Brazil sees $25 billion investment in ethanol

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 29 -- Brazil's state-owned Empresa de Pesquisa Energetica (EPE), a division of the energy and mines ministry, said the country will invest some $25 billion for the construction of new ethanol plants to meet domestic demand growth projected at 150% over the next decade.

In its "Energy Plan for the Decade," EPE said ethanol produced from sugar cane will overtake gasoline and become Brazil's main fuel for powering automobiles, accounting for some 80% of all liquid fuels consumed by light vehicles by 2017.

"Brazilian demand for alcohol fuel will grow at an annual rate of 11.3% during 2008-17," surging to 14.1 billion gal from 5.4 billion gal in 10 years, the EPE report said.

To meet the demand, Brazil must expand its production capacity over the next 10 years by constructing 246 new sugar and distilling plants.

So far, the report said, 114 plants, or 46% of the total needed, have already been established or are now under construction.

Brazil's investment plans for ethanol are firm and will not be adversely affected by the current global financial crisis, according to EPE director Mauricio Tolmasquim.

"There is no lack of investor interest; The crisis is not affecting these forecasts," Tolmasquim told journalists. "The prospects for demand are strong."

He said ethanol projects are profitable even if oil falls to $75/bbl from its current level of more than $100/bbl.

Brazil, the world's largest producer and No. 1 exporter of ethanol made from sugar cane, has foreign sales of nearly 396 million gal/year.

Last week, it was reported that as a result of increased interest in Brazil's ethanol industry, the country's export terminals are nearing the saturation point.

Fabio Abrahao of International Logistics & Supply Chain consultants said that Santos port is under heavy pressure and that transport bottlenecks likely will increase (OGJ Online Sept. 24, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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