Brazil’s Petrobras Creates Biofuel Division, a US$ 1.5 Billion Investment

Brazilian president Lula looks at bioethanol at Petrobras Petrobras, Brazil's state-controlled oil multinational, plans to invest US$ 1.5 billion in the biofuel sector in the next five years. These funds should be invested in the new company subsidiary in the area. This information was disclosed by the financial director at Petrobras, Almir Barbassa.

The establishment of a subsidiary to manage the biofuel area was announced on Monday, March 3, after a meeting by the Petrobras Board of Governors. The new company should, for example, control the group's refineries in the northeastern Brazilian states of Bahia and Ceará and in the southeastern Minas Gerais.

Barbassa explained that despite having a capital of US$ 1.5 billion, which, according to him, is "a large volume of funds within the area of bio energy", it represents a small share of total Petrobras capital and, for this reason, has been separated.

"Its share of Petrobras is 1%. So, not to get lost within the organization, it is better to put it into a company," he said. "The company (subsidiary) will be important in the sector and within Petrobras it loses little."

Barbassa pointed out that the subsidiary is born with "all the potential to produce biofuels" and it will have the advantage of concentrating sector activities, as Petrobras operates in a different area.

"We are going to deal with farmers, both producers of alcohol and of oleaginous plants. We are going to have a different strategy. All this specialization requires centralization of efforts." Barbassa also said that Petrobras has not defined how the new company will be run, a decision to be taken in three months.

He only forwarded that the company should not have partners in the area. "Only Petrobras," he pointed out. The director also explained that despite separation, Petrobras will trade the products made by the subsidiary and will manage their transportation.

The biofuel activities are currently spread around the group, in several areas within the company. The new company will be responsible for production of ethanol, purchase of inputs and processing biodiesel, as well as for future inputs.

The oil company has just announced figures for 2007. Petrobras registered net profit of 21.5 billion Brazilian reais (US$ 12.9 billion). According to the organization, the value was 17% lower than in the previous year, due to the great appreciation of the real against the dollar, and to the fact that the company incorporated greater long-term stability to the employee pension plan.

In the period, the Petrobras market value grew 87%, powered by discoveries at sites like Tupi and Jupiter. There was also 34% growth in investment, to 45.3 billion reais (US$ 27.1 billion), the largest value registered by the company in one year. Net operating revenues totaled 170.6 billion (US$ 102 billion), 8% greater than in 2006.

Brazil Biodiesel

With the greater consumption of B2 (mineral diesel with a compulsory mixture of 2% biodiesel), Brazil may leap from the fourth to the second position among the main world producers of biodiesel, overtaking Italy and France, second only to Germany.

This according to the director of the Renewable Fuel Department at Brazil's Ministry of Mines and Energy, Ricardo Dornelles, on stating that production in 2007 was 450 million liters and should reach 850 million liters this year.

Dornelles pointed out the global demand for clean sources of energy, due to climate and environmental matters: "Markets are going to open up and Brazil may become a large exporter of biodiesel. This depends on other nations implementing their programs, breaking barriers and establishing standards, but we have great potential."

According to the ministry, between 60% and 70% of Brazilian biodiesel is currently produced from soy oil. Animal fat and castor seeds answer to around 10%, each, and the remains come from cultures that are not so intensive. But from the technical point of view, soy is not the best option, as it presents lower productivity in liters of oil per hectare sown than do other sources, like castor beans and sunflower.

"There is government concern in strengthening other cultures, so that they may post greater productivity," stated Dornelles.

He guaranteed that, for consumers of biofuels, price changes should be minimal due to the compulsory mixture of B2, mainly due to competition among retailers.

ABr

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