,

52
a blend of 25% ethanol and 75%
petroleum gasoline. In the first Table Epsilon
case (Table Epsilon), we see that Hydrous Ethnanol Costs with Taxes
and Duties
Brazil is able to keep production
US$/Liter Percentage
costs below the costs of the
Ethanol commodity price 0.27 55.10%
feedstock, which even at Taxes and duties 0.06 12.24%
$0.27/liter, are far more Ex-distillery ethanol price 0.33 67.35%
competitive than those for other Freight cost 0.012 2.45%
countries. Compared to United Distributor's acquisition cost 0.342 69.80%
States production costs we see that Distributor margin 0.021 4.29%
Brazil’s advantage not just lay in Delivery freight cost 0.004 0.82%
its cheap costs for feedstock but in Taxes and duties 0.059 12.04%
production as well. Price charged by distributor 0.426 86.94%
Retail margin 0.062 12.65%
Looking at a blended fuel, the Taxes and duties 0.002 0.41%
Total Retail Price 0.49
story is similar. In this case we
Total Taxes and Duties 0.121 24.69%
see that despite having the added
Source: World Bank 2005
cost of having to mix ethanol with
petroleum gasoline, Brazilian E25 Table Zeta
at the pump is less expensive than E25 blend costs with taxes and
the current ex refinery price of duties
gasoline (Table Zeta). However Gasoline costs US$/Liter %
here in this cost breakdown we see Gasoline commodity price 0.366
one possible reason fro Brazil’s Taxes and Duties 0.554
success. As this table shows in the Ex-refinery price 0.921
Ethanol costs
cost breakdown of petroleum
Commodity price of anhydrous
gasoline, the excessive taxes and ethanol 0.27
levies placed upon this far Freight cost for anhydrous ethanol 0.008
outweigh the same tax burden that Anhydrous ethanol output price 0.278
is placed on ethanol. So while it is Blended Costs
still true that Brazil no longer Gasoline freight cost 0.001 0.11%
directly subsidizes its ethanol Distributor’s cost for E25
industry, it does alter the market acquisition 0.761 85.79%
Distribution margin 0.029 3.27%
so as to give ethanol a favorable
Delivery freight 0.004 0.45%
position in the market.
CPMF 0.006 0.68%
Distributor’s price 0.797 89.85%
This policy has clear implications Retail margin 0.086 9.70%
for Ghana, as this is the means by Retail price 0.887
which Brazil has been able to Source: World Bank 2006
cultivate a domestic market. If
even the world leader in ethanol production requires policy to make ethanol more
attractive to its consumers, then the lesson is that policy is the key to making progress in
the biofuel industry.

53
The Ghana Model
Having established the need to use costs from the United States and benchmarking
against Brazil it is possible to construct a model for Ghana that determines what the
maximum feedstock price might be in order for Ghana to be competitive in the world
ethanol market. In this case one starts from the ex-pump price of petroleum gasoline, as
the price of ethanol becomes competitive when its cost match that that of its petroleum
counterpart (Table Eta). Then by applying Ghanaian taxes and duties, the ex-refinery
cost of petroleum gasoline is reached. By applying United States production costs (and
acknowledging that such costs are likely to be higher in Ghana), it is demonstrated that
under these circumstances, the maximum cost for sugarcane feedstock in Ghana would be
roughly $0.28, one penny more than what was assumed in the Brazilian model.
Considering the current lack of a viable sugar industry in Ghana at the moment, it is not
realistic to believe that Ghana would be able to produce sugarcane feedstock at a level of
efficiency on par with that of Brazil.

