Gutter oil, recycled waste cooking oil, is in the news again. But not because someone has been found selling the potentially lethal stuff to restaurants in Shanghai. This time it's because a Shanghai company is planning to sell it to be used by a European aviation fuel company, which will refine it to fuel aircraft.

Taking gutter oil away from kitchens and putting it into engines is good news for consumers who have had to trust oil suppliers and have been betrayed too often in the past. However there are still problems in the oil recycling business.

The Shanghai Lüming Environmental Protection Co Ltd grabbed the headlines when it announced last month that it was to sell processed gutter oil to SkyNRG, the biofuel supplier for KLM Royal Dutch Airlines.

But then, Dirk Kronemeijer, the managing director of SkyNRG, told the Xinhua News Agency that the company was interested in obtaining recycled waste cooking oil from China, but it had not yet actually nailed down any details with Chinese companies.

"We have only discussed a rough framework of cooperation in this regard, and have not signed any contracts yet," Zhang Yingwen, the CEO of Shanghai Lüming, admitted to the Global Times.

But why isn't this profitable and environmentally friendly solution to the problem of gutter oil not being embraced and promoted with vigor?

A health threat

Professor He Dongping, a food science expert at the Wuhan Polytechnic University, has suggested that one-tenth of China's cooking oil could be gutter oil. Waste cooking oil has been found being recycled in kitchens and is a serious problem as the oil contains toxins and carcinogens, especially the fungus aflatoxin, which is a noted cause of liver cancer.

In 2005, the Shanghai Lüming Environmental Protection Co Ltd became one of the two companies in the city authorized by the government to treat waste cooking oil. The company's website claims that its plant is able to take gutter oil and turn it into 30,000 tons of biodiesel annually.

"If our production lines runs at full capacity, we can treat 100 tons of gutter oil every day," Zhang Yingwen told the Global Times.

But the company at present is only getting about 30 tons of the raw material daily, half the amount it needs to operate efficiently and profitably, Zhang said.

Companies that collect gutter oil sell it to Zhang's company for about 4,000 yuan ($629) a ton. It costs the company between 1,500 and 2,000 yuan to convert a ton of the raw material into biodiesel fuel and one ton will make 900 kilograms of biodiesel. At present the market price for a ton of biodiesel is 7,000 yuan.

But as the alternative to petroleum diesel, the market price of biodiesel is subject to international oil price fluctuations.

"We are under a lot of pressure because the price of domestic petroleum diesel dropped earlier this year. Our production rates are unstable because we face losing money if the price of petroleum diesel drops too much. The more biofuel we produce, the more money we will lose," Zhang said.

Inconstant production

There are 18 authorized waste cooking oil collection companies in the city collecting around 250 tons of kitchen waste oil every day. Used frying oil makes up about 15 percent of the total waste cooking oil they collect. The other 85 percent is a mixture of water, oil and other materials collected from restaurant waste along with the oils that have been collected in the oil-water separation devices found in some restaurant kitchens.

These companies give the 250 tons of kitchen waste oil they collect every day some initial processing. This results in 50 tons of semi-processed oil which is then ready to be transformed into biodiesel by the two authorized city plants.

The Shanghai Xinwang Environmental Sanitary Service Co Ltd is one of the 18 companies authorized by the government to collect waste cooking oil from over 13,000 restaurants and eateries in the city. This company collects used frying oil from over 200 KFC outlets all over the city.

The company's head, Mao Haiping, told the Global Times that the production lines at Lüming had been off and on, and from the beginning of the year had not been running constantly.

Mao believes that the raw materials these companies collected from restaurants have been sold to Lüming cheaply, around 1,000 yuan lower than the prices paid in the neighboring Zhejiang and Jiangsu provinces, to ease the financial pressures caused by international oil price fluctuations.

"These prices were recommended by the government. Besides, we are not allowed to collect used cooking oil to sell to treatment plants in other provinces. This is the bottom line for the city authority. We usually take everything we collect to the two treatment plants in Shanghai," Mao said.

According to Mao, there are two reasons for this: it prevents gutter oil being delivered to illegal factories outside Shanghai, where it could be added to other oils and returned to kitchens under different labels. The Shanghai authorities closely monitor the transportation of the waste cooking oil once it has been collected to prevent any illegal plants being supplied.

"The other reason is that the authority expects that the two city companies can safely treat all of Shanghai's waste cooking oil and turn it into something valuable," Mao said.

But these expectations are not being met. Mao's company records show that there has been a drop in the amount of waste oil transported to Lüming since the beginning of the year. Almost no waste oil was delivered in June and July when the factory had almost completely stopped operating, Mao said.

To dispose of the collected gutter oil his factory processes and maintain the plant's normal operations, Mao's company recently had to begin taking its oil to two companies in the neighboring Zhejiang Province.

"The two Zhejiang companies have been approved by the Shanghai authorities and they act as emergency backup treatment plants when the two plants in Shanghai cannot cope. I can only store 100 tons of waste oil in my warehouse - a little more than the amount collected over two months," Mao said.

A sub-standard product

The two Shanghai treatment plants, Lüming and the Shanghai Zhongqi Environmental Protection Co Ltd, have complained to the media that they lack sufficient supplies. But the Shanghai Quality Supervision and Inspection Station for Petrochemical Products last November reported that the biodiesel products supplied by the two plants did not meet the national standards for water content and acidity.

Sun Yuanhai is head of the Waste Disposal Department of the Shanghai City Appearance and Environmental Sanitation Administration. He told the Global Times that before these two companies started talking about supplying biodiesel fuel to a foreign company, it was more important that they improved the quality of their product.

Sun said that the quality of oil both factories were producing failed to meet national standards. At present the fuels the two factories produce can only be used in industrial boilers. But this standard of fuel sells for a lot less, and therefore it is hard for the companies to make a profit. This had led to the predicament the companies were facing.

"Shanghai Lüming was not planning to sell processed biofuel to the foreign company but was simply thinking of providing the unprocessed gutter oil directly to SkyNRG. This is definitely forbidden. Anyway Lüming does not even have the required authority and licenses to export their product let alone it doesn't even have a product of their own," Sun said.

He said that what Lüming had done was against the original principles the company espoused when it claimed it wanted to turn gutter oil into a valuable product and become one of the pioneering companies for the industry.

"If Lüming gets around this and sells unprocessed materials, then what will happen to the 18 collection companies? They can do the same thing. I think Lüming is not matching the promises it made when it was trying to win the contract years ago," Sun said.

The Shanghai City Appearance and Environmental Sanitation Administration gave Lüming a June deadline for it to improve its processing techniques, modify its production lines and resume operation.

However the company only began testing new processing techniques a few days ago. Official quality reports on the company's modified products are not yet available.

When being asked about his company's partnership with SkyNRG, Zhang Yingwen said he could offer no more details for the moment. But he announced that once the company's product had passed the quality tests, its biodiesel fuel would be used in the city's fleets of garbage trucks and street cleaning vehicles.

"We do expect to be one of the pioneers in this field. Using biodiesel will not only help our company but will assist in food safety issues. We are very aware of our responsibility to society," Zhang said.