Petrobras has announced that it's creating a subsidiary company which will work exclusively with biofuels and could become Brazil's leading biofuel exporter. The Brazilian giant believes a new company will create good economies of scale to reduce costs in biofuel production, storage and distribution.

At the same time, the company wants to certify the sustainability of its biofuels. Brazil has been accused of poor work conditions in sugarcane plants, as well as destroying the Amazon forest to plant more soy and sugarcane. Deputy and former minister Antonio Palocci now supports a new international certification entity to guarantee the sustainable provenance of biofuels around the world.

[Source: Diariohoy via Econoticias]

Luiz Inácio Lula da Silva, the President of Brazil visited last week a plant near São Paul which is testing a new method to obtain ethanol from sugarcane pomace bagasse (what's left after sugar is extracted). Petrobras, the company that is financing this research hopes to obtain 40 percent more ethanol without harvesting more sugarcane.

Plans are to have a full-working plant in 2011 that is able to process 10 tons of pomace and produce 2,800 liters of ethanol from it per day. Although theoretically the process can use any kind of agricultural waste, the plant is being tuned up to use sugarcane pomace, because there's currently more of that than anything else.

Both Petrobras and the Government of Brazil consider this plant the country's first step towards second generation biofuels.

Related:

• Nebraska opens cellulosic ethanol plant
• Royal Nedalco will open a cellullosic ethanol plant using yeast, not bacteria
• Don't use food to make ethanol, use garbage

[Source: Econoticias]

[Edited: Thanks to Chris for the correction on the correct term for bagasse]

Petrobras continues saying they can be one of the most powerful oil companies in the world by means of biofuels. The truth is that the latest movements from Brazil and its state-owned oil company leave no doubt about their expansion intentions.

Now it's the turn of José Sergio Gabrielli, Petrobras CEO, who announced that the company is going to invest 112,400 million dollars between 2008 and 2012. 87 percent of this money will be invested in Brazil and the remaining in all the international projects the company has abroad (check our Related links to have a glimpse of a couple of them).

Among biofuels, which is our field of interest, Petrobras plans to use 1,500 million dollars to extend the use of biofuels, mainly ethanol. That's about one percent of the global amount, which is quite surprising due to the interest that Brazil attracts because of its ethanol industry. In words of Mr. Gabrielli: "By 2020, the energy matrix won't change much from today's in terms of coal, gas and oil percentages" but also he forecasted there would be "25 percent of biofuels in the world market, even if ethanol is not growing as expected."

He also added some very interesting information about Brazil's automotive energy market: 56 percent of Brazilians use ethanol, LPG or CNG on their cars and only a 40 percent use gasoline made by Petrobras.

Related:

• Brazil teaming up with Mexico to produce ethanol
• Galp Energia and PetroBras launch biodiesel joint-venture
• Brazil ethanol exports rising

[Source: El Universal via Econoticias]

Portugese energy company Galp Energia is hooking up with Brazil's PetroBras on a new biodiesel project for the European market. The plan is produce 600 thousand tonnes per year of vegetable oil in Brazil that will be converted to biodiesel fuel. The new project will be a 50/50 joint-venture between the two companies as Galp tries to expand the European market for biodiesel.

[Source: Galp Energia]

"Brazil has all the necessary conditions to become the Saudi Arabia of ethanol", affirms Petrobas board member, Paulo Roberto Costa. He also adds "Brazil is surely to become the preferred biofuel provider of the world". After such enthusiastic (!) affirmations from Mr. Costa, let's have a look at the facts and previsions for the following years.

Ethanol production for 2006 was 3.5 billion liters and the previsions for 2012 are 9 billion. But this ethanol is not only for Brazilian cars: 5.5 billion gallons are to be exported. Petrobras will get the biggest part of the market, with 3.5 billion sold mostly to Japan. Petrobras, the biggest Latin American oil company, is planning to invest 1.2 billion dollars in biofuel production (both for biodiesel and ethanol).

The strategy for Petrobras is selling the Japanese the ethanol they need for Japan's upcoming 3 percent ethanol blend in gasoline while also selling sugarcane ethanol to Venezuela, Nigeria and the US. Mr. Costa also affirmed that they're negotiating with South Korea and China for a similar agreement.

Related:

• Brazil ethanol exports rising
• Does Brazil have an ethanol "bubble"? And will it burst?
• Bush, da Silva talk ethanol again; charity warns ethanol is a disaster

[Source: O Globo via Econoticias]

Falling oil prices are starting to claim some biofuel casualties in India, with biodiesel not being able to compete at the pump. With crude oil dropping to around $50 per barrel, diesel in India currently costs around Rs 36 per litre (US$3.10 per gallon) which makes biodiesel at Rs 41 per litre ex-factory plus taxes look very expensive. The India Times quotes the managing director of a biodiesel company in Maharashtra as saying, "With such a stark difference, we have no option but to shut down production for now."

