Japan's Cosmo Oil to start ETBE ouptut from 2011

TOKYO, Jan 9 (Reuters) - Japan's Cosmo Oil Co (5007.T) will convert an existing facility at its Sakai refinery to produce ethanol-based gasoline additive ethyl tertiary butyl ether (ETBE) from 2011, it said on Friday.

Japan's oil industry prefers ETBE, made from ethanol and isobutylene, over pure ethanol, because it does not require distribution network modifications.

Cosmo is the second Japanese refiner after Nippon Oil Corp (5001.T) to turn an existing methyl tertiary butyl ether-producing (MTBE) facility to ETBE.

The country's fourth-biggest refiner plans to begin remodelling the 1,700 barrel-per-day MTBE unit in the year starting in April.

A maximum of 10,000 kilolitres a year (63,000 barrels) of ethanol that Cosmo and Nippon Paper Chemicals will produce from paper-making residue will be used as feedstock, a Cosmo Oil spokesman said.

Cosmo also plans to acquire feedstock ethanol from Japan Biofuels Supply LLP (JBSL), a joint venture set up by the oil refiners, which is also responsible for purchases of ETBE.

Nippon Oil has been undergoing work to convert the MTBE-production facility at its Negishi refinery to an ETBE unit and start trial operations by the end of 2009.

Japanese oil companies started selling gasoline blended with ethyl tertiary butyl ether (ETBE) in some retail markets in 2007, and plan to market ETBE-blend gasoline nationwide from 2010.

By then the industry plans to blend an annual 840,000 kl of ETBE, containing 360,000 kl of bioethanol, with gasoline so that biofuel blends will make up 20 percent of the country's annual total gasoline demand of 60 million kl (1 million bpd). (Reporting by Osamu Tsukimori; Editing by Michael Urquhart)