Mitsubishi, Kirin to build ethanol plant in Japan

TOKYO (Reuters) - Mitsubishi Corp., Japan's biggest trading firm, and Kirin Brewery Co. Ltd., the No.2 brewer, will join in a government-backed "green" fuel project by building an ethanol plant in the northern island of Hokkaido.

A Mitsubishi Corp. spokesman said on Tuesday that the domestic ethanol business is one of its main areas of interest. Previously, Mitsubishi has imported plant-origin ethanol for industrial use, and in March took a 10 percent stake in an ethanol production company in Brazil.

The Japanese government has been promoting the usage of non-fossil fuel at home to combat climate change. In May, the Ministry of Agriculture said it would boost ethanol output from domestically-grown farm produce to a total 31,000 kilolitres a year by subsidizing three regional groups, including this project.

A consortium formed by the two companies and unlisted Osaka-based Japan Chemical Engineering & Machinery Co. Ltd. won a plant order for the project of some 6 billion yen ($48.5 million) as a new stock company founded on Tuesday.

Hokkaido Union of Agriculture Co-operatives, a lead manager of the project, has said the government is expected to shoulder half of the cost.

Construction will commence in October with production starting in March 2009, Mitsubishi Corp. said. The project based in Shimizu town, central Hokkaido, is aimed at producing 15,000 kl of ethanol a year from excess sugar beet and low quality wheat grown in the surrounding fields as feed stocks.

Japan, the world's second-largest gasoline consumer of some 60 million kl a year, is almost totally dependent on oil imports, and last year produced only 30 kl of biomass ethanol at government-backed pilot plants.

($1=123.64 Yen)