TOKYO (AFX-ASIA) – Japanese trading companies and machinery manufacturers are developing technologies and facilities that turn waste and grains into fuels for automobiles, the Nihon Keizai newspaper reported.

Marubeni Corp and other major trading firms will start producing “biomass” fuels in Southeast Asia, and are considering importing them into Japan as early as 2006, the newspaper said.

JGC Corp and Mitsubishi Heavy Industries Ltd have begun domestic trial production of biomass fuels.

Marubeni has joined with firms such as Sapporo Breweries Ltd to start building an ethanol plant in Thailand as early as June.

Investment for the project, to be carried out with a local alcohol distiller, is 2-3 billion yen.

The plant will produce ethanol, to be used as a substitute for the light oil used in diesel fuel, from material such as crushed sugar cane by using microorganisms for fermentation.

The plant is expected to start operating in the spring of 2005 with an annual capacity of 30,000 kiloliters, the newspaper said.

The project will mark the first time that a Japanese firm will produce biomass fuel in Thailand, which aims to have 600,000 kilolitres of biomass fuel supplied to the market, equivalent to roughly 10% of its gasoline consumption.

Marubeni intends to boost plant capacity to around 100,000 kl a year and import some of the ethanol into Japan.

Mitsui & Co has developed equipment that removes moisture from ethanol produced from biomass and will test it with a Brazilian ethanol producer in March.

The equipment will require half as much energy to produce concentrated ethanol as conventional distillation techniques. The trading firm is considering producing ethanol locally and exporting it to Japan.

To produce methyl ester from palm oil in Malaysia, Itochu Corp plans to build a plant next fiscal year with an annual capacity of 50,000 tons.

The substance is slated to be used as an alternative to the light oil employed in diesel fuel. The project will require an investment of roughly 2 billion yen. (US$1=120 yen).

JGC has developed a plant that can produce ethanol by fermenting old paper and discarded wood. The company has set up a test plant in Kagoshima Prefecture, the report said.

Mitsubishi Heavy is developing commercial biomass fuel technology with the Nagasaki Institute of Applied Science, it said.