Petrobras, Petrochina Enter into Ethanol Partnership

A day after Brazilian oil giant Petrobras announced it acquired a stake in its first ethanol mill, Petrobras and Chinese oil major Petrochina signed an MOU to cooperate on sugarcane ethanol production. Under the agreement, both companies will develop joint technical and financial studies on a possible partnership between the two groups for ethanol production in Brazil, Petrobras said in a statement. Petrobras said the move comes as large parts of China need to mix ethanol with gasoline and China has insufficient supplies. The ethanol produced by an eventual joint venture would be exported to China, which just last week lowered its ethanol import tariff. See China tariff cut could open door for ethanol imports. Petrobras Biocombustivel, the biofuel arm of Brazilian oil and gas giant Petrobras, targets to achieve a share of between 15% and 20% in the local ethanol market. Petrobras Biocombustivel plans to acquire up to 40% stakes in several ethanol plants.

PRESS RELEASE: Petrobras and Petrochina sign Memorandum of Understanding

Petrobras, its subsidiary Petrobras Biocombustível S.A. (PBio), and Petrochina International Company Limited, signed a six-month Memorandum of Understandings (MOU) aimed at undertaking joint studies to assess the technical and economic feasibility of developing ethanol production projects in Brazil, in a partnership between Petrochina and PBio, in addition to projects aimed at exporting ethanol to China, in an association between Petrochina and Petrobras.

Because of the need to adopt a blend of ethanol in gasoline in a larger portion of the Chinese territory and on account of the lack of conditions to supply such a market solely with local production, China intends to not only pursue supplies but also invest in its own production of the product in Brazil. In this regard, Petrochina considers Petrobras as the natural partner for such ventures on account of the excellent trade relationship between the two companies and because of possibile synergies.

PRESS RELEASE: Petrobras Biocombustível acquires stakes in ethanol plant

Petrobras Biocombustível entered the joint stock of Total Agroindústria Canavieira S.A., going on to hold 40.4% of the company’s stock, through a capital contribution of approximately R$150 million. This partnership marks Petrobras Biocombustível’s entrance in ethanol production.

Total owns an ethanol plant located in the municipality of Bambuí, in the State of Minas Gerais, with installed capacity to produce 100 million liters of hydrated ethanol per year. The partnership will make it feasible to enhance the plant’s total capacity to 203 million liters per year and to generate a surplus of 38.5 MW of electric power to market by using the sugar cane bagasse.

Participating in ethanol and electric power plants is in line with Petrobras’ Strategic Plan and will help the company meet its ethanol production and marketing goals, as set forth by the 2009-2013 Business Plan. In total, investments in the order of $2.4 billion are foreseen for ethanol and biodiesel production from 2009 to 2013

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