Japan to receive bulk of Brazil's ethanol exports

The Japan Bank for International Cooperation (JBIC) has signed a memorandum of understanding (MOU) to provide Brazil's state-run Petroleo Brasileiro SA (Petrobras) with $8 billion to help it export ethanol to Japan.

Eric Watkins
Senior Correspondent

LOS ANGELES, Mar. 6 -- The Japan Bank for International Cooperation (JBIC) has signed a memorandum of understanding (MOU) to provide Brazil's state-run Petroleo Brasileiro SA (Petrobras) with $8 billion to help it export ethanol to Japan.

As a result of the aid, annual shipments to Japan by Petrobras are expected to rocket to 3 billion l., with the Asian country taking nearly 90% of Brazil's available exports. In 2006, Brazil exported 3.4 billion l. of ethanol, of which less than 7%, or 225.4 million l., went to Japan.

The JBIC assistance will help Petrobras expand output and sales to Japan, with financing to cover ethanol plants, storage tanks, pipelines, and ports, according to a Mar. 4 report in Brazil's largest newspaper, Folha de S. Paulo, which quoted Petrobras executive Paulo Roberto Costa. Projects to be evaluated include the production and sale of ethanol and biodiesel, electric power plants using sugar cane bagasse as raw material, and carbon credit opportunities.

On Feb. 26, it was announced that Japan's Marubeni Corp. and Dutch grain trader Agrenco Group in 2008 plan jointly to start producing biodiesel from Brazilian soybean oil (OGJ Online, Feb. 26, 2007).

And on Feb. 27 Petrobras announced an MOU with Japan's Mitsui & Co. and Brazilian Construces e Comercio Camargo Correa SA to study the construction of pipelines for exporting ethanol (OGJ Online, Feb 28, 2007).

The Folha de S. Paulo report marked the first time an investment amount was disclosed. The paper said the funding would be used largely to take minority stakes in 40 ethanol distilleries across Brazil, ensuring Japan with a stable supply as it prepares to mandate an obligatory mix of 3% bioethanol in gasoline.

JBIC will help finance the distilleries, Folha de S. Paulo reported. Investment in each distillery could total $200 million, Costa said.

Costa added that Japan insists on guaranteed long-term ethanol supply, increasingly popular because of persistent high oil prices.

Last month, the Japanese government said it aims to increase domestic output of biofuels to 6 million bbl/year by 2030. It said Japan lags behind other nations in the production of bioethanol—producing just 30 kl/year—while Brazil and the US produce 16.7 million kl and 15 million kl, respectively.

Contact Eric Watkins at hippalus@yahoo.com.

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