China Agro-Tech inks MOU for Guangxi biofuels plant

BEIJING, March 10 (Reuters) - China Agro-Technology Ltd. said on Monday it had signed a memorandum of understanding with the city of Beihai, in South China's Guangxi, to build a refinery which will make biodiesel from jatropha, a woody plant.

The company, which trades over the counter in Singapore, will invest up to $200 million over the next four years to operate the plant, which it said would produce 80,000 to 100,000 tonnes beginning in the first quarter of 2009.

It ultimately plans to expand the plant to 2 million metric tonnes a year, it said in a statement.

China Agro-Technology said last month it had aquired the land use rights for 494,200 acres in Indonesia to plant jatropha.

In an interview on Monday, China Agri-Industries Holdings Ltd (0606.HK), an unrelated firm planning a cassava-fueled ethanol plant, said it expected China to soon grant licences for new ethanol plants that use feedstocks other than grains [ID:nL10383059].

China is eager to reduce crude oil imports by developing alternative fuels like ethanol and biodiesel, but has banned using grains as feedstock for new biofuel plants for fear of causing food shortages and inflation.

It is wary that feedstocks other than grains could still crowd out food crops.

(Reporting by Lucy Hornby, Editing by Peter Blackburn)