Transcript Document

Biofuels Market in Brazil
and the Participation of Petrobras
Historical and Recent Development
of Biofuels in Brazil
Integrated
Growth
Profitability
Social and Environmental
Responsability
Expand operations in target markets for oil, oil products, petrochemicals, gas and energy,
biofuels and distribution, being a world benchmark as an integrated energy company
To grow
production and
oil and gas
reserves
sustainably,
being recognized
for excellence in
E&P operations
To expand integrated
operations in
refining,
commercialization,
logistics and
distribution with a
focus on the Atlantic
Basin
Develop and lead the
Brazilian natural gas
market and operate
on an integrated
basis in the gas and
electric energy
markets with a focus
on South
America
Expand operations
in petrochemicals
in Brazil and
South America on
an integrated
basis with the
PETROBRAS
Group’s other
businesses
Operate on a global
basis in biofuels
commercialization
and logistics,
leading the
domestic production
of biodiesel and
expanding
participation in the
ethanol segment
Operational, management, technological and human resources excellence
E&P
Downstrea
m (RTC)
Distribution
Gas & Energy
Petrochemicals
Biofuels
Commitment to sustainable development
Historical and Recent Development
of Biofuels in Brazil
1973
1st Oil Chock
2003
2005
Biodiesel National
Program launching
1974
Brazil creates
PROÁLCOOL
2001
End of deregulation
process
Flex-Fuel vehicles
launching
1977
1979
Mar 2008
Non-Renewable
Energy
World 86%
Brazil - 55%
1983
2nd Oil Chock
4,5% Blending of
ethanol to gasoline
1992
90’s
Rio 92: Signing of the
climate change
Ethanol blending varies
milestone
between 20% - 25% of
gasoline
May 2008
Aug 2008
CNPE authorizes 3%
blending of biodiesel to Ethanol consumption
July 11, oil prices rose
is bigger than
diesel
to a new record of
gasoline
$147.27
Renewable
Energy
World 14%
Brazil – 45%
Ethanol dedicated
vehicles participation
of total vehicles sales
>90%
15% Blending of
ethanol to gasoline
Jan 2008
2% Blending of
biodiesel to diesel
1980
1989
Crude oil prices fall
and price of gasoline
equates to that of
ethanol
Jul 2009
4% Blending of
biodiesel to diesel
1985
Ethanol blending into
gasoline reaches 22%
Jan 2010
CNPE anticipates 5%
blending mandate
from 2013 to 2010
The Economics of Brazilian Ethanol Supply
Proalcool Program and flex-fuel vehicles were both responsible for the
strong growth observed in the last 30 years
Cane, Sugar and Ethanol Production
Flex-fuel vehicles
launching
500
400
60
50
40
Proalcool
300
30
200
20
100
10
0
0
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/7
75 5
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76 6
/7
77 7
/7
78 8
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79 9
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80 0
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81 1
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82 2
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83 3
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84 4
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85 5
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86 6
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87 7
/8
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89 9
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90 0
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91 1
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92 2
/9
93 3
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99 9
/0
00 0
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01 1
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02 2
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/1
1(
*)
million tons (Cane)
600
70
Harvest
Cane (million tons)
Source: MAPA
Sugar (million tons)
Ethanol (billion liters)
billion liters (Ethanol)
million tons (Sugar)
700
Looking Ahead
domestic market growth & export opportunities
billion liters
ETHANOL
Production, consumption and export projections of ethanol reflect great dynamism,
especially the growth of domestic demand.
Source: EPE
Production
Ethanol Domestic Demand Forecast
Looking Ahead
domestic market growth & export opportunities
million liters
BIODIESEL
Accompanying the demand for diesel, the demand for biodiesel is expected to
reach 3.5 billion liters in 2017
Biodiesel production
Biodiesel Demand Projection (EPE)
Source: EPE
Looking Ahead
Ethanol
domestic market growth & export opportunities
Historical and Recent Development
of Biofuels in Brazil
PROALCOOL PRINCIPLES AND CHARACTERISTICS
On November 14, 1975 the Alcohol National Program was created with
five stated goals:

Foreign currency savings

Reducing regional income disparities

Reducing disparities in individual income

Growth of domestic income

Expansion of capital goods production
Historical and Recent Development
of Biofuels in Brazil





Use of its nationwide logistical and retail infrastructure to assure that the blend and
the pure ethanol could reach all the country
Development of technical solutions for adequate handling of ethanol, including its
transportation by multi-product pipelines and storage
Formulation of gasoline to receive the blend of ethanol
R&D of solutions regarding quality of product, effects of blend and pure ethanol on
the engines and materials etc
Instrumental, on behalf of the government, in centralizing acquisitions of huge
volumes of ethanol to regulate the domestic market
The Economics of Brazilian Ethanol Supply
ETHANOL INDUSTRY HAS IMPROVED AND BECOME MORE SUSTAINABLE
SINCE IT WAS FIRST ESTABLISHED

