Petrobras and Japan’s Mitsui partner with Itaruma to finance 53 Mgy Brazilian ethanol plant

In Brazil, Petrobras and Japan’s Mitsui announced an investment in a 53 Mgy Goias state ethanol plant through their Participacoes Nippo Brasileira em Complexos Bioenergeticos joint venture.  The companies will team up with Itaruma Participacoes SA to construct the sugarcane ethanol plant. At the time their joint venture was announced in March, Petrobras and Mitsui said that they planned to construct 1.2 Bgy in new sugarcane ethanol capacity.

Petrobras background

• Petrobras will debut its biofuel production subsidiary today in Curitiba, and will outline its plans to produce synthetic biofuels and cellulosic ethanol in addition to sugarcane ethanol. Petrobras will have its first pilot plants in operation by 2010, although the company is expected to commence exporting ethanol to Japan starting this year with a blending operation in Okinawa that will supply 10,000 gas stations throughout the country with ethanol-blended fuels at a discount to conventional gasoline.

• The president of Petrobras said the state oil company will complete its 700 mile ethanol pipeline from Goias state to Sao Paulo by the end of 2009. Petrobras also said that its second pipeline was in the planning stages, and the initial studies would be completed next month on the alternative route from Cuiaba and Paranagua. The Goias pipeline has a project cost of $1 billion. Petrobras, Mitsui and Camargo Correa established a joint venture to finance and construct an ethanol pipeline between Senador Canedo and Paulínia, and the section that connects the Tieta-Parana Waterway to the Paulínia Terminal.

Petrobras said earlier this year that it will establish a biofuels subsidiary to centralize its biofuel production management. The new unit will supervise both biodiesel and ethanol production, although sales and logistics will continue to be supervised by the Petrobras supply division. The company has set a goal of becoming the largest producer of biodiesel in the country. Petrobras said it will construct a new 193 Mgy “superplant” for biodiesel production, and will make biodiesel directly from seeds rather than oils. The new technology is being tested at a pilot plant in Guamare, Rio Grande do Norte state. Petrobras is already constructing three smaller plants that will each have a capacity of 15 Mgy. Total project investment for the four plants will be $300 million.

Petrobras previously announced that it will construct 10 new biodiesel plants between now and 2012. Total project cost for the 13 facilities was projected at $507 million and planned capacity at the time was anoucned at 225 Mgy. Petrobras commenced marketing biodiesel in the past few months, and the company has made sales to date of 41 Mgy, primarily in Rio Grande do Sul. Petrobras will market a total of 100 Mgy which is estimated to cover Brazil’s consumption of biodiesel for the first half of 2008. Brasil Ecodiesel has a 62 percent market share in the Brazilian biodiesel market.

• The Brazilian government has targeted reaching a B5 biodiesel blend level by 2013. Brazil has set a B2 blending mandate effective in January 2008, and the director general at the National Petroleum, Natural Gas and Biofuel Agency (ANP), said that he expected that there would be enough biodiesel to cover more than twice the amount mandated.

• Analyst Julio Maria Borges has projected that Brazilian sugar cane output will double by 2015, but the industry will consolidate from 200 producers to 30, as producers vertically integrate their business and place more emphasis on acquiring distribution for ethanol. Cosan, which recently acquired 1500 ExxonMobil stations in Brazil and has reached 36 million tonnes of cane production, was cited as an example of the trend towards consolidation.

• The Brazilian sugar growers association, Unica, said that it expects to increase exports to the US of sugarcane ethanol in the aftermath of US Midwestern floods, which have caused US feedstock prices to skyrocket. Unica President Marcos Jank said that Brazil expects to increase ethanol exports by 340 Mgy this year compared to 2007.

• Sugar Cane Technology Center research leaders said that Brazil would enter the cellulosic ethanol industry at the commercial-scale with a first plant opened as soon as 2011. The proposed plant would use sugar cane bagasse as feedstock. Two cellulosic projects are already at the pilot stage, one owned by CTC and the other by Petrobras.

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