March 8, 2007

 

Brazil to guarantee ethanol supply if Japan contracts to buy

 

 

If Japan guarantees purchases of Brazilian ethanol, Brazil will guarantee a long-term supply, Brazil's Agricultural Minister Luis Carlos Guedes Pinto said Wednesday (Mar 7), the Estado newswire wrote.

 

"Brazil can't produce ethanol without a purchase guarantee as ethanol isn't petroleum, the extraction of which you can reduce in case there's no demand," Guedes Pinto is quoted as saying in a speech to Japanese businessmen in Brasilia.

 

"There needs to be a firm and guaranteed demand for us to be able to supply ethanol," he said.

 

For the past few years, Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, has been in talks with Japan, a major oil importer, about long-term ethanol export contracts.

 

However, Japanese officials have delayed sealing any deals as they wait for more guarantees that Brazil will be able to furnish the biofuel without weather hitches or supply problems.

 

Ethanol supply contracts with Japan could be long-term, stretching over about ten years, Guedes Pinto said. The minister is scheduled to travel to Japan next weekend to participate in the Foodex food fair.

 

If a contract is closed, however, Petrobras has estimated that Japan could import between 1.8 billion to 6 billion litres of ethanol a year, depending on whether the government mandates a 3 percent to 10 percent mix of ethanol in its gasoline.

 

By contrast, Brazil exported a total of 3.4 billion litres in 2006, of which less than 7 percent, or 225.4 million litres, went to Japan, according to Agricultural Ministry data.

 

The President of Japanese firm Mitsui & Co, Shoei Utsuda, is quoted as saying on Estado in Brasilia Wednesday that he is "convinced that Brazilian ethanol supplies are guaranteed ... as Japanese buyers want to acquire the fuel in great quantities."

 

Petrobras and Mitsui last week had signed a memorandum of understanding to study the construction of an ethanol pipeline network in Brazil.

 

The companies plan to study the technological and economic viability of a pipeline network aimed at exporting ethanol from Brazil to Japan and other markets, Petrobras had said in a release.

 

Petrobras, and the Japan Bank for International Cooperation (JBIC) on Monday also signed a memorandum of understanding on biofuels.

 

The Brazilian oil firm and JBIC plan to evaluate financing possibilities for biofuel projects to be developed jointly by Petrobras and Japanese companies, both inside and outside Brazil.

 

Projects to be evaluated include the production and sale of ethanol and biodiesel, electric power plants using sugar cane bagasse as raw material and carbon credit opportunities, the company said in a release.