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BP signs up for ethanol

Dick Honan, the man who sparked the political debate that led to oil companies being forced to offer motorists ethanol/petrol blends, has won again.

BP announced yesterday it had contracted with Mr Honan's Manildra Group for the supply of 40 million litres of ethanol during the next year, with the possibility of extending the agreement for a further two years.

Manildra Group is Australia's biggest producer of ethanol, which is a by-product of its wheat-based industrial starch business, based at Bomaderry in southeastern NSW.

For years Mr Honan conducted an acrimonious debate with the major oil companies, accusing them of refusing to supply him with wholesale supplies of petrol so that he could distribute a 20 per cent ethanol petrol blend.

The use of ethanol reduces the petroleum industry's share of the fuel market.

In 2003, it was revealed that Mr Honan had met secretly with Prime Minister John Howard in August 2002 before the Government introduced a scheme under which ethanol would not attract excise until 2011, thus destroying an ethanol import market.

That policy was designed to force oil companies to supply ethanol blends, so that the Government's uncosted 2002 federal election promise to develop biofuels industry of 350 million litres a year by 2010, originally seen as a boost to the struggling sugar industry, which could be achieved.

While the federal Government has encouraged oil companies to blend ethanol with petrol, up to a maximum of 10 per cent, the NSW Government has mandated a 2 per cent ethanol level across the product range from October 1.

Oil company representatives said yesterday this was not achievable across the whole of the retail business, as many petrol distributors and wholesalers would not be ready in time.

Effectively, the switch to E10 blends will see the gradual wind-back of the existing 91-octane unleaded petrol, with the ethanol blends having octane ratings of about 94 , making them compatible with new, fuel-efficient car engines.

BP said yesterday that, as a result of its deal with Manildra, it would offer new BP Unleaded 91 to NSW motorists at a 3c a litre discount through its Biorewards program.

Currently, BP's 88 sites across Queensland, NSW and the ACT are being supplied with the new fuel. By the end of the year all 50 BP branded service stations in NSW will be selling the new product in place of regular unleaded petrol.

BP Australia president Gerry Hueston said the company's actions demonstrated its commitment to create a sustainable future for biofuels in Australia.

Both Shell and Caltex said yesterday that BP was well behind in supplying ethanol-petrol blends across Australia.