The state-owned Ukrainian chemical company Zarya has begun construction of $59 million ethanol facility in the Luhansk region bordering Russia.

The facility, which is expected to begin operation in 2015, will have capacity to produce 30,000 metric tons of ethanol annually. Zarya will use wheat, corn, rye and other grains as raw material, reports Platts.

“There are not such facilities yet in Ukraine,” Dmytro Drozhzhin, the head of the industry and energy department at the Luhansk regional administration, said in a statement. “About 70% of equipment will be supplied by leading European producers.”

Even though there are no ethanol fuel producei plants in Ukraina yet the state has adopted a law saying  saying 5 % ethanol has to be blended in gasoline in 2014 and 15 and a raise to 7% in 2016.

The ministry has also been working on a program that would encourage alcohol producers to retool for producing ethanol to be used in automobile engines. Zarya is one of the largest producers of a wide range of industrial explosives, emulsion explosives and special grades of TNT in Ukraine.