Thursday, 25 March 2010

Brazil oil growth won't stunt biofuel: official

Peter Murphy

SAO PAULO (Reuters) - An expected rise in Brazil's oil output will not threaten its fast-growing biofuels sector as more petroleum will be destined for export while most of its cane-derived ethanol is consumed at home, a government biofuel official said on Tuesday.
Brazil made a huge find of crude several miles below the sea floor in 2007 whose total reserves have been estimated at 50 billion to 80 billion barrels. Its oil production in Brazil is expected to nearly double by 2020.
At the same time, it is pioneering one of the world's largest biofuels industries and 90 percent of its new car sales have flex-fuel technology, enabling them to run solely on its cane-derived ethanol, gasoline or any mixture of both.
Ethanol is usually the cheaper of the two and increasing availability of crude oil is unlikely to influence that, said Ricardo Dornelles, director at the Secretariat for Petroleum, Natural Gas and Renewable Fuels.
"There is not this worry because oil production will look to the export market," Dornelles told reporters after making a presentation on the influence of rising Brazilian oil output on the Latin American country's biofuel sector at the F.O. Licht analysts' Sugar and Ethanol Brazil conference in Sao Paulo.
"Petrobras is making plans for refineries because Brazil wants to be an exporter (of refined products)," he said, referring to the state-controlled energy company.
Petrobras is one of the nation's biggest ethanol distributors through its network of filling stations, but does not yet have its own ethanol production. It has ethanol projects that are still in development and plans to buy stakes in ethanol companies.
Most of Brazil's ethanol is consumed on the domestic market and flex-fuel cars now comprise around 40 percent of its total vehicle fleet, the sugar and ethanol cane industry association Unica says.
Many motorists abandoned ethanol in recent months and filled up with gasoline after poor weather restricted cane harvesting and ethanol production but are switching back after a sharp drop in the biofuel's price in the last few weeks.
Brazil, whose environmental credentials have suffered over deforestation in the Amazon, is proud of its status as a pioneer in biofuels and hopes to develop the still relatively small international market for its cane ethanol.
To do this, it says other countries need to begin producing the biofuel to reassure consumer nations about the security of supplies which heavily influenced by the weather.
In a separate presentation, Jose Luiz Oliverio, the vice-head of Technology and Development at Dedini, a Brazilian firm producing machinery to equip sugar and ethanol mills, said total energy yield from Brazil's ethanol would be more than from oil in 2010 at the equivalent of 2,310 barrels of oil per day. He expected that to climb to 3 million barrels a day by 2015.
"Even with subsalt (oil production), I doubt (oil) will get to that level," he said.
With a vast area of uncultivated land with potential for farming use, Brazil is likely to become an increasingly important source of both food and biofuels as well as oil and gas from the offshore fields near the southeast coast.
"The discovery of subsalt won't reduce the importance that the government attributes to the development of the biofuel sector," Dornelles said.
(Editing by Marguerita Choy)