2/3/07 (Reuters) - IMMINGHAM, England - Independent oil company Greenergy's biodiesel plant in north-east England began commercial production on Friday and should ramp up to full output in a couple of weeks, chief executive Andrew Owens said.
 
The plant has an initial capacity of 100,000 tonnes of biodiesel from rapeseed oil, palm oil and soyabean oil.
Owens told Reuters in an interview that the second phase, which should take capacity to 200,000 tonnes is on schedule to be completed in November.

The plant includes a vegetable oil refining unit, allowing to buy crude vegetable oil.

Rival UK biodiesel producers Biofuels Corp plc. and D1 Oils have both been running at below capacity recently, citing a sharp decline in profit margins with feedstock costs rising and the mineral oil market weakening.

"We are very comfortable with margins where they are now," Owens said.

Both Biofuels Corp and D1 Oils use more expensive refined vegetable oils.

Owens said the plant would adjust its balance between vegetable oils during the year, with rapeseed oil likely to be used more in winter than in summer.

Palm oil becomes solid at a relatively low temperatures, restricting its use during winter.


LOCAL SALES

Immingham is one of Britain's biggest ports and has two major oil refineries. Several companies, including Spain's Abengoa, have announced plans to build bioethanol plants at the port.

Owens said he expects to sell much of the biodiesel plant's output "locally."

Biofuels, which can be made from grains, vegetable oils and sugar crops, are seen as a way to reduce emissions of the greenhouse gases believed to contribute to climate change.

Owens expressed doubts about the viability of bioethanol plants in Britain.

"The Northern Hemisphere is not as attractive as tropical production," he said.

Industry sources have estimated that bioethanol from UK wheat has carbon savings of up to 20 percent, well below bioethanol from Brazil sugar cane which can produce savings of about 80 percent.

"To me it (UK bioethanol production) looks tricky," he said.

Owens said Greenergy is now looking at a further three biodiesel projects, one in Britain and two outside Europe.

Andrew Barnard, Oilseeds Director of farmers co-operative Grainfarmers, said he expects the plant to use about 10 percent of Britain's rapeseed crop when it reaches full production.

Barnard, who visited the site on Friday, said Grainfarmers were working on developing new varieties of rapeseed to meet the needs of the biofuels sector.

"There is an opportunity to segregate varieties specifically for fuel and food production," he said.