Sugar-energy sector: US$ 28.1531 billion (almost 2%of GDP)

Increased productivity (as ethanol yields)
*Mapping the sugarcane genome
Power generation with sugarcane bagasse
(1/3 of the plant)


~ 7 thousand liters/ha
Use of the vinasse as a fertilizer
Production of 9.2 units of energy per unit
of fossil fuel energy

~ 2 thousand liters/ha
Recognized as an advanced biofuel, it
emits more than 60% less

Source: MAPA
The Economics of Brazilian Ethanol Supply
NUMBERS OF THE BRAZILIAN SUGARCANE INDUSTRY

434 Plants¹

70,000 Sugarcane growers

The 15 largest producers of ethanol represent only 37% of total production

1.28 million People formally employed²

1,042 Municipalities directly benefited

GDP of the sugarcane sector: US$ 28 billion

Foreign revenue: US$ 9.8 billion (2009)

Participation in Brazilian energy matrix: 18% (> Hidroelectricity)

Avoided CO2 emissions: > 600 million tons since 1975³
Source: UNICA (1-Position on 07/12/2010; 2-Data of 2008 from Rais (Relação Anual de Informações Sociais do Ministério do
Trabalho e Emprego); 3- Neves, Marcos Fava et. al, (2009) -Mapeamento da cadeia sucroenergética)
Historical and Recent Development
of Biofuels in Brazil
ETHANOL PLANTS IN BRAZIL
Ethanol Plants
Operational: 434 plants
Total: 27 billion liters/year
Looking Ahead
domestic market growth & export opportunities
Ethanol (billion liters)
Production
Growth Rate
2009/2010 up to 2019/2020
Production
9.38
Domestic Demand
9.00
Exports
10.70
Domestic Demand
Exports
Source: AGE/MAPA
Looking Ahead
Biodiesel
domestic market growth & export opportunities
Historical and Recent Development
of Biofuels in Brazil
MOTIVATIONAL PRINCIPLES FOR THE CREATION OF BRAZILIAN BIODIESEL
PROGRAM
Introduction of a new sustainable
renewable fuel
 Diversifying the Energy Matrix


Reduction in imports of diesel and oil

Employment creation and income
Castor-Oil
Plant
Sunflower

Fixing families in the countryside

Expansion of sustainable agriculture

Utilization of soil unsuitable for food crops

Offering an environmentally friendly fuel
Soy
African Oil
Palm
Cotton
Historical and Recent Development
of Biofuels in Brazil
BRAZILIAN VEGETABLE OIL PRODUCTION
Soy: large-scale farming, helped make Brazilian
Biodiesel Program possible


Castor beans production: helping family farming
Jatropha, Macauba, Sunflower and Others: small
scale or still in development

Animal Fat: the second largest feedstock for
brazilian biodiesel


Palm oil in the north region: the new frontier
Cottonseed
Animal Fat
Soy
Source: EPE
Social Fuel Stamp
Granted to producers who:
Buy raw material from family agriculture in the minimum percentage
of:
• 15% North and West-center region
• 30% Other regions
Do negotiated contracts with family farmers, consisting:
• The contractual period
• The value of buying criteria and adjustment of contract price
• The delivery terms of raw material
• The safeguards of each party
• Identification and agreement of a representation of farmers who
participated in the negotiations
Ensure training and technical assistance to family farmers.
Source: MDA
Historical and Recent Development
of Biofuels in Brazil
BIODIESEL PLANTS IN BRAZIL
Biodiesel plants
authorized by ANP
Operational: 63
Commercialization: 42
Total: 4,5 billion liters/year
B5: 2,4 billion liters/year
Plants in the
Social Pact
(k m³/y)
Plants not
in the Social
Pact (k m³/y)
0
Petrobras and Biofuels
PETROBRAS - BUSINESS PLAN 2010-2014
• The segment of biofuels will receive U$ 3.5 billion, operating in
production, logistics and marketing of biofuels and participating in the
value chain in Brazil and abroad, working in an integrated manner.
• The strategy in the ethanol segment was redirected to the acquisition
of shares in order to become a major player in the market, ensuring the
field of technology for sustainable production of biofuels.
Ethanol Production
Produção
de Etanol
2.600
%
%
+47
2014
Mil m³/ano
886
2010
1.055
5
+13
Mil m³/ano
Mil m³/ano
3%
+19
Capacidade
de Produção
Production capacity
of biodiesel inde
Brazil
Biodiesel no Brasil
Export of ethanol
Exportação
de Etanol
449
2010
2014
747
507
2010
2014
BIODIESEL and ETHANOL PLANTS
4 Biodiesel Units in
operation
Quixadá (CE)
Candeias (BA)
Montes Claros (MG)
Marialva (PR)
10 Ethanol units in
operation:
Guarani: 7 in SP and 1 in
Moçambique
Total (MG)
Nova Fronteira (GO)
BIODIESEL PLANTS
Semiarid region of Brazil
• Candeias (BA), Quixadá (CE) and Montes Claros (MG)

