Ukraine's bioethanol perspectives on European market

Author : News Agency

Respondent : Yury Luchechko

Source : 112 Ukraine

In recent years, the development of the alcohol industry is one of the most resonant challenges in the development of the processing segment of Ukraine’s agricultural sector
13:47, 3 October 2018

In recent years, the development of the alcohol industry is one of the most resonant challenges in the development of the processing segment of Ukraine’s agricultural sector. Creation of the state enterprise Ukrspyrt in 2010 was aimed at improving the efficiency of alcohol production management and ensuring a fundamentally new level of product competitiveness. Despite the favorable organizational, resource-production, and technical prerequisites for expanded reproduction, for a long time the enterprise could not overcome stagnation and reach an upward trend of development. But since the end of 2017 and in the first half of 2018, the company's management managed to localize the crisis and revive the investment projects aimed at modernization and reconstruction of the technological base of alcohol production. During the 7 months of 2018, the state enterprise Ukrspyrt has got 2,8 million USD capital investments, which is 3 times more than during the whole of 2017. Ukrspyrt Acting Director Yuriy Luchechko shares his thoughts on the prospects and priorities of the development of the enterprise, in particular, the increase in the volume of investment and the diversification of production and business activities


What should be the main strategic priority of Ukrsyprt to ensure the necessary level of capitalization of alcohol production and the maximum possible utilization of production capacity?

This is primarily the production of bioethanol and alternative motor fuel on the unused production sites of the alcohol enterprises. Having established the production of bioethanol, we will be able to ensure the use of an environmentally friendly component in motor fuel, which significantly reduces emissions of toxic substances, reduces dependence on energy imports, and improves the overall environmental situation in the country. Moreover, according to the National Action Plan on Renewable Energy, we are obliged to increase the production of bioethanol for the period until 2020.

Related: Ukrainian export increased by 12,7% in 2018

The National Action Plan envisages that total expected contribution of bioethanol, ethyl tert-butyl ether produced from bioethanol should be 320 thousand tons of oil equivalent in order to achieve the mandatory indicative goals for their consumption in transport for 2020. According to expert estimates, the volume of production based on ethanol (bioethanol) amounted to only 80-85 thousand tons in 2017. With this volume, Ukraine will not be able to fulfill the EU requirements regarding the mandatory use of 10% of biofuel or other renewable resources in fuel for transport.

Does the Ukrspyrt’s rate on the production of bioethanol correlate with the new EU energy indicators?

January 1, 2016, an agreement on a free trade zone with the EU has entered into force, and Ukraine is committed to implementing Directive 2009/28/EU of April 23, 2009, which provides for the introduction of biofuels or other renewable fuels in total consumption by 2020 in the amount of 10%. To fulfill these requirements, the Cabinet of Ministers has issued the corresponding order No. 791-p of September 3, 2014 "Action plan for the implementation of the Directive of the European Parliament and Council 2009/28 / EC of April 23, 2009 on encouraging the use of energy produced from renewable energy sources" and No. 902-p of October 1, 2014 "National Action Plan for Renewable Energy for the Period to 2020."

Related: Ukrspyrt joins Wine and Spirit Trade Association (WSTA)

In addition to the institutional framework for the production of bioethanol, Ukraine also has preferences in the framework of free trade between our country and the EU, which set duty-free EU tariff quotas for ethanol. The total EU tariff quota for Ukraine for 2018 is 56.2 thousand tons. In 2019, the tariff quota will increase to 70.8 thousand tons, in 2020 - up to 85.4 thousand tons, and in 2021 - up to 100 thousand tons, which means that we are opening up the capacitive market for bioethanol of the European Union countries.

Does the company have the necessary technical and technological capabilities for setting up bioethanol production in the near future?

Ukrspyrt has the sites, which are currently not used in the production process. They might be used for the production of bioethanol and motor alternative fuels. The company also has technical and technological capabilities for the production of bioethanol from starch-containing raw materials, as well as from sugar-containing raw materials. There are the necessary personnel and technical support for the introduction of technology for the production of motor fuel containing bioethanol based on a compounding installation of gasoline and diesel fuel.

Related: Vodka production in Ukraine might stop: Bank accounts of Ukrspyrt are arrested

How much investment is needed to organize the production of bioethanol? And what about the investment support of the modernization of fixed capital at Ukrspyrt?

By overcoming the stagnation processes in the enterprise, as evidenced by the elimination of losses and the establishment of profitable activities, we were able to increase the financing of capital investments. For 7 months of 2018, 2,8 million USD of capital investments were financed, which is three times more than in the whole of 2017.

To establish the production of bioethanol and alternative motor fuel, the state-owned enterprise Ukrspyrt plans to modernize eight production facilities in Vinnytsia, Kyiv, Lviv, Ternopil, and Chernivtsi regions. The total investment requirement is 53,3 million USD.

Related: Former Acting Director of Ukraine’s biggest alcohol producer is shot dead in Kyiv’s Darnytsya district, - source

In case of establishing bioethanol production, what markets will you try to enter?

We will supply bioethanol both to the Ukrainian market and to the markets of the European Union countries. There are all the institutional prerequisites for the development of the EU market, primarily unfilled quotas for the supply of bioethanol from Ukraine. 85.2 thousand tons of products under code UKT VED 2207 20 00 10 "Bioethanol brand B" are planned to be annually sold for export. The company uses the other 80.5 thousand tons of products for the production of commodity items according to the UKT VED code 3824 90 97 10 "Motor fuel" SUPER A "/ 95" and "Motor fuel alternative for gasoline engines."

Related: UNICEF: Ukrainian youngsters consume less alcohol and drugs

You focus on the significant economic efficiency of the implementation of the proposed strategic priorities for the development of Ukrspyrt. What social effect will be achieved?

The expected economic effect would be the growth of revenues to the Consolidated Budget of Ukraine, in particular, to the local budgets. It will significantly increase Ukrspyrt’s budget-fulfilling role, which will help the depressed agrarian administrative districts recover. The establishment of bioethanol production and other types of products will definitely affect the growth of labor remuneration and will necessitate additional labor resources. This will be a decisive factor in increasing household income and employment of the local population.

Related: Considering Ukrspyrt for privatization, authorities will realize - there is yet nothing to sale

Related: No more Ukrainian alcohol in annexed Crimea

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Interviewer: Vasyl Holian

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