A mandated blend of 5% biodiesel is set to go into effect on 1 January, and the government has negotiated with export producers to allow them to sell into the internal market, which totals about 700,000 tonnes per year, Recharge has learned.

Until now the local market has been restricted to government entities or farmers.

The negotiations have been finalized, but a formal publication of the agreement has yet to be published.

But Recharge has learned that small producers will be allowed to sell 100% of their output to the government, and big producers pick up the remainder. Delays in making the deal official are suspected to be a result of gas and oil companies complaining because the government promised to pay the biodiesel producers high prices. Regular diesel in Argentina is subsidized by the government but biodiesel is not, and the latter is more expensive.

“It’s a hell of a good price,” says Carlos St. James, president of the Argentine Renewable Energies Chamber, of the rate secured by biodiesel producers. He would not divulge specifics, but adds that “it’s comparable to international prices.”

Until end of the first quarter of 2009, export prospects had been bleak for the world’s fifth largest biodiesel producer. Now, producers are operating “at just about full capacity,” says St. James and are sold out for the next six months after exports picked up in the secodn quarter.

The Argentine association for biofuels and hydrogen adds that the country should export a total of 1.1 million tonnes of biodiesel this year.

A 5% ethanol blend could also be pushed back to February because local producers—while they have signed deals with the government—have yet to build any production plants.

A proposal to lower the mandate to a 2% blend is being considered instead, with a bump up to 5% by the middle of 2010.