Biofuels output seen doubling, still marginal: IEA

LONDON (Reuters) - World biofuels output is expected to reach 1.75 million barrels per day (bpd) by 2012, more than double 2006 levels, but the fuel will remain marginal as economics hobble further growth, the International Energy Agency said on Monday.

It raised its 2006 biofuels supply figure by 79,000 bpd to 863,000 bpd, reflecting strong growth and more detailed information on projects.

But looking ahead, its latest Medium-Term Oil Market Report stated the need for caution and said limited data made prediction difficult.

"Price pressure this year on feedstocks such as corn, sugar, soybeans, wheat and palm oil reinforces our concerns over economic viability due to competition between first-generation biofuels and the food chain," it said.

The issue of competition with foodstuffs will remain unresolved until the advent of a second generation of biofuels that can be produced from non-food crops.

Although the IEA projections are conservative and based only on mandates already in place, the IEA assessed potential production capacity at 2.92 million bpd globally by 2012.

While economics are very uncertain, the IEA said biofuel production should be boosted by increased political support, but that needs to be clarified.

"Until clear mandates and specific incentives are in place to support bold political targets, it is impossible to gauge with any accuracy the impact these policies will have on biofuel output," the IEA said.

It held out little hope biofuels could play anything other than a modest role for the foreseeable future.

"As a whole, compared with total crude output, they will remain a rather marginal factor in the total oil mix, at not even 2 percent," the IEA said.