Table Eta
Ghana Ethanol Pricing
US$/Liter GHC/Liter
Current price of petrol (ex pump) $0.8603 7,743.00
Gross margin (distributors) $0.0722 650.00
Transport margin (oil marketers) $0.0340 306.00
BOST Margin $0.0111 100.00
Distribution Margin $0.0056 50.00
Government subsidy -$0.0325 -292.09
Taxes and Levies $0.2435 2,191.72

Current ex Refinery Price $0.5264 4,737.37

Production Costs*
Administrative Labor $0.0152 136.80
Administrative Non-Labor $0.0245 220.50
Total Administrative Costs $0.0397 357.30
Repairs and Maintainance $0.0654 588.60
Processing
Labor $0.0478 430.20
Fuel $0.0085 76.50
Chemicals $0.0054 48.60
Electricity $0.0057 51.30
Materials and Supplies $0.0216 194.40
Total Processing Costs $0.1544 1,389.60
Cane Transportation $0.0518 466.20

Maximum Feedstock Cost $0.2805 2,524.27

Sources: Anehe-Omoah 2007; Ahenkorah 2007; USDA 2006

54
 APPENDIX III

Ethanol from Cassava

Unlike sugarcane, cassava is grown in great quantities in Ghana. In fact it is most likely
the largest crop in Ghana in terms of actual production with an estimated annual
production of over 10 million Metric Tonnes (RTIP 2004). Not only is it widely grown,
but cassava is also fairly inexpensive throughout the country. As a result it may be that
cassava is Ghana’s most viable crop in terms of potential ethanol production.

The Model
While costs for sugarcane must be estimated based on production in other countries,
cassava costs have been estimated and utilized by the Ghana Root and Tuber
Improvement Programme. However there are still no ethanol production costs and
therefore estimates based on similar operations in sub-Saharan Africa must be used.

The first step is to determine the maximum feedstock cost involved with the production
of Cassava. Using costs obtained through similar programs, it is shown that the
maximum cost is approximately $0.17 (Table Theta). This compares favorably with an
average cost of dried cassava of $0.12.

Table Theta
Maximum Costs for Competitiveness of Ghanaian Cassava Ethanol
Program
US$/Lite GHC/Lite
r r
Current price of petrol (ex pump) $0.8603 7,743.00
Gross margin (distributors) $0.0782 703.52
Transport margin (oil marketers) $0.0368 331.19
BOST Margin $0.0111 100.00
Distribution Margin $0.0056 50.00
Government subsidy -$0.0325 -292.09
Taxes and Levies $0.2435 2,191.72

Current ex Refinery Price $0.5176 4,658.66

Production Costs
Inputs (Chemical) $0.0048 43.19
Electricity $0.2072 1,865.16
Labour 30 workers $0.0047 42.58
Cassava Transport $0.0210 189.00
Total Input costs $0.2378 2,139.93
Cost of Drying $0.1100 990.00
Maximum Feedstock Price $0.1699 1,528.73
Average Feedstock Price $0.1177 1,058.87
Sources: Ahene-Omoah 2007; RTIP 2004; Technoserve

This only shows part of the story, however, due to the lack of producer margins factored
into this model. There is also another cost factor in that ethanol must be mixed with

55
petroleum gasoline in Ghana (as of this report there are no flex-fuel cars available on the
Ghanaian market).

Assuming a blend of E10 (10% ethanol mixed with 90% petroleum gasoline) and taking
the farm gate price of cassava and adding both farmer margins and estimated costs of
drying the cassava into chips to be converted to ethanol, we see that the cost of a liter of
ethanol would be just over $0.82 per liter (Table Iota). This again compares favorably
with the current price of petroleum gasoline in Ghana and demonstrates that an E10
mixture may be viable if some costs can be reduced.

Table Iota
Costs of Producing Ethanol from Dried Cassava (Dry Chips Model))
Feedstock Costs: US$/Liter GHC/Liter
Land Rent $0.0227 204.55
Planting Material $0.0061 54.55
Labor $0.0537 482.85
Implements and Other Materials $0.0031 27.55
Feedstock Cost $0.0855 769.49
Cost of Drying $0.1100 990.00
Farmer Margins $0.0322 289.39
Farmgate Price $0.2277 2,048.87
Transportation to Ethanol plant $0.0293 264.00
Production Costs
Inputs (Chemical) $0.0048 43.19
Electricity $0.2072 1,865.16
Labour 30 workers $0.0047 42.58
Cassava Transport $0.0210 189.00
Total Input costs $0.2378 2,139.93
Ex Distillery Price (Break even) $0.4948 4,452.80
Mix with 90% Gasoline at GHC 4,659 $0.5153 4,638.07
Blending Costs $0.0024 21.24
Gross margin (distributors) $0.0782 703.52
Transport margin (oil marketers) $0.0368 331.19
BOST Margin $0.0120 108.23
Distribution Margin $0.0060 54.12
Government subsidy -$0.0325 -292.09
Taxes and Levies $0.2435 2,191.72
Pump Price of E10 $0.8618 7,756.00
Sources: Ahene-Omoah 2007; Technoserve

