Ethanol: a leap to the future
With huge investments, Petrobras plans a sizeable growth in its share of the biofuel market.
Commanding a mechanic harvester through a sugarcane field, Edson Aparecido Ferreira has only one companion: the country music coming from his radio. At the Cruz Alta sugarcane processing plant, located in Olimpia, in the state of São Paulo, the harvest ended in November 2011. The work, however, never ceases. In the field, projections about the next harvest are already being made and a battalion of machines and workers is preparing the 295,000 hectares of sugarcane fields surrounding the plant – the equivalent to twice the size of Mexico City. The cycle, then, begins anew. Ferreira has been working in Cruz Alta (one of the nine ethanol plants in Brazil in which Petrobras has a stake) for four years. And he helps to move, along with other important players, a productive chain that is profitable, cleaner, sustainable, and, above all, prosperous.
The Brazilian ethanol market is agitated. In the last few years, large companies from the energy and the food industries started to invest in the sector. Petrobras took