Petrobras to export ethanol to US this year

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, Mar. 19 -- Silas Oliva Filho, manager of ethanol and oxygenates at Brazil's state-run Petroleo Brasileiro SA (Petrobras), said the company plans to start exporting anhydrous ethanol to the US in 2007.

The Petrobras executive said the exports to the US could be greater if it were not for the US import tax of 14¢/l. plus an "ad valorem" tax of 2.5%.

Oliva Filho forecast that Petrobras will export 850 million l. of anhydrous ethanol this year, mainly to the US, Venezuela, and Nigeria. "This figure is seven times larger than the ethanol exported in 2006 by Petrobras," he said.

At the end of January Petrobras inked an accord to export ethanol to state-owned Nigerian National Petroleum Corp.

Brazil as a whole is expected to export about 3 billion l. of ethanol this year compared with 3.3 billion exported last year, said Tarcilo Rodrigues, head of the major trading company Bioagência. The US is Brazil's top ethanol export market. Last year, one of Brazil's top ethanol exporters to the US was a Royal Dutch Shell PLC subsidiary in Brazil.

Petrobras ex-Pres. Henri Phillipe Reichstul, head of Brazilian Company for Renewable Energy Ltd. (Brenco), formally inaugurated the Brazil-focused ethanol company on Mar. 15. The new company—with backing from several large corporate US investors—has raised $200 million in a private placement of its common shares, said Ana Fernandes Kertesz, a vice-president of Goldman Sachs in Brazil.

Brenco aims to become one of the largest ethanol producers in the world, with an output of 1 billion gal/year of ethanol, said a spokesperson for the new company, "This $200 million that was raised is just an initial placement; $2 billion is the target."

Petrobras will also test ethanol exports to Japan, expected to be about 20 million l. Brazil has been engaged in extended negotiations with Japan about signing a long-term ethanol import contract to help trim rising carbon emissions.

Separately, Filho said the company would start construction of a $750 million ethanol pipeline as early as August. The pipeline, which will have the capacity to transport 8 billion l. of ethanol, will take about 2 years to complete.

The pipeline "is a big risk for the company, because no one knows for sure when the market will come," Filho said. "It could take a few years after construction before we really have the (ethanol) buyers."

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