From this analysis, it would appear that cassava has potential to become an economically
workable crop for the production of biodiesel. However, it must be pointed out that the
production costs are estimates and therefore may not accurately reflect costs that would
be encountered in a Ghanaian context. Additionally, while the production of ethanol
from cassava may appear to be feasible, the experiences of the Ayensu starch factory
have to also be taken into consideration. Nevertheless, if nothing else this analysis
demonstrates a need to critically examine the potential of cassava and determine what
factors need to be in place for this production to become a viable industry.

56
 APPENDIX IV

NATIONAL MODEL

JATROPHA
Estimated Cost of Jatropha biodiesel B100 SME Best case scenario - 5 kg @ 30%
US$/L GHC/L % of Cost 1650 trees % of Cost
Feedstock
Cost of Maintenance (equivalent to 1 liter of oil) $0.3302 2,971.60 0.1574
Farm gate price for seeds equivalent to 1 liter of oil $0.5111 4,600.00 35.50% 0.1584 15.33%
Transport Cost $0.0460 414.00 0.0307
Oil 0.00
oil extraction cost $0.1570 1,413.00 0.1560
Estimated cost of jatropha oil per lt $0.7141 6,427.00 49.61% $0.3451 33.38%
Cost to Transport Feedstock (Takoradi-Accra) $0.0224 201.60 1.56% 0.0224 2.17%
Biodiesel Production
Financing* $0.0081 72.90 0.56% 0.0081 0.78%
Depreciation $0.0115 103.50 0.80% 0.0115 1.11%
Electricity $0.0026 23.84 0.18% 0.0026 0.26%
Labor $0.0034 30.23 0.23% 0.0034 0.32%
Causstinc Soda $0.0059 52.80 0.41% 0.0059 0.57%
Methanol $0.3003 2,702.50 20.86% 0.3003 29.05%
Margin for Biodiesel Producer $0.0534 480.72 3.71% 0.0166 1.60%
ex Production Plant Price $1.1217 10,095.09 $0.7159
Gov and Distribution
Taxes and Levies $0.2250 2,025.00 15.63% $0.2250 21.77%
Government subsidy ($0.0300) -269.87 -2.08% ($0.0300) -2.90%
Distribution Margin (from Production plant to BOST) $0.0056 50.00 0.39% $0.0056 0.54%
BOST margin $0.0111 100.00 0.77% $0.0111 1.07%
Transport margin (Oil marketers) $0.0340 306.00 2.36% $0.0340 3.29%
gross margin (distributor) $0.0722 650.00 5.02% $0.0722 6.99%
Estimated Biodiesel Pump Price B100 $1.4396 $ 12,956.22 100.00% $1.0338 100%

Estimated price of jatropha oil per MT $ 776.21

Estimated Cost of B5 Blend SME Best case scenario - 5 kg @ 30%

US$/L GHC/L % of Cost
Biodiesel Ex-Production Plant Price $1.1217 $0.7159
Distribution Margin (from plant to blending) $0.0056 50.00 $0.0056
Blending $0.0017 15.30 $0.0017
Biodiesel Ex-refinery cost $1.1289 $0.7231
Diesel Ex-refinery cost $0.5022 $0.5022
Blended B5 Ex-refinery cost $0.5335 62.66% $0.5133 61.75%
Gov and Distribution
Taxes and Levies $0.2250 2,025.00 26.43% $0.2250 27.07%
Government subsidy ($0.0300) -269.87 -3.52% ($0.0300) -3.61%
Distribution Margin (from Tema to BOST) $0.0056 50.00 0.65% $0.0056 0.67%
BOST margin $0.0111 100.00 1.30% $0.0111 1.34%
Transport margin (Oil marketers) $0.0340 306.00 3.99% $0.0340 4.09%
gross margin (distributor) $0.0722 650.00 8.48% $0.0722 8.69%
Estimated Biodiesel Pump Price $0.8514 $ 2,926.43 100.00% $0.8312 $1.0000

