Dubai-based investors to set up biofuel plant

DUBAI (Reuters) - Dubai-based asset manager Daman Investments will take a majority stake in a venture to build the emirates' first plant to produce biodiesel from inedible oils, Daman Chief Executive Shehab Gargash said on Sunday.

Rapidly-growing Dubai is facing a surge in oil demand as one of the cities benefiting from an petrodollar-fuelled economic boom in the Gulf. It is the trade and tourism hub of the United Arab Emirates, one of the world's highest per-capita emitters of greenhouse gasses.

"We need to harness all our energy sources domestically to diversify the energy mix and fuel the infrastructure required for economic growth," Emirates Biodiesel (EmBio) managing partner and founder Wadah Abusin said at a news conference on Sunday.

"We're focused on sustainability, it will reduce some of the carbon footprint."

EmBio will produce around 3 million gallons per year (or 230 barrels per day) of biodiesel, a fraction of the UAE's around 50,000 bpd of diesel consumption.

EmBio will use waste cooking oil and other inedible oil as feedstocks and the plant was scheduled to start up in the first half of 2009, Abusin said.

The biodiesel will be blended with petroleum-based diesel, helping to reduce emissions and increase lubricant properties of the diesel, Abusin said. EmBio plans to sell to local construction and transport companies that are looking to boost their sustainability credentials, he added.

If successful, the plant will ramp up to 5 million gallons per year or more, Abusin said.

Daman Investments would be the majority owner through its venture capital fund Alf Yad, Gargash said at the same event. He declined to give further details on Daman's stake or total investment in the plant, but said Alf Yad only considered investments which targeted a return on investment of 30 percent or more.

(Reporting by Simon Webb; Editing by David Holmes)