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London, U.K. -- Global biofuel production will climb to 1.2 million barrels a day in 2011, almost double 2005 production of 650,000 b/d and four times larger than output in 2000, the International Energy Agency said in a five-year outlook report Wednesday.

"This could still be an understatement of biofuels growth," the report said.

The IEA said a study of proposed or existing projects already suggests a potential increase of 1.0 million b/d in ethanol and biodiesel supplies between 2006 and 2011.

"While there are numerous uncertainties regarding medium-term supply projections for biofuels, there is no doubt that capacity will continue to increase rapidly over the next few years given the current political and economic environment," the IEA said.

Brazil, the U.S. and the European Union will account for the largest share of biofuel production increases, the report said.

Meanwhile, countries such as Malaysia, the Philippines and Thailand are targeting Europe and the U.S. as potential new biofuel export markets.

Brazil and the U.S. will lose market share as new producers enter the market.

The IEA forecasts their combined share of the world ethanol market at 78% in 2008, versus 92% in 2005.

The IEA predicts European biodiesel production, based on announced construction and capacity expansion plans, will more than double by 2008 from the 64,000 b/d produced in 2005.

European ethanol output is also expected to rise to 71,000 b/d in 2008 from just 14,000 b/d in 2005.

Due to uncertainties regarding the relationship between biofuels and food prices as well as oil prices, IEA said that "the current economic attractiveness of biofuels could change very rapidly."

The agency also holds a fairly conservative biofuel expansion view after 2008, citing that Brazil, which primarily derives ethanol from sugar cane, has production advantages to allow its industry to grow further as the nation's production will like stay more constant.

The IEA figures ethanol from sugar cane is competitive once the oil price reaches around $40/bbl and biodiesel from animal fats is around $60/bbl.

Meanwhile, biofuels made from other feedstocks will only compete when oil is above $70/bbl unless the production costs can be significantly reduced.

"Otherwise they will continue to be dependent on government support mechanisms," said the IEA.

The agency says the lower energy content of biofuels compared with conventional transport fuels will tend to inflate total transport fuel demand in areas where they are used as a blendstock.

The IEA said second-generation biofuels, such as cellulosic ethanol, aren't expected to make a significant contribution to output over the next five years.

Some second-generation demonstration plants are being built in Canada, Spain and the U.S. and the development of this technology may eventually help lessen the burden on food and land use as seen in first generation biofuels.

For more information, call Lisa Kallal, Dow Jones Newswires at (4420) 7842-9415.

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