57
COCONUT
NATIONAL MODEL
Estimated Cost of coconut biodiesel B100 Current Small Holder Production Best Case
US$/L GHC/L % of Cost
Feedstock
Cost of Maintenance (equivalent to 1 liter of oil) $0.2576 2,318.30 $0.2576
Farm gate price for nuts equivalent to 1 liter of oil $0.7556 6,800.00 44.02% $0.2576
Transport Cost $0.1662 1,496.00 $0.1662
Oil
oil extraction cost $0.0324 291.97 $0.0324
Cost of producing coconut oil $0.9542 8,587.97 $0.4563
Estimated sale price of coconut oil per lt $0.9776 9,000.00 56.96% $0.4563
Cost to Transport Feedstock (Takoradi-Accra) $0.0224 201.60 1.31% 0.0224
Biodiesel Production
Financing* $0.0081 72.90 0.47% $0.0081
Depreciation $0.0115 103.50 0.67% $0.0115
Electricity $0.0026 23.84 0.15% $0.0026
Labor $0.0034 30.23 0.20% $0.0034
Causstinc Soda $0.0059 52.80 0.34% $0.0059
Methanol $0.3003 2,702.50 17.50% $0.3003
Margin for Biodiesel Producer $0.0666 599.29 3.88% $0.0405
ex Production Plant Price $1.3983 12,585.06 $0.8509
Gov and Distribution
Taxes and Levies $0.2250 2,025.00 13.11% $0.2250
Government subsidy ($0.0300) -269.87 -1.75% ($0.0300)
Distribution Margin (from Production plant to BOST) $0.0056 50.00 0.32% $0.0056
BOST margin $0.0111 100.00 0.65% $0.0111
Transport margin (Oil marketers) $0.0340 306.00 1.98% $0.0340
gross margin (distributor) $0.0722 650.00 4.21% $0.0722
Estimated Biodiesel Pump Price B100 $1.7162 $ 15,446.19 100.00% $1.1688

Estimated price of coconut oil per MT 1062.6087 495.927

Estimated Cost of B5 Blend Ghana

US$/L GHC/L % of Cost
Biodiesel Ex-Production Plant Price $1.3983 $0.8509
Distribution Margin (from plant to blending) $0.0056 50.00 $0.0056
Blending $0.0017 15.14 $0.0017
Biodiesel Ex-refinery cost $1.4056 $0.8582
Diesel Ex-refinery cost $0.5022 $0.5022
Blended B5 Ex-refinery cost $0.5474 63.26% $0.5022
Gov and Distribution
Taxes and Levies $0.2250 2,025.00 26.00% $0.2250
Government subsidy ($0.0300) -269.87 -3.47% ($0.0300)
Distribution Margin (from Tema to BOST) $0.0056 50.00 0.64% $0.0056
BOST margin $0.0111 100.00 1.28% $0.0111
Transport margin (Oil marketers) $0.0340 306.00 3.93% $0.0340
gross margin (distributor) $0.0722 650.00 8.35% $0.0722
Estimated Biodiesel Pump Price $0.8653 $ 2,926.27 100.00% $0.8201

58
 PALM OIL
NATIONAL MODEL Best Case

Farm gate Price Farm gate Price

USD/Lt % of total USD/Lt % of total
Feedstock
Cost of Feedstock
Cost of transport fruit to oil extraction plant
Cost of oil extraction
Oil
Estimated oil cost 0.3560 0.4183
Transport oil to biodiesel plant (Takoradi - Accra) 0.0224 0.0224
Biodiesel
Finanacing 0.0081 0.0081
Depreciation 0.0115 0.0115
Electricity 0.0026 0.0026
Labor @ minimum wage (30,000 cedis/day) 0.0034 0.0034
Caustic Soda (including transport) 0.0059 0.0059
Methanol (including transport) 0.3003 0.3003
Marging for biodiesel producer 0.0355 0.0386
Biodiesel Ex-production plant cost - B100 0.7457 0.8111
Taxes and Levies 0.2250 0.2250
Government subsidy (0.0300) (0.0300)
Distribution Margion (from Tema to Bost) 0.0056 0.0056
BOST Margin 0.0111 0.0111
Transport margin (oil marketers) 0.0340 0.0340
Gross margin (distributors) 0.0722 0.0722
Ex-pump price B-100 1.0636 1.1290

