Petrobras Magazine

Taking office in July, 2008, as president of the recently created Petrobras Biocombustível (Petrobras Biofuels), a Petrobras subsidiary which takes care of those projects related to the management and production of ethanol and biodiesel, Alan Kardec Pinto* has a lot of work ahead of him. After all, in the area of ethanol, the subsidiary is responsible for achieving the goal of producing and exporting 4.75 billion liters of fuel in 2012. In the biodiesel area, the new company expects to win a relevant position in the market and, in order to promote social inclusion, to establish partnerships with about 80,000 agricultural families, who will cultivate oleaginous plants to supply the three Petrobras Biocombustível plants. These and other topics are discussed in detail by Kardec in the following interview granted to Petrobras Magazine.

Why did Petrobras feel the need to create Petrobras Biocombustível?

Petrobras has been developing activities in the biofuels segment for some time, carried out in different areas of the company, such as Downstream, Gas and Energy, and International Business. The creation of the subsidiary, a global company founded on marketing, social, and environmental principles, has brought together all the biofuel production projects of the holding company and the management of this project portfolio in one place, at the same time that Petrobras has continued to be responsible for the logistics and the commercialization of the products. In environmental terms, the subsidiary comes into existence with a commitment to the environment and to the reduction of global warming. Socially, the new company is seeking partnerships with agricultural families to obtain raw materials, thereby generating employment and income in the rural areas. In marketing terms, the objective of Petrobras Biocombustível is to secure relative participation in the production of biodiesel and ethanol.

Petrobras Biocombustível was created in line with the Brazilian Government’s National Program for the Production and Use of Biodiesel and is committed to seeking and maintaining certification by means of a Social Fuel Seal. What does this mean in practice?

The company is following the premises of the National Program for the Production and Use of Biodiesel, whose objective is the implementation, production, and use of biodiesel in an environmentally sustainable and economically viable manner, with a focus on social inclusion and regional development, by creating jobs and income in the rural areas. Included in the Petrobras Biocombustível directives, with regard to its relationship with family agriculture, are the stimulants for the cooperative cultivation of oleaginous plants and other food crops, and the diversification of oleaginous crops respecting the regional diversification and the specific characteristics of each Brazilian region. As for the Social Fuel Seal, it is granted to biodiesel producers who purchase at least 50% of their raw material from agricultural families in the Brazilian Northeast, 10% in the North and Central-West, and 30% in the Southeast and Southern regions; who sign long-term contracts with agricultural families in accordance with the standards stipulated; and who guarantee technical assistance to the farmers, among other requirements. In return, the producers are granted a reduction in taxes, better bank financing conditions and improvement in their public image, considering that the Seal presupposes operations with social responsibility. In addition, they can participate in all the biofuel auctions, conducted by the ANP, the Brazilian agency in charge of regulating the oil, natural gas, and biofuel industry activities in the country. The Petrobras biodiesel plants in Candeias, Bahia and in Quixadá, Ceará have already received the Social Fuel Seal.

Miguel Rossetto has been the CEO of Petrobras Biocombustível since May 2009.

In the biodiesel sector, what projects are within the Petrobras Biocombustível jurisdiction?

It is worth mentioning the Petrobras biodiesel plants in Candeias, in the state of Bahia, and in Quixadá in the state of Ceará, both of which are already in production, and the plant in Montes Claras, in the state of Minas Gerais, which should be inaugurated in the first quarter of 2009. The three together, when they reach their maximum capacity, will produce 170 million liters of biodiesel per year. To obtain the necessary supply of raw materials, Petrobras plans to form partnerships with 80,000 agricultural families, by means of negotiations with representative entities of the category, and to acquire 160,000 tons of grains from oleaginous crops per year. The farmers will plant principally castor beans and sunflowers. In Minas Gerais, the family farmers will be encouraged by incentives to take economic advantage of macaw palm, a plant native to the region. These will not be monocultures. Each product will be cultivated together with crops like beans and corn, for family consumption, with the sale of the surplus.

