Brazil's state-controlled oil company Petrobras and Italy's energy company ENI signed an agreement in São Paulo, Brazil, to develop and commercialize biofuels technology and announced plans to build four bio-diesel plants in Brazil.

The memorandum defined as "a strategic alliance for international markets" was signed before Italian Primer Minister Romano Prodi and Brazil's president Lula da Silva.

Both companies will also study the possibility of using other commodities for refining into biofuels and will assess the expansion of Brazil's current capacity for refining heavy fuels.

The four biodiesel plants are likely to cost about US$ 480 million and are in line with the EU target of producing 20% of its energy from renewable sources such as bio-diesel and ethanol by 2020.

Brazil is the world's second-biggest ethanol producer (behind the US) and the top exporter. Brazil recently signed a similar agreement with the United States during the visit of US President George Bush. (US ethanol is made out of corn, Brazilian from the remains of sugar cane refining).

Brazilian cars have been running on biofuels for decades and the country's expertise is in great demand.

"The Italian market is interested in the import of biofuels because Italy is not self sufficient," said Mr. Prodi following his meeting with the all powerful São Paulo Federation of Industries.

Prodi also announced that the new strategic alliance represents "a bilateral association logic" between both countries and targeted to third parties.

The strategy could mean undertaking joint projects for the production of ethanol in African countries and "could begin in Angola", but other countries have also been considered.

Eni is 30% owned by the Italian government and Petrobras is 60% state-owned.

Mercopress