B-5
Distribution Margin (from production plant to blending) 0.0056 0.0056
Blending Cost 0.0017 0.0017
Ex refinery price of Biodiesel 0.7529 0.8183
B5 at 5% 0.0376 0.0409
Diesel at 95% 0.4771 0.4771
Ex refinery price of B-5 0.5147 0.5180
Taxes and Levies 0.2250 0.2250
Government subsidy (0.0300) (0.0300)
Distribution Margion (from Tema to Bost) 0.0056 0.0056
BOST Margin 0.0111 0.0111
Transport margin (oil marketers) 0.0340 0.0340
Gross margin (distributors) 0.0722 0.0722
Ex-pump price of B5 0.8327 0.8360

59
 APPENDIX V

MINING SECTOR MODEL

JATROPHA

Estimated Cost of Jatropha biodiesel Mixed 50% Best case scenario - 5 kg @ 30% - 1650 t
% of Cost
Feedstock
Cost of Maintenance (equivalent to 1 liter of oil) $0.1574
Farm gate price for seeds equivalent to 1 liter of oil = 4.45 kg $ 0.3668 $0.1584
Transport Cost $ 0.0408 $0.0307
Oil
oil extraction cost $0.1570 $0.1560
Estimated cost of jatropha oil per lt $0.5646 $0.3451 47.85%
Cost to Transport Feedstock (Takoradi-Accra) 0.0224 0.0224 3.11%
Biodiesel Production
Financing* $0.0081 $0.0081 1.12%
Depreciation $0.0115 $0.0115 1.59%
Electricity $0.0026 $0.0026 0.37%
Labor $0.0034 $0.0034 0.47%
Causstinc Soda $0.0059 $0.0059 0.81%
Methanol $0.3003 $0.3003 41.64%
Biodiesel producer margin $0.0166 $0.0166 2.30%
ex Production Plant Price $0.9354 $0.7159
Gov and Distribution
Taxes and Levies $0.0000 $0.0000 0.00%
Government subsidy $0.0000 $0.0000 0.00%
Distribution Margin $0.0000 $0.0000 0.00%
Blending $0.0000 $0.0000 0.00%
Biodiesel producer margin $0.0000 $0.0000 0.00%
Transport margin (biodiesel plant to storage/blending) $0.0049 $0.0053 0.74%
gross margin (distributor) $0.0000 $0.0000 0.00%
Estimated Biodiesel Pump Price B100 $0.9403 $0.7212 100.00%

Estimated price of jatropha oil per MT $ 776.21 $ 375.12

Estimated Cost of B5 Blend Mixed Best case scenario - 5 kg @ 30% - 1650 t

US$/L
Biodiesel Ex-Production Plant Price $0.9354 $0.7159
Distribution Margin (from plant to blending) $0.0056 $0.0056
Blending $0.0017 $0.0017
Biodiesel Ex-refinery cost $0.9427 $0.7231
Diesel Mining Pump Price including taxes $0.7479 $0.7479
Blended B5 Ex-refinery cost $0.7576 $0.7467
Gov and Distribution
Taxes and Levies $0.0000 $0.0000
Government subsidy $0.0000 $0.0000
Distribution Margin (from Tema to BOST) $0.0000 $0.0000
BOST margin $0.0000 $0.0000
Transport margin (Oil marketers) $0.0000 $0.0000
gross margin (distributor) $0.0000 $0.0000
Estimated Biodiesel Pump Price $0.7576 $0.7467

