Poland's Trzebinia refinery said on Tuesday it restarted biofuels production after a six-month break as surging oil prices put the business back into profit. The refinery, a subsidy of Poland's largest oil refiner, PKN Orlen halted production after delays in government subsidies to farmers and cuts in tax incentives made production difficult to sustain. But Piotr Prusakiewicz, a member of Trzebinia's management board, said global oil prices now exceeded the cost of biocomponents and this had encouraged the company partly to resume production. "The prices allow us to produce and sell biofuels to clients in the 150-km (94-mile) range of our plant where costs for logistics can be kept low," Prusakiewicz said.

Crude oil prices have surged to 11-month highs above US$75 per barrel this month on supply concerns. Prusakiewicz said Trzebinia, with a maximum annual capacity of 100,000 tonnes of biofuels, would produce 3,000-5,000 tonnes of biodiesel per month. The refinery had initially planned to at least double its capacity but had to change plans after government's reforms forced producers to suspend production, he said. "Because of changes in tax regulations we put our plans on hold, but not completely. We are still planning to modernise our plant which would raise our capacity by 20 percent," he said.

Poland wants to encourage investment in biofuels to diversify energy sources away from Russia, counter rising oil prices and boost farm incomes as well as to limit carbon emissions. The government has proposed subsidies for farmers to make biofuels more profitable, counterbalancing a cut in tax relief for producers that was made under EU pressure in January. But quarrels between government officials have delayed decisions and some subsidies will not take effect until early next year. "We hope that the legislation which will require all biofuels producers to include biocomponents, will create other realities for the biofuels and biocomponents markets in Poland," he said, adding that Trzebinia planned to again be the market leader it once was when it started producing biofuels in 2004.

The National Biofuels Chamber has forecast that Poland's annual biodiesel production capacity could surge to some 800,000 tonnes in 2008 from the current 280,000 tonnes and rise by 500,000 tonnes each year after that. By 1530 GMT, PKN shares stood at 58.25 zlotys (US$21.42), down 2.9 percent from Monday's close, valuing the company at 24.9 billion zlotys.
(By Barbara Sladkowska, Planet Ark, 18/07/2007)