As ever, the final price of biodiesel comes down to the price of your feedstock and Indian farmers can currently produce jatropha curcas seed for Rs 12,000 per tonne. It is expected that this will have to fall to Rs 10,000 per tonne before biodiesel is economical again. Jatropha can only become cheaper if more farmers grow it, but the three-year lag between planting and the first harvest is too long for small farmers to survive.

In South America, Dow Jones Newswires is reporting that the Brazilian Energy Minister has predicted that Brazilian companies and other investors are likely to invest an estimated 17.4 billion Brazilian reals (US$8.1 billion) in the country's biofuels sector over the next four years. This investment should yield a confirmed 77 new ethanol mills and 46 new biodiesel plants by 2010.

The investment will increase Brazil's biofuels output to 23.3 billion liters / 6.1 billion gallons of ethanol, and 3.34 billion liters / 882 million gallons of biodiesel. This represents a 33 percent increase in ethanol production and a four-fold increase in biodiesel production over 2006/2007 levels. State-owned oil firm Petrobras SA is leading the charge with massive investment in both ethanol and biodiesel facilities.

Analysis: Clearly Petrobras has the muscle to forge ahead with biofuels in the face of lower oil prices where small, Indian farmers do not. Petrobras themselves are a huge oil producer so they win either way. Arguably the true cost, including environmental concerns, of petroleum fuels is not reflected by cheap oil, but knowing that doesn't improve the bottom line for smaller biofuels producers.

Related:

• State of the Union - I'm guessing Bush couldn't pronounce "cellulosic ethanol"
• Animal fat biodiesel to top half billion gallons by 2012?
• Cargill profit jumps 34 percent on back of biofuels surge

[Source: India Times & Cattle Network]

In an effort to complement its world-leading ethanol production, Brazil is looking to embrace biodiesel and meet a goal of producing 855 million liters per year by 2011. To do so, Petroleum Brasil (more commonly known as Petrobras), the state-owned oil company, is looking to build 15 new biodiesel plants in several different regions of the country. Petrobras stated it has already received environmental authorization to build three.

Brazil's push for biodiesel comes in the form of legislation as well. The South American country has implemented a mandate to mix two percent biodiesel to its petroleum-based diesel fuel by 2008. In 2013, this is set to increase to five percent, though, the government is conducting studies to move that up to 2010.

[Source: Platts]

Brazil, the world's largest ethanol producer, announced it will be conducting two projects investigating the use of hydrogen as a fuel for buses.

The first will be to implement a test fleet of 5 buses in Sao Paulo that run on hydrogen fuel cells. After the four-year experiment, assuming the hydrogen buses "pass" the test, the fleet may be expanded to 200 buses.

The second is a research and development project in hydrogen production which will supply hydrogen developed from natural gas to a single bus that will run in Rio de Janeiro. It is slated to begin next year at the Federal University of Rio de Janeiro and will involve the participation of Petrobras (the state-owned oil company), bus manufacturers and other scientific institutions.

Antonio Nunes Junior, President of the Brazilian Association of Electric Vehicles (ABVE) says that the project in Rio de Janiero is "to develop the technology and research," while the experiment in Sao Paul is focused on testing the buses in real-world conditions.

Nunes also states that the 43 hybrid buses currently in use in the Sao Paulo metropolitan area are a good transition option, "because the outlook for hydrogen isn't clear."

[Source: Inter Press Service News Agency]

The Venezuelan state oil company (PDVSA) announced recently that it would likely be producing biodiesel and ethanol within the next few years. Ethanol will be the first of the two biofuels to market, since the company has already adopted ethanol production technology and plans on selling the first of the biofuel next year. Biodiesel is scheduled for three years down the line. PDVSA director Igor Martinez said the company would be studying technology used by Petrobras, the state oil company of Brazil. How much biofuel would be needed in Venezuela or produced by PDVSA, Martinez did not say. So far this year, Venezuela has imported over 150 million liters of Petrobras ethanol.

[Source: Reuters]

Brazil is making further steps towards energy independence with the announcement of a new diesel fuel, which is mixed with a variety of vegetable oils at the refinery. Petrobras, the state-run oil company, claims Brazil will be the most important country for renewable energy, which might already be true. The new fuel, called H-Bio, is made by mixing refinery petroleum with oil from soy, sunflower seeds, cotton and castor beans. While regular biodiesel is blended into petroleum diesel by distributors, the H-Bio is created by blending vegetable oils at the refinery level. The fuel is expected to replace 15% of Petrobras' current diesel imports in 2006.

[Source: Business Week Online]