60
COCONUT

MINING MODEL
Estimated Cost of coconut biodiesel B100 Ghana Ghana no margin
US$/L GHC/L % of Cost
Feedstock
Cost of Maintenance (equivalent to 1 liter of oil) $0.2576 2,318.30 $0.2576
Farm gate price for nuts equivalent to 1 liter of oil $0.7556 6,800.00 $0.2576
Transport Cost $0.1662 1,496.00 $0.1662
Oil
oil extraction cost $0.0324 291.97 $0.0324
Estimated sale price of coconut oil per lt $0.9542 0.00 71.34% $0.4563
Cost to Transport Feedstock (Takoradi-Accra) $0.0224 201.60 1.67% $0.0224
Biodiesel Production
Financing* $0.0081 72.90 0.61% $0.0081
Depreciation $0.0115 103.50 0.86% $0.0115
Electricity $0.0026 23.84 0.20% $0.0026
Labor $0.0034 30.23 0.25% $0.0034
Causstinc Soda $0.0059 52.80 0.44% $0.0059
Methanol $0.3003 2,702.50 22.45% $0.3003
Margin for Biodiesel Producer $0.0262 $0.0111 235.51 1.96% $0.0111
ex Production Plant Price $1.3195 11,875.24 $0.8215
Gov and Distribution
Taxes and Levies $0.0000 0.00 0.00% $0.0000
Government subsidy $0.0000 0.00 0.00% $0.0000
Distribution Margin $0.0000 0.00 0.00% $0.0000
Blending $0.0017 15.14 0.13% $0.0017
Biodiesel producer margin $0.0111 99.90 0.83% $0.0111
Transport margin (biodiesel plant to storage/blending) $0.0053 48.00 0.40% $0.0053
gross margin (distributor) $0.0000 0.00 0.00% $0.0000
Estimated Biodiesel Pump Price B100 $1.3376 $ 12,038.28 101.13% $0.8396
78.85% 12.27%
Estimated price of coconut oil per MT $ 1,037.20 $ 495.93

Estimated Cost of B5 Blend Ghana Ghana

US$/L GHC/L % of Cost
Biodiesel Ex-Production Plant Price $1.3195 $0.8215
Distribution Margin (from plant to blending) $0.0056 $0.0056
Blending $0.0017 $0.0017
Biodiesel Ex-refinery cost $1.3268 $0.8288
Diesel Mining Pump Price including taxes $0.7479 $0.7479
Blended B5 Ex-refinery cost $0.7768 100.00% $0.7519
Gov and Distribution
Taxes and Levies $0.0000 $0.0000
Government subsidy $0.0000 $0.0000
Distribution Margin (from Tema to BOST) $0.0000 $0.0000
BOST margin $0.0000 $0.0000
Transport margin (Oil marketers) $0.0000 $0.0000
gross margin (distributor) $0.0000 $0.0000
Estimated Biodiesel Pump Price $0.7768 $0.7519

61
PALM OIL
MINING MODEL
Farm gate price Farm gate price
USD/Lt % of total USD/Lt % of total
Feedstock
Cost of Feedstock
Cost of transport fruit to oil extraction plant
Cost of oil extraction
Oil
Estimated oil cost 0.3560 0.4183
Transport oil to biodiesel plant (Takoradi - Accra) 0.0224 0.0224
Biodiesel
Finanacing 0.0081 0.0081
Depreciation 0.0115 0.0115
Electricity 0.0026 0.0026
Labor @ minimum wage (30,000 cedis/day) 0.0034 0.0034
Caustic Soda (including transport) 0.0059 0.0059
Methanol (including transport) 0.3003 0.3003
Biodiesel Ex-production plant cost 0.7102 0.7725
Taxes and Levies - -
Government subsidy - -
Distribution Margin - -
Biodiesel Producer Margin 0.0111 0.0111
Transport margin (oil marketers) - -
Gross margin (distributors) - -
Ex-pump price B-100 0.7283 0.7906

B-5
Transport to blending 0.0053 0.0053
Blending Cost 0.0018 0.0018
Ex refinery price of Biodiesel 0.7354 0.7977
B5 (at 5%) 0.0368 0.0399
Diesel (at 95%) 0.7105 0.7105
Ex pump price at the Mine of B-5 0.7473 0.7504
Taxes and Levies - -
Government subsidy - -
Distribution Margin - -
Transport margin (oil marketers) - -
Gross margin (distributors) - -
Ex-pump price B-5 0.7473 0.7504

