CORRECTED-UPDATE 1-Novozymes sees China biofuel project

Mon Apr 20, 2009 10:50am BST

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(Corrects to say the $13 billion is China's total biofuel potential investment, not its project with COFCO and Sinopec)

* Sees up to $13 bln needed to support China biofuel projects

* Chinese firms to get 75 pct of value from projects (Recasts, adds background, company comments, share price)

HONG KONG, April 20 (Reuters) - Denmark's industrial enzyme maker Novozymes A/S (NZYMb.CO), which has teamed up with China's COFCO and Sinopec to develop a solution for cellulosic ethanol, said the country would need a total of 90 billion yuan ($13.2 billion) investment in a short period to support the industry.

The move reflects growing demand from China as it shifts to produce more renewable energy.

Novozymes -- the world's biggest producer of industrial enzymes -- joined China National Cereals, China Oil & Foodstuff Corp (COFCO) and top Asian refiner China Petroleum and Chemical Corp (Sinopec) (0386.HK) (600028.SS) in February to develop an industry chain to collect agricultural waste, process it into bioethanol and distribute the clean fuel through petrol stations.

The estimated total investment could go toward building 250 factories, assuming total demand for bioethanol in China reaches a projected 37 million tons in 2020, the firm said in a statement on Saturday.

China's energy-related firms including COFCO and Sinopec could capture at least 75 percent of the potential value, since the enzyme cost would account for just 25 percent of the total cost, Mars Zhu, Novozymes' China Communications Manager, told Reuters on Monday.

Zhu said a cellulosic ethanol industry in China could come into place within five to 10 years, depending on the speed of cooperation among the companies and government regulation.

China, which has pledged to curb emissions of greenhouse gases, could overtake the United States as the world's top cellulosic producer by 2013, Novozymes' Chief Executive Officer Steen Riisgaard told Reuters in an interview in February. [ID:nN09536188].

Cellulosic uses enzymes or large amounts of heat and pressure to break down the tough woody bits of crop waste and non-food plants into sugars that can be made into ethanol.

Cellulosic ethanol could be made in China for $2.50 a gallon by 2010, and that could fall to $1.50 a gallon by 2015, Novozymes said.

By converting agricultural residues into fuel ethanol, China can reduce its gasoline consumption by 31 million tons in 2020, thereby reducing its dependence on imported petroleum by about 10 percent, Riisgaard said in a statement on Saturday.

So far this year, Novozyme's shares have fallen 3.8 percent, while shares of Sinopec have risen about 32 percent. (Reporting by Sui-Lee Wee; Editing by Ken Wills)