The crude tall oil value chain: Global availability and the influence of regional energy policies

Abstract

It is believed that several global policies incentivising the energetic utilisation of Crude Tall Oil (CTO) might have had an impact on the demand for CTO from its competing and emerging end-use application in biofuels in the recent years. Hence, this study performed a methodological and structural analysis of the global CTO chain to assess the availability of the CTO (supply) and its demand in the respective end-use markets globally. The overarching goal was to examine whether market distortions occur when CTO is diverted from its historical utilisation in the production of bio-chemicals to the production of biofuels. The methodology consisted of collecting and analysing primary data from currently operating as well as upcoming softwood kraft pulp mills, CTO fractionators and refiners. Additionally, present day as well as upcoming CTO-based biofuel capacities were also collected. The geographical scope covered the following five regions: (1) North America, (2) Europe, (3) Russian region and the common wealth of independent states (CIS) (4) South America (5) Rest of the World. The analysis shows that since 2009 there is a steady rise in the global CTO supply, with a 16% increase in supply until 2018 compared to 2009 levels, with supply and demand in balance. However, this balance is expected to shift after the year 2020, where a tipping point could be reached, since the global CTO demand may exceed the global CTO supply for the first time. This shift in balance can primarily be attributed to the continuously growing demand for biofuels (capacity expansions and new capacities), and will – at least on short term – be reflective of the European legislation and its national implementation by member states. In particular, the estimations project a supply deficit of CTO of 0.6% in 2020. This deficit will rise to 8% or 0.18 million tonnes by 2030 globally, and is driven primarily by the increase in demand for CTO-based biofuels for transportation. The supply-demand imbalance for CTO might grow further unless alternative raw materials become available or corrective legislative measures are taken.