The U.S. Navy's first general call for biofuels for ships and aircraft should result in prices comparable to what the military service pays for conventional fuels, an official said Sunday on Platts Energy Week."We've got a very, very good set of analysis that shows us that it's going to be coming in under $3.50 a gallon," Dennis McGinn , the Navy's assistant secretary for energy, installations and environment, said on the all-energy news and analysis program.

"We are absolutely confident, and we are moving forward based on that assumption that it is going to be competitive with petroleum," McGinn added.

The U.S. Defense Logistics Agency (DLA), which obtains fuel for military services, closed a procurement last week seeking at least 37 million gallons of drop-in biofuels to blend with F-76 marine diesel and JP-5 jet fuel.

The Navy uses F-76 marine diesel to propel ships and JP-5 jet fuel to operate fighter jets and other aircraft based on ships. The procurement marked the first time DLA made biofuels part of a regular call for Navy fuels. DLA called for blends of 10-50% and required the biofuel bids to be cost-competitive with conventional fuels.

McGinn, a retired Navy vice admiral, said the service generally pays "over $3.60" a gallon for conventional F-76 marine diesel and JP-5 jet fuel.

The Navy has come under criticism in the past for paying as much as $30 per gallon for biofuels used in test runs of ships and aircraft. A defense authorization bill passed by the U.S. House of Representatives would prohibit military services from buying biofuels unless their costs were comparable to conventional fuels.

"That was money well spent that proved at the operational level that we could in fact operate our helicopters, our jets, our ships on bio-blends of up to 50%," McGinn said of the tests.

Assuring secure supplies of fuel is still a primary reason for the Navy biofuels program despite the recent resurgence in U.S. oil production, he added.

"In the national security business, we get paid for looking years down the road," he said. "And we see an environment globally where there's going to be increasing competition, increased cost for pulling petroleum out of the ground. It's wonderful that right now in this country, we are enjoying the blessings of increased oil and gas production. We think that's great. But we don't see that persisting forever."
Source: Platts