Petrobras to produce H-Bio diesel by end 2007

RIO DE JANEIRO (Reuters) - Brazil's state-run oil company Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz) (PBR.N: Quote, Profile, Research, Stock Buzz) will start commercial production of diesel fuel in at least four refineries by the end of 2007, using its new H-Bio process, a company official said on Wednesday.

The technology calls for the addition of vegetable oils during diesel refining and results in a product with "much lower" sulfur content, Nilo Carvalho, Petrobras' marketing and trading executive manager, told Reuters.

"We intend to begin production (of diesel) with vegetable oils in at least four of our refineries by the end of the year," said Carvalho, interviewed as part of the Reuters Global Fuel Summit.

The company expects to use annually 200-225 million liters of vegetable oils, mainly soy oil, to produce diesel through H-Bio, a process that is being tested by Petrobras.

The lower amount of sulfur represents an environmental benefit but production will be sold as regular diesel, said Carvalho, adding that the company does not expect higher prices for the product.

The company expects that this technology could help reduce production costs in future refineries.

Petrobras is using soyoil due to its huge availability in Brazil, the world's No. 2 producer which expects a record soybean crop this year, but other oils are being analyzed.