Project
Pará
Project Belém


2008/09: 150.000 tonnes/year (50.000 tonnes/year each plant)
Dec,2009: 300.000 tonnes/year (100.000 tonnes/year each plant)
Sept/10: duplication of Candeias: + 100.000 tonnes/year
South region of Brazil
• Marialva
 May,2010: 60.000 tonnes/year (PBIO owns 50% of the plant of
120.000 tonnes/year capacity)
New Projects
• Belém project (Portugal)
 2014: 300.000 tonnes/year of palm oil biodiesel
• Pará project
 2013: 120.000 tonnes/year of palm biodiesel
• Guamaré – RN (30% - castor oil)
 2011: 55.000 tonnes/year
(9,6% of semiarid production)
Overall processing capacity (2010) ~ 475.000 tonnes/year
ETHANOL PLANTS
SANTA LUZIA
Greenfield project
GO
SÃO MARTINHO
BOA VISTA
GO
MG
GUARANI
VERTENTE
TOTAL
BAMBUÍ
GUARANI
CRUZ ALTA
GUARANI
TANABI
GUARANI
MANDÚ
GUARANI
ANDRADE
GUARANI
SÃO JOSÉ
GUARANI
SEVERÍNIA
SP
SP
GUARANI
SENA
( Mozambique – AFRICA)
Overall Crushing Capacity (2010) ~ 20 million tonnes of sugarcane
Overall Ethanol Production (2010) ~ 890.000 m3
PARTNERSHIP: USINA TOTAL



December 22, 2009: Petrobras Biofuels announced
its entry into the ethanol segment, by acquiring
40.4% of Usina Total S.A.
Plant capacity: production of 103.000 m3 of ethanol
and 9.8 MW of electric power of 9.8 MW.
Petrobras Investment: R$ 150 MM that will be used
to expand the unit to 203.000 m3 of ethanol and 38.5
MW of electricity. The other portion will be invested in
machinery and equipment to achieve the goal of
100% of mechanized harvesting of sugarcane in
2012.
PARTNERSHIP: TEREOS

A strategic investment
Petrobras Biocombustível announced in April, 2010 it was forming a strategic partnership with Tereos Internacional
to jointly invest in Guarani and become a leading player in the Brazilian sugarcane industry.
A strategic investment that provides Petrobras Biocombustível with a significant stake in a market leader;
The capital increase strengthens Guarani’s balance-sheet and provides the company with new resources and
expertise for its growth.

Total investment of R$2.2 Bn in Guarani
Investment by Petrobras Biocombustível of R$1.6 Bn over next 5 years (R$682 MM already invested) with an
option to reach a stake of up to 49% in Guarani;
Option for Tereos Internacional to invest up to R$600 MM of new equity in Guarani in the 12 months following
Petrobras Biocombustível’s initial investment in Guarani.
JV post-merger structure
26.3% to 49.0%
73.7% to 51.0%
PARTNERSHIP: SÃO MARTINHO

June, 21 2010: Petrobras announced a strategic
partnership with Grupo São Martinho S.A. for the
growth of ethanol production in the Midwest region of
Brazil, State of Goiás.

A new company will be created, called Nova Fronteira
Bioenergia S.A., which controls the Usina Boa Vista,
currently in production, and the greenfield project called
SMBJ Agroindustrial S.A., both located in Goiás.

Petrobras investment: R$ 420.8 MM to Petrobras
Biocombustível acquire 49% stake in the new company.

The investment will be used to expand production of the
new society, especially Usina Boa Vista. With the
investments already made and implemented, it will have
its milling capacity expanded from the current 2.5 million
tonnes of sugarcane to 7 million tonnes in the 2014/15
season.
Export Logistics
Senador Canedo
1
Multi-product pipeline
Existent
2
Ethanol pipeline
Study concluded
3
Ethanol pipeline
In study
4
Barges
Study concluded
Uberaba
MG
3
Presidente
Epitácio
Ribeirão Preto
MS
Araçatuba
2
4
REDUC
SP
Anhembi
REPLAN
Taubaté
1
REVAP
São Sebastião
PR
RJ
Ilha
D’ água