[September 27, 2007]

Petrobras plans 5 new ethanol projects

(EFE News Service Via Thomson Dialog NewsEdge) Brazilian oil giant Petrobras plans to build five new ethanol plants with the capacity to produce 1 billion liters (264 million gallons) for export to Japan under joint ventures with foreign firms, a company executive said.

The projects are expected to be approved in the next few weeks by the company's board and are an integral part of the business plan, which calls for expanding ethanol exports to 4 billion liters (1.05 billion gallons) by 2012, the Petrobras executive in charge of fuel supplies, Paulo Roberto Costa, said.

"These are all new projects that will not compete with the domestic market," Costa said.

The five plants, which will cost about $200 million each and will have the capacity to produce 200 million liters (52.8 million gallons) of the fuel annually, will be constructed in the central state of Goias and the western state of Mato Grosso.

Petrobras and Japan's Mitsui will have joint stakes of 20 percent to 30 percent in each plant, with private investors holding the controlling stakes.

The first shipment from the new ethanol plants to Japan is expected to be made in 2010, Costa said.

The Petrobras executive said the plants would be "bioenergy complexes" that would both produce ethanol and meet their own energy needs by generating electricity from sugar cane residues, an arrangement that could allow them to qualify for carbon credits under the Kyoto Protocol.

The Kyoto Protocol, which expires in 2012, called for industrialized nations to collectively reduce greenhouse gas emissions by 5 percent from 1990 levels in an effort to slow global warming.

Costa said, however, that it would be up to "the projects' owners" to market any surplus electricity and carbon credits.

Brazil is the world's largest producer and exporter of sugar and ethanol made from sugar cane, with output of some 30 million tons and 17.5 billion liters (4.62 billion gallons), respectively, annually.

Along with the United States, the other important world ethanol producer (the U.S. variety is made from corn), Brazil is leading a campaign to promote the production and consumption of biofuels around the world.

The Brazilian government has signed agreements with countries in Latin America and Africa to provide technical assistance and support for biofuels projects.

Brazil has also reached agreements with developed countries, mainly in Europe, to provide incentives and finance ethanol production in developing nations.

Petrobras plans to approve 15 other ethanol projects in 2008 to allow it to meet its aggressive export goals for the fuel.

"We are already working on a second package of projects for next year, and shooting for exports of 4 billion liters (1.05 billion gallons) by 2012," Costa said.

Japan, which wants to reduce its dependence on fossil fuels and diversify its suppliers, is the main market being targeted by Petrobras for ethanol exports.

Last month, Petrobras said delays in the signing of ethanol sales contracts with Venezuela and Nigeria could threaten its export goals for the fuel.

The company's initial forecasts called for ethanol exports to hit 800 million liters (211 million gallons) in 2008, with that figure later being revised downward to 500 million liters (132 million gallons).

Ethanol, made from crops such as sugar cane and corn, is basically grain alcohol. The clean-burning fuel is usually mixed with unleaded gasoline and can be pumped into vehicles at existing service stations.

Last year, Brazil exported 3.9 billion liters (1.03 billion gallons) of ethanol, capturing 70 percent of the global foreign sales of the fuel.

The 2006 sales volume was a 50 percent increase over the 2.6 billion liters (686 million gallons) Brazil sold internationally in 2005.

Petrobras, for its part, exported 120 million liters (31.7 million gallons) of ethanol last year, with most of the fuel going to Venezuela.

Petrobras, whose shares are listed on the Sao Paulo, Buenos Aires, Madrid and New York stock exchanges, has some 52,000 employees and posted revenues of $74 billion last year, making it one of the largest oil companies in the world.

Copyright 2007 EFE News Services (U.S.) Inc., Source: The Financial Times Limited

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