Brazil Petrobras studies fuel ethanol production

By Peter Blackburn

RIO DE JANEIRO (Reuters) - Brazil's state-run energy company, Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz)(PBR.N: Quote, Profile, Research, Stock Buzz), is studying possible production of fuel ethanol from sugar cane in response to surging demand, a company executive said on Wednesday.

Petrobras is already active in the transport and distribution of ethanol to domestic and export markets.

"There's no formal decision by the Petrobras board yet ... We are studying the possibility," Nilo Carvalho Vieira Filho, marketing and trading executive manager, told Reuters.

Speaking at Petrobras' headquarters in Rio de Janeiro as part of Reuters Global Biofuel Summit, Carvalho said Petrobras was seeking to take advantage of growing international demand for alternative sources of energy.

He noted that since the global oil crises in the 1970s, Petrobras has been involved with the development of ethanol, initially for domestic consumption.

"Brazil has a favorable climate, the technology and the lowest ethanol production costs," he said. "We're looking for new clients, opening new global frontiers."

Carvalho said that Japan Ethanol Trading, a 50/50 joint venture between Petrobras and a Japanese state trading house, was developing the Japanese ethanol market.

Commenting on a Reuters report from Tokyo, that Japan will import ethyl tertiary butyl ether to blend with gasoline, Carvalho said that this did not exclude Brazilian ethanol because energy demand was huge.

Petrobras was already exporting ethanol to Venezuela and expects to also ship to Nigeria and Scandinavia this year.

"Every day we receive buying interest from new countries," he said.

Petrobras was also offering technical assistance in the use of ethanol and had agreements with South Africa, Venezuela and Nigeria.

The United States has the capacity to find its own solutions, but Petrobras has long experience with fuel ethanol and this is available, if needed, Carvalho said.

For instance, he said, Petrobras could show how the same pipeline could be used to transport both gasoline and ethanol.

In 1978, Brazil was spending 90 percent of its export earnings on importing oil.

Carvalho said that ethanol exports were expected to rise to 850 million liters in 2007, from 120 million liters last year.  Continued...