Challenges in Producing Biodiesel in the UAE

Lootah Bio Fuel LLC (LBF), a fully owned subsidiary of the S.S. Lootah Group, is the leadingbio diesel fuel manufacturer of biodiesel in the UAE. A pioneer in the waste-to-energy and alternative fuel industry, LBF, produces biodiesel from used cooking oil (UCO), and succeeds in pricing it cheaper than petroleum diesel, making it the cheapest diesel in the UAE.

This is no small feat. Prior to the deregulation of the price of oil in the UAE, the cost of diesel was higher than petrol in the UAE which is the inverse of the situation in the majority of countries across the world. The price gap provided an instant incentive for LBF to manufacture and sell biodiesel at rates below the market rate for petroleum diesel.

However, the deregulation of oil prices in the UAE, which began in August 2015, brought about an obstacle that needed effective planning and strategizing to maintain LBF's low-price policy. "With the deregulation of oil prices, we suddenly had a situation where petroleum diesel was cheaper than petrol which put us in a predicament and forced us to construct new strategies," commented Mr. Yousif Saeed Lootah, CEO of LBF.

Compounding the costs of manufacturing biodiesel, is the collection of UCO. UCO, a waste product, is amply available in the UAE. However, collecting UCO from restaurants, food courts, and other food and beverage establishments is a difficult process owing to the number of unauthorized collectors. In general, LBF collects approximately 200,000 liters of UCO on a monthly basis (which has a 1:1 conversion rate to biodiesel) but can collect more (and manufacture more biodiesel) if not for the unauthorized collectors.

To counter the unauthorized collection and exportation of UCO, LBF is leading efforts to introduce regulation of the UCO sector in coordination with Dubai Municipality, other government institutions and other stakeholders in the alternative fuel industry. While this is a top-down approach that may take a significant amount of time for finalization and implementation, it will be an effective policy instrument for the future of the waste-to-energy and alternative fuel markets.

In the meantime, LBF has designed strategies and tactics to help deal with the cost of manufacturing biodiesel. Building awareness of biodiesel and its effectiveness is a priority. As LBF operates in the waste-to-energy industry, building awareness is two-fold and along the value chain. "Firstly, we provide information on the harmful disposal of UCO either through the sewage lines and unauthorized collectors,'' said Mr. Yousif Saeed Lootah while speaking on the functions of the in-house UCO collection department at LBF.

The environmental benefits while may be obvious to some, is not widely known to others. Emphasizing the reduction of green-house-gases or carbon dioxide (some studies suggest, 100% pure biodiesel can cut emissions by 78%) does little if it is not used widely.

A specialty at LBF is the various biodiesel blends that are available and can be concocted according to customer needs. The most popular of this is B5 which is a combination of 5% biodiesel and the 95% petroleum diesel, which can be used in any diesel engine with absolutely no modification to the engine, or voiding vehicle warranty. This is a huge advantage to companies seeking to build and maintain corporate social responsibility (CSR) campaigns as there is no added operational cost. In fact, there have been studies that suggest the high -lubricity of biodiesel can have a positive effect on the longevity of the engine.

To remain competitive in the market, LBF has implemented innovative pricing policies that include a credit scheme, delivery of biodiesel (in addition to the three refueling stations across Dubai), and contractual partnerships that involve the collection of UCO and return supply of biodiesel. Yet, with falling oil prices, and in an unregulated UCO sector, the challenges to manufacturing, marketing and promoting the use of biodiesel in the UAE remain significant but with LBF's commitment to sustainability and continuous innovation, these challenges will most certainly be conquered.


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