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Ethanol in Brazil: a successful experience Ministry of Agriculture, Livestock and Food Supply, Ministry of Development, Industry and International Trades

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Ethanol in Brazil: a successful experience Ministry of Agriculture, Livestock and Food Supply, Ministry of Development, Industry and International Trades Ministry of Mines and Energy Washington - March, 2006. Economic Agents of Sugar Cane Industry. Sugar Cane Agriculture Phase.

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slide1

Ethanol in Brazil: a successful experience

Ministry of Agriculture, Livestock and Food Supply,

Ministry of Development, Industry and International Trades

Ministry of Mines and Energy

Washington - March, 2006

slide2

Economic Agents of Sugar Cane Industry

Sugar Cane Agriculture Phase

Sugar and Alcohol Industrial Phase

  • 50 thousand sugar cane growers
  • 346 Industrial Plants

Regulatory Domain: Ministry of Agriculture

Regulatory Domain: Ministry of Mines and Energy / ANP (National Petroleum Agency)

Gas Stations

  • 32,030 Gas Stations sell alcohol.
  • (92% of total gas stations in Brazil)
  • Mercado de Preços Livres

Fuel Distributors

Exporters

  • 160 Operating Distributors
  • Only distributers may blend ethanol with motor gasoline
  • 2.38 Billion litters exported in 2004

Fonte = MAPA – MME – MDIC - 2005

slide3

Why BIOFUELS?

  • Environmental gains

- carbon sequestration

- lower emission levels in consumption

  • Renewability

- short production cycle

- man-controlled process

  • Economicaspects

- new demand component

- impacts on trade balance

  • Socialaspects

- jobs creation

- income deconcentration

slide4

BIOFUELS: a natural aptitude in Brazil

30o N

Trop. Câncer

Equator

Trop. Capricórnio

30o S

slide5

Why choosing ETHANOL?

  • Renewable:
    • Zero Carbon Balance
    • Not dependent of petroleum
    • Large scale of production
  • High miscibility with gasoline and it is a perfect substitute for tetraethyl lead
  • Oxygenated Compound:
    • Reduces row emission
  • Low toxic
  • Sulfur free
slide6

Why choosing SUGAR CANE?

  • Exceptional life cycle balance (the production of 1m³ of alcohol allows for the reduction of 2.6 tons of CO2).
  • Highly favorable energetic balance.
  • Increases in industrial efficiency, with lower sugar production costs.
  • Improvement in sugar quality.
  • Market diversification and the reduction of oil dependency.
slide7

Why choosing SUGAR CANE? (continuing)

  • Equivalent energy: 1 ton / sugar cane = 1.2 barrel / oil.
  • Energy distribution: 1/3 on sugar juice, 1/3 on bagasse, and 1/3 on straw.
  • Process otimization allows to transform mills into thermoelectric plants.
  • Possibilities: straw and bagasse burning or gasification, or alcohol production by hydrolysis.
slide9

Current Matrix of Vehicle Fuels

Diesel

2005

53.9%

(*)

VNG

2.9%

Gasoline A

26.2%

Anhydrous Alcohol

Hydrated Alcohol

8.7%

8.3%

Share of Regular Gasoline(1)

26.2% + 8.7% =34,9%

Share of alcohol

8.7 + 8.3  17%

(1) The gasoline available in Brazilian Gas Stations is added with 25% of alcohol.

Source: ANP; ABEGAS – 2006

Elaborated by MME - 2006

slide11

Alcohol with motor gasoline: 80 years of experience

First tests using ethanol

blended to gasoline

1979: vehicles manufacturers started

selling 100% hydrous alcohol cars

slide12

Brazilian Automotive Market by Fuel Kind

Great share of alcohol

cars: more than 80%

Sales of new alcohol

cars fallen

slide13

Brazilian Experience: nowadays…

1) Since 2003, 31 new models of Flex-Fuel Vehicles, by nine automakers: it can use any mixture of gasoline and alcohol, from 0 to 100%, without any action of car driver.

2) In December-2005, Flex Fuel vehicles sales represented 73% oftotal light vehicles sold (2003-2005: 1,245,201 units).

slide14

Nowadays: Brazilian Automotive Market by Fuel Kind

Start of Flex-Fuel Sales

Brazilian Light Vehicles Market Sales

5%

100%

20%

80%

60%

73%

40%

20%

0%

jan/03

jun/03

nov/03

abr/04

set/04

fev/05

jul/05

dez/05

Flex (Alcohol or Gasoline)

Alcohol (Pure)

Gasoline

Diesel

Source: Anfavea - 2006

slide15

Sugarcane: Cropped and Preserved Areas due to Technological Improvements

productivity

Productivity (tons/hectares)

preserved

area

Area ( thousand hectares)

cropped area

1 ton of sugarcane = 80 liters of alcohol

1 hectare of sugarcane = 6 m3 of alcohol

Source: CIMA

slide16

The success of the ethanol replacing gasoline...

Total economy of 1,09 billion boe

or 22 months of the present Brazilian

petroleum production

This curve shows how much gasoline would be necessary to satisfy the fuel demand for light vehicles supposing the non-existence of the Brazilian Ethanol Program

IN THIS PERIOD, THE USAGE OF ETHANOL FUEL IN BRAZIL HAS PREVENTED THE EMISSON OF 615 MILLION TONS OF CO2

Source: Ministry of Mines and Energy

Brazilian Energy Balance – 2005

and Laura Tetti – USP – 2002

slide17

ETHANOL as a new commodity...

  • Good business for tropical countries
  • Challenges to overcome:

- regular supply (short-term)

- predictable prices

- guaranteed supply (long-term)

slide18

How to start a program of blending ethanol with gasoline?

  • Infrastructure installations and logistic;
  • Technical and formal questions
  • Economic questions;
  • Instruments for supply garanty;
  • Fiscal questions
  • Consumer reaction

GENERAL RULE:

  • There isn’t any general prescription to launch such a program. Each Country has to design its own model.
slide19

Conclusions:

  • Ethanol can be an excellent business, specially that traditional sugar cane producers;
  • Producing and blending ethanol with gasoline are simple tasks, if all the process is carefully planned;
  • Brazil learned with its own mistakes. The other countries don’t need to do the same;
  • We are interested in share our experience, specially because we need the help of other suppliers to organize the market.
slide20

Thank you!

Contacts:

Ministry of Agriculture, Livestock and Food Supply:

[email protected]

Ministry of Development, Industry and International Trades

Phone: 55 (61) 2109-7293

Ministry of Mines and Energy

Phone: 55 (61) 3319-5106

slide21

Incentives established by the Pro-Alcohol at That Time

  • Alcohol price lower than gasoline price
  • Guaranteed remuneration to the producer
  • Tax reduction for hydrous alcohol cars
  • Loans for alcohol producers to increase their capacity
  • Gas stations were obligated to sell alcohol
  • Maintenance of strategical alcohol stocks
slide22

Problems and solutions of a alcohol-fueled cars

Ignition difficulties during

cold weather

Auxiliary gasoline tank

Metal corrosion (tank, exhaust pipe,

fire injection bomb components)

Substitution of tin and iron

for aluminium and stainless steel

Drying of plastic and rubber parts

(pipes in general)

Substitution for more resistent

materials and the use of additives

Increase in compression rate,

R&D and subsidies to consumers

during the program’s initial phase.

Consumption increase (alcohol’s

heating capacity is

30% lower than gasoline’s)

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