A deal that could avert a fresh CO2 gas supply crisis could be in the offing, The Grocer can reveal, after a key industry player said it had delayed imminent plans to close a plant manufacturing bioethanol, at the request of the government.
Concerns over the supply of critically important CO2 gas resurfaced last month, in the wake of the UK/US trade deal announcement announced on 8 May, after the eleventh-hour inclusion of tariff-free access to US bioethanol producers to the UK market.
Both CO2 gas and high-protein animal feed are key byproducts of bioethanol production. The so-called Economic Prosperity Deal allows access to the UK market for up to 1.4 billion litres of US bioethanol.
CO2 gas is deployed across a number of uses in the food sector, from controlled atmosphere packaging to the carbonation of drinks and in the pre-slaughter stunning of livestock.
But in the wake of the trade agreement, the UK’s two main bioethanol producers had warned they would effectively be priced out of the market, leaving their business models “unviable”.
Chemical giant Vivergo last week said the impact of the deal meant its Wilton biofuels site on Teeside – which supplies about 30% of the UK’s CO2 gas needs – now faced “imminent closure”, adding the deal had “fundamentally undermined its business position”.
“We are at the eleventh hour and the government urgently needs to find a solution to a crisis of its own making,” said Ensus UK chairman Grant Pearson. “We need a solution which will not only save these skilled jobs on Teesside, but also prevent a catastrophic knock-on effect in other vital sectors of the economy.”
Associated British Foods-owned bioethanol producer Vivergo, which currently does not produce CO2 gas but had plans to do so, also warned in mid-May that it could have to close its plant in Humberside.
However, it told The Grocer today that “at the request of the government”, it had “agreed to postpone Vivergo closure decisions for 24 hours while discussions continue on the appropriate process for resolution of the issues facing the UK bioethanol industry”.
The Department for Business & Trade declined to comment.
E20 fuel mandate
The Grocer understands crisis talks on a potential government rescue deal for Ensus and Vivergo could centre on whether it will agree to mandate the rollout of E20 fuel – a blend of 20% ethanol and 80% petrol – across the UK’s forecourts.
The current industry standard is E10 fuel, which contains 10% ethanol. An agreement on this change could potentially allow for an increase in demand for bioethanol – helping maintain the viability of Ensus and Vivergo’s business models, while also safeguarding demand for British wheat as a feedstock for the fuel.
The potential for shortages of CO2 has raised fears of a fresh supply crisis of what is described as a critical commodity for the food sector. The UK faced shortages in the summer of 2018 due to a series of supply chain disruptions, with a 2019 FDF report warning of ‘a structural fragility’ in the UK’s CO2 supply chain. This led to tight supply of products ranging from beer to fizzy drinks, chicken and pork.
Further issues were faced at the turn of 2022, when a government bailout of then-key gas supplier CF Industries expired, only for a fresh deal to be sealed in February 2022.
Since then, CF has exited the UK CO2 market – which was supplied via its ammonia operation, due to its economic unviability.
It is understood about 10% of the UK’s CO2 gas needs are currently derived from anaerobic digestion plants, with 60% imported and the remaining 30% supplied by Ensus, which previously said it could double its production, under favourable circumstances.
One senior food industry source said the government appeared “to have learnt nothing from previous issues around CO2 gas supplies”, and now needed to act with urgency to resolve the issue before it became a full-blown gas supply crisis.
Their comments echo those of senior leaders such as NFU president Tom Bradshaw, who last month said it was “shocking” the commodity had not been included on the government’s National Risk Register.
Responding to the wider situation around gas supply uncertainty, the British Soft Drinks Association told The Grocer that drinks producers were ”monitoring the current situation and have plans in place to help maintain their service to customers, including working with CO2 suppliers to mitigate any possible impact as well as looking at alternative sources”.
No comments yet