S.Korea's ECO Solutions bullish on biodiesel

SEOUL (Reuters) - Despite a recent plunge in oil prices, the chief executive officer of South Korean biodiesel producer ECO Solutions Co., Ltd. 052510.KS is optimistic about the alternative energy market.

"I expect fluctuations in the market this year with low oil prices but there is a lot of room to grow in the market, especially in South Korea," John Park told Reuters on Tuesday.

Last year, the Korean government promoted the use of biodiesel by revising guidelines and incentives related to the mandatory usage and blending of the fuel.

However, despite allowing up to a 5 percent mix of biofuel in diesel, actual use is only about 0.5 percent as people remain skeptical, ECO Solutions said.

"With the revised 5 percent, South Korea's demand will grow by 1 million tons but the current supply is only 100,000 tons," Park said.

"This means there is room for 900,000 tons for biodiesel," he added.

The biodiesel market remains unfamiliar in South Korea, with only a handful producers dominating the market, but the rise in oil prices last year made more drivers turn to alternative fuel.

GOALS

Late last year, ECO Solutions announced it had invested 35 billion won ($37.39 million) to build a plant in Malaysia that will boost capacity to 500,000 tons per year by 2008.

"Our production capacity will be the world's largest by then," Park said.

ECO Solutions unveiled investment plans for the neighboring Philippines this year to secure a low-priced and steady supply of feedstocks for biodiesel production.

"Our investment will include planting seeds to use as feed stocks, building necessary infrastructures and securing shipping to Malaysia," Park said.

The local Global Bio-Diesel Sdn. Bhd. in Malaysia started construction of a 200,000-tons-per-year biodiesel plant last year. The company will add another 300,000 tons to its capacity in 2008.

The company plans to produce its first batch of biodiesel by the end of 2007 after beginning construction in October 2006.