Bilfinger Berger Services was awarded a $A15 million contract to upgrade the distillery. The upgrade is expected to be completed by July, which will see the 32 million litre a year distillery revamped to produce fuel grade ethanol.

Currently, ethanol at Sarina is produced from molasses, a by-product of sugar refining, which is then reprocessed to fuel grade material at CSR’s Melbourne facility.

The sugar, aluminium and building products company produces about 60 million litres of ethanol per year, but most are used in industrial applications. Only about 6 million litres of ethanol produced by CSR are currently converted into fuel for use in cars.

However, there are currently nearly 50 sites in Queensland that supply ethanol-blended fuel made with ethanol produced by CSR, and demand for ethanol fuel blends is growing, according to CSR Ethanol general manager Gavin Hughes.

“CSR sees itself as a major player in the growing fuel ethanol industry and this project is in the first stage in CSR’s strategy to meet expected demand over the next 12 months,” Hughes said.

“Additional projects to further expand capacity are under review.”

CSR also has plans to market ethanol for another Queensland facility, the Lemontree Ethanol Pty Ltd plant to be located near Millmerran on the Darling Downs.

The plant, scheduled to be operating by mid 2007, will use wheat and sorghum, with waste products that can be used as a nutritious cattle feed. The plant will be located next to a feedlot in order to make direct use of the production by-product.

While Australian consumption of ethanol fuel is only about 23 million litres of the 20 billion litres of fuel used by vehicles each year, the federal government and the four main oil refining companies last year agreed to aim to raise Australia’s yearly usage of biofuels to 350 million litres by 2010.