Petrobras offers ethanol expertise at a price

By Andrei Khalip

RIO DE JANEIRO (Reuters) - Brazil's state energy company Petrobras is willing to share its expertise in pipelines that pump both ethanol and oil products with various foreign companies that have approached it, including U.S. ConocoPhillips, but at a price.

Paulo Roberto Costa, Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz)(PBR.N: Quote, Profile, Research, Stock Buzz) downstream director, said on Tuesday the United States could use the Brazilian experience to feed its growing ethanol needs or shift to fossil fuels when needed in a flexible fashion.

"We have a 10-year experience working with a poly-pipeline that can transport liquefied petroleum gas, diesel, gasoline or ethanol and we have no operating problems," he said at the Reuters Global Agriculture and Biofuel Summit in Rio de Janeiro.

"This knowledge is valuable and we can share it if the other side of the deal is right. We'd have to do a memorandum of understanding with Conoco, to get something in return, maybe involving them sharing knowledge on some oil block, or something," he said.

He said a ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) delegation had visited Petrobras recently and mentioned certain problems with using pipelines for ethanol transportation.

"We had the first meeting and they will mull over the conditions now... They seek us as they have a growing ethanol market in the United States and they have no pipelines, having all their output in the center of the country."

Petrobras has a poly-pipeline between the refinery of Paulinia on the coast of Sao Paulo state and the town of Senador Canhedo in the central state of Goias and is evaluating the construction of another similar pipeline in the southern state of Parana, which would have a parallel ethanol-only route for exports.

Petrobras also plans another ethanol pipeline in the southeast, which would partly coincide with the Paulinia-Senador Cahnedo route. The two ethanol pipelines, estimated to cost $2.3 billion, are designed to feed an expected exports boom driven by Japanese imports.

EXPORTS HINGE ON JAPAN

The company is working closely with Japanese companies like Mitsui and the Japanese government, aiming to sell 4.5 billion liters to Japan in 2012, when Petrobras expects the Asian country to have introduced a 10 percent ethanol blend in gasoline.

Brazil, the world's pioneer of mass ethanol usage in cars, has been mixing the sugar cane-based fuel with gasoline for decades, as well as running a vast fleet of vehicles on pure ethanol. Petrobras, an oil company, is still a small player on the ethanol market, but it seeks to become a major.

Costa said Petrobras exports plan, including the building of the pipelines, hinged on Japan's approval of ethanol blending and imports, but he said the process "should not take too long", citing a recent bill proposed by a pro-government party on lifting ethanol imports duty.

"We've advanced with ethanol plants and pipelines as much as it was possible and now are holding a bit awaiting advances with future sales to Japan. We have a fairly positive evaluation... though I cannot say if it will happen this year or not."

"When the contracts are being signed, we'd need two years to build plants and pipelines, and Japan would need two years to prepare infrastructure for ethanol," he said.

Apart from Japan, it seeks to export to South Korea, as well as Nigeria and the United States, which already consume Brazilian ethanol.  Continued...