GOING GREEN

The Egyptian businesses recycling used cooking oil

Link of article :

https://enterprise.news/news/story?storyId=22e81fef-6d69-4cf8-9e3e-1ab2681067ac

What’s cooking? Over the last two decades, a number of local startups have sprung up that collect used cooking oil (UCO) to turn it into UCO-derived biodiesel. These companies have to navigate the logistical nightmare of making small collections from thousands of household kitchens and restaurants across the country. Then, they need to decide whether to seek offtakers for the product in export markets or domestically manufacture biodiesel themselves. It’s a crowded market with tight margins — so are UCO recyclers on to something or is the industry just a flash in the pan?

Oil (and money) down the drain: According to estimates from a 2020 paper by the National Research Center, Egyptians get through 2.5 mn tons of edible vegetable oils a year, which equates to an incredibly calorific 25 liters per person annually. It also estimated that 90% of the country’s UCO is thrown down the drain. This could cause serious sewer blockages, spiraling maintenance bills for the government, and even social discontent, according to some.

One person’s trash is another’s treasure: This once worthless waste product is now expected to be a USD 11 bn global market by 2028, according to Fortune Business Intelligence. On the local level, our UCO market stood at USD 14 mn in 2021, Nour El Assal, co-founder of local UCO startup Tagaddod, previously told Enterprise. He added that the Egyptian market’s total local potential stood at some USD 352 mn, making it 96% untapped. Some 200k tons of UCO a year are currently collected by “26 companies working in the field of UCO, either collecting for exporting, collecting for producing biodiesel, or even collecting for making soap,” local biofuel consultancy Bio Rotterdam for Energy Consultancy Executive Manager Ibrahim Farouk told Enterprise.

Biodiesel 101? Biodiesel is a type of biofuel that is made from either purpose-grown or waste vegetable oils and animal fats. It can be used in cars, planes, and pretty much anything with an engine. The basic idea behind biodiesel is that the carbon released by biofuel is only that which has already been sequestered during the growth of the biomass, presenting a supposedly closed system with no net increase in atmospheric carbon (although doubts have been raised). While biodiesel can be used straight, it’s almost always blended with petrodiesel at a rate of 2%-20%.

It’s a mostly export-orientated business: Two industry insiders told us that no less than 70% or 85% of UCO collected in Egypt is exported abroad. The remainder goes to the few local biodiesel refineries or to make soap and other oil-based products.

There’s demand in Europe: Delta Oil for Oil Recycling is among the majority of local UCO recyclers who focus purely on the collection and export of UCO. Company CEO Serag Moussa told us their market research made clear that Europe doesn’t lack for biodiesel manufacturing plants — but does suffer from a shortage of UCO to supply them as a feedstock.

Who’s buying? While some of the foreign offloaders of Egyptian UCO are specialized biofuel companies, the market is increasingly dominated by the oil and gas giants. Finnish fossil fuel goliath Neste’s facility in Rotterdam has an annual production capacity of 1.4 mn tons — set to increase to 2.7 million tons in 2026 — and is joined by the likes of France’s Total and Italy’s Eni with massive facilities that far outstrip our local production capabilities.

Can the industry be fully localized? The question of whether to export UCO abroad or use it to supply domestic biodiesel plants was a point of contention for all the industry insiders that spoke to Enterprise. BioRotterdam’s Farouk says it's viable to make our own homegrown biofuels from both UCO and purpose-grown crops, adding that Egypt could act as a hub for biodiesel production in Africa or the MENA region. The returns that can be made on exporting biodiesel feedstock has discouraged investment into the more complicated and riskier proposal of domestic UCO processing, he said, insisting that local production is “not expensive, [rather] it’s an investment.”

Our current biodiesel production is tiny, but that may soon change: According to one industry expert who spoke to Enterprise, our entire annual biodiesel production stands at approximately 50k tons. We were told that this output is spread between six “operational” refineries and three that were described as “semi-operating.” For comparison, our annual biodiesel production is only 0.4% of what the EU produces and is less than what Germany produces every day. However, state and private institutions, both foreign and Egyptian, have announced large-scale biofuel projects in recent years, including a planned 600 mn biofuel production plant whose 350k annual output could increase Egyptian biodiesel production 7x.

UCO collection from Egyptian households is no easy task: “Households on average give away three liters per month and we have thousands of orders spread over different cities,” Delta Oil’s Moussa says. The company trains local partners in disadvantaged and mostly rural neighborhoods and offers them equipment to collect the UCO. The partners then sell the product to Delta Oil in bulk, Moussa told us.

Other companies have turned to tech to manage the logistics involved in such a scattered supply chain. Ten-year-old startup Tagaddod, for example, allows households to request collections through its Green Pan app to map more efficient, data-driven routes.

It’s a tight market: Many companies involved in UCO collection are increasingly like “animals in the wild that fight because they are drinking from the same pool,” BioRotterdam’s Farouk says. Pointing to what he believes is one of the biggest challenges facing the industry, Farouk called for regulation to push UCO collectors to search for untapped markets from which to collect UCO.

High prices, small margins: Biodiesel is 70% to 130% more expensive than diesel and petrol in Europe, our main export market. However, the high costs involved in the collection of UCO in addition to an expensive manufacturing process means that margins are much slimmer than for traditional fossil fuel production. The situation for Egyptian UCO startups has only gotten more difficult in 2023 with a glut of reportedly suspicious Chinese biofuels entering the European market. The influx of biofuels from China “created a huge scandal in the first quarter of this year and prices dropped more than 50%,” Delta Oil’s Moussa told Enterprise.