Are there plans to export biodiesel? Have partnerships been formed with foreign companies with this in mind?

In the biodiesel sector, the Petrobras Biocombustível initial goal is to carve out a relevant position in the Brazilian market, but the company is forming a partnership with the Portuguese company Galp Energia to produce vegetable oil in Brazil, to transport it to Portugal, and to turn it into biodiesel, to supply the Portuguese market and Europe in general, where a consolidated market for the product already exists. In this partnership, Petrobras Biocombustível will figure as a partner not only in Brazil but also in Portugal. The project, still under study, is divided in two phases, each one foreseeing an annual production of 300,000 tons of vegetable oil produced from oil palms and sunflower seeds, and 250,000 tons of second generation biodiesel.

What are the principal projects in the Petrobras Biocombustível portfolio dealing with the ethanol sector?

In the ethanol sector we have adopted the model already created by Petrobras for the construction of Bioenergetic Complexes (CBios). This deals with enterprises each one of which foresees a partnership between a Brazilian ethanol producer as the majority stockholder, Petrobras Biocombustível as a relevant minority stockholder, and an international company with a prominent position in a long-term export market also holding a relevant minority position. Each CBio should produce on average 200 million liters per year, as well as generate 50 MW of electric energy, of which 1/3 will be consumed internally and 2/3 destined for sale. The creation of 20 CBios is presently under study.

What markets does the new company aspire to win overseas for Brazilian ethanol?

Petrobras Biocombustível expects to export to the major consumer markets in Asia, Europe, and the United States. Considering that the world sees Brazil as an important ethanol supplier because the country has extensive land and water supplies, a favorable climate, know-how acquired since the 1970s as a result of the Brazilian government’s Proálcool program, and the advantages of sugarcane-based ethanol over ethanol produced from corn such as lower cost and greater energy yield, the chances of establishing profitable partnerships are great. In addition, Brazil is the second largest producer of ethanol in the world, surpassed only by the USA, and possessing ample conditions to increase the production of ethanol without having to invade forest areas or compete with food-producing lands.

In your opinion, is ethanol destined to become a commodity, to be produced from agro-industrial residues, which would mean it would become bioethanol or lignocellulose ethanol? How is Petrobras Biocombustível preparing to handle this new development ?

I believe the tendency is for ethanol to become a commodity, that is merchandise of uniform quality, produced globally, and in large quantities by different producers. I also believe that the future lies in lignocellulose ethanol or 2nd generation ethanol, obtained from vegetable residues such as sugarcane bagasse, sugarcane straw, and castor bean bagasse, through the action of enzymes on the cellulose present in the residues to produce sugars through and the subsequent fermentation and distillation. Thanks to 2nd generation ethanol, Petrobras will be able to increase ethanol production by about 60% using residues and without the necessity of increasing planted areas. Throughout the world the investment in research in this field has been considerable. The technology of enzymatic processing has already been developed but production is expensive. Therefore, further research is required to lower costs. In the Petrobras research and development center, CENPES, the enzymatic procedure is presently under study. A pilot plant has been used for tests. Whoever makes this technology economically viable will undoubtedly gain a competitive advantage.

In such a short time, much has been accomplished, but the responsibility is growing, isn’t it?

No doubt about it. The responsibility is even greater when one considers that Petrobras Biocombustível is anxious to contribute to the inclusion of biofuels in the Brazilian and world energy matrix, which will help reduce global warming and is also a question of energy security. In this way, we reduce the Brazilian and the rest of the world’s dependence on oil, which is a non-renewable fossil resource; we diversify energy sources and we provide universal access to these sources. At the same time, we are acting in a socially responsible manner, making possible the generation of employment and income in the rural areas. Finally, we can say that the new company produces not only clean, renewable energy but also quality of life and citizenship. It is a huge responsibility. And there is still much to be done.