62
 APPENDIX VI

PRICE COMPETITIVENESS WITH CRUDE OIL

No tax for biodiesel produced MINES
Jatropha BC Jatropha Coconut BC Coconut Palm Oil BC Palm Oil

Biodiesel Ex-Refinery Cost 1.0921 0.7231 1.3811 0.8582 0.7977 0.7354

Diesel Ex-Refinery cost 0.5022 0.5022 0.5022 0.5022 0.5022 0.5022

Taxes and Distribution 0.2457 0.2457 0.2457 0.2457 0.2457 0.2457

Percent % difference 168.54% 95.06% 226.09% 121.96% 109.92% 97.51%

Approx. Price of oil (barrel) 03/16/07 $ 60.88 $ 60.88 $ 60.88 $ 60.88 $ 60.88 $ 60.88

Estimated Price of oil needed (barrel)

Price of oil 3/16 * % difference needed $ 102.61 $ 57.87 $ 137.64 $ 74.25 $ 66.92 $ 59.36

Pump diesel price (march 16) 0.7479 0.7479 0.7479 0.7479 0.7479 0.7479
needed Diesel Ex-Refinery Cost (Lt) $ 0.8464 $ 0.4774 $ 1.1354 $ 0.6125 $ 0.5520 $ 0.4897
New Diesel pump price (B5) 1.0921 0.7231 1.3811 0.8582 0.7977 0.7354

No Tax break NATIONAL MODEL -

Best Case Best Case Best Case
Jatropha Jatropha Coconut Coconut Palm Oil Palm Oil

Biodiesel Ex-Refinery Cost 1.1289 0.7231 1.4291 0.8582 0.8183 0.7529

Diesel Ex-Refinery cost 0.5022 0.5022 0.5022 0.5022 0.5022 0.5022

Taxes and Distribution 0.3179 0.3179 0.3179 0.3179 0.3179 0.3179

Percent % difference 224.79% 143.99% 284.57% 170.89% 162.94% 149.92%

Approx. Price of oil (barrel) 03/16/07 $ 60.88 $ 60.88 $ 60.88 $ 60.88 $ 60.88 $ 60.88

Estimated Price of oil needed (barrel)

Price of oil 3/16 * % difference needed $ 136.85 $ 87.66 $ 173.24 $ 104.04 $ 99.20 $ 91.27

needed Diesel Ex-Refinery Cost (Lt) $ 1.1289 $ 0.7231 $ 1.4291 $ 0.8582 $ 0.8183 $ 0.7529
New Diesel pump price (B5) 1.4468 1.041 1.747 1.1761 1.1362 1.0708
Diesel price @ pump 03/16 0.8201 0.8201 0.8201 0.8201 0.8201 0.8201

Tax Break only for Biodiesel (5% cut) NATIONAL MODEL -

Jatropha BC Jatropha Coconut BC Coconut Palm Oil BC Palm Oil

Biodiesel Ex-Refinery Cost 1.1289 0.7231 1.4291 0.8582 0.8183 0.7529

Diesel Ex-Refinery cost 0.5022 0.5022 0.5022 0.5022 0.5022 0.5022

Taxes and Distribution 0.3066 0.3066 0.3066 0.3066 0.3066 0.3066

Percent % difference 179.99% 99.18% 239.77% 126.09% 118.14% 105.12%

Approx. Price of oil (barrel) 03/16/07 $ 60.88 $ 60.88 $ 60.88 $ 60.88 $ 60.88 $ 60.88

Estimated Price of oil needed (barrel)

Price of oil 3/16 * % difference needed $ 109.58 $ 60.38 $ 145.97 $ 76.76 $ 71.92 $ 64.00

liters per barrel (including refinery cost) 121.23 121.23 121.23 121.23 121.23 121.23
needed Diesel Ex-Refinery Cost (Lt) $ 0.9039 $ 0.4981 $ 1.2041 $ 0.6332 $ 0.5933 $ 0.5279
New Diesel pump price (B5) 1.2218 0.8160 1.5220 0.9511 0.9112 0.8458
Diesel price @ pump 03/16 0.8201 0.8201 0.8201 0.8201 0.8201 0.8201

63