Oman’s entrepreneurs hope to turn biofuels into liquid gold

Alamy/Images by Itani

• Biofuel demand rising
• Local support and regulation lacking
• New fuel sources pursued

A bus powered partly by date kernels launched on the streets of Muscat at the end of 2022. It was a Sultan Qaboos University project, set up as Oman strives to develop sustainable sources of energy.

The bus successfully runs on a mix of biodiesel made from the oil extracted from date kernels and conventional diesel.

However, investors did not bite when it came to launching commercial-scale production.

“There was a lot of local and regional interest, but it all went quiet,” says Lamya Al Haj, a scientist heading the project.

“The challenges which I expected came up: the production cost of this new technology is relatively high and it is difficult to collect the seeds. The logistics are complicated – we don’t have the infrastructure for it yet.”

Oman’s burgeoning biofuels entrepreneurs say they need government support to change this.

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Global demand for biofuels, derived from organic sources such as biomass and organic waste, is expected to increase by 38 billion litres between 2023 and 2028, according to the International Energy Agency.

The Middle East and Africa are the standout markets, expected to grow almost 10 percent a year until 2030.

The Omani government has set up a special committee to develop and support the biofuels sector. Industry sources say talks include regulations like introducing subsidies or removing VAT, but the decision-making process is slow. 

Industry experts say that the lack of feedstock and high production costs are the main challenges to the development of biofuels in countries like Oman.

Biodiesel is two to four times more expensive than hydrocarbon diesel. The price of diesel in Oman at the moment is $0.67 per litre, while the global average is $1.18 per litre.

While conventional fuels are heavily subsidised, biofuels cannot compete without institutional help.

Subsidising biodiesel enough to match conventional fuel prices at the pump would open the floodgates to huge volumes, according to John Jones, co-founder of X2e, an Omani-British environmental startup.

Oman’s monthly diesel consumption is around 190 million litres, “so if the mandate of mixing 5 to 7 percent of biodiesel came in (like in Europe) or if we had this subsidy, the volume would be massive”, Jones says.

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Regulation needed

Meanwhile, a lack of regulation and support is challenging the industry. 

Wakud is the first Omani business producing biofuel from used cooking oil (UCO) at commercial scale and succeeded in attracting local and international investors, but is struggling to survive. Since it was set up three years ago, it has been losing money, according to Maher Habsi, CEO of Wakud.

“I am dying because I am waiting (for the regulations to change),” says Habsi. “But I hope the change will come, maybe after the summer.”

Production costs have rocketed because of problems with feedstock. Once dumped in drains, UCO becomes difficult to obtain and is therefore expensive. 

When available, it can reach twice the price of finished biodiesel, Jones says. The oil is mostly collected by unofficial players who offer a premium to waste generators such as restaurants or hotels and can be smuggled to neighbouring countries under false names such as palm oil, sesame oil, or industrial waste, where it is sold for a higher price. 

“It’s the ‘wild west’ of Middle Eastern UCO collection here,” says Jones.

In 2021, the Omani government limited exports of UCO and imposed high fees to prioritise local factories. Still, according to sources, around 90 percent of UCO is smuggled out of Oman.

For Wakud, securing volumes for its biorefinery has become a persistent problem. The company has had to turn to imports and produces only up to 17 tonnes a day.

However, as the prospects for biofuel usage are enormous, Wakud has invested $18 million in expansion. A second plant at Khazaen Economic City will add an extra 50 to 70 tonnes a day of production capacity.

The company is targeting overseas markets, including Europe and the UAE, and wants to export to Singapore and Malaysia, where there is a demand for biodiesel, mainly from the shipping industry.

New raw material sources

Omani entrepreneurs are seeking new ways to secure raw materials. 

X2e, which owns 49 percent of Wakud and has stakes in several companies which specialise in environmental technologies, is investing in Camelina crops. This oil seed plant shows significant potential for biofuel production, according to promoters.

Three Omani companies — Net Zero Solutions, Al Tharmad Business and Services Company, and Green Gulf Industries — have formed a partnership to develop a $23 million project to cultivate microalgae for biofuels. At full capacity, they hope to produce 3,700 tonnes.

X2e also plans to establish sustainable aviation fuel (SAF) plants in Oman, which may cost up to $400 million. The plants will produce jet fuel from bio-crude via Saker, a spinoff company.

X2e is also expanding worldwide with SAF projects from biomass in the UK, US and Portugal and is acquiring a biodiesel plant in the Middle East.

In Oman, X2e will wait until the end of the year in the hope that the government will impose new regulations.

“If nothing changes, we will export our production,” says Jones. “There’s a huge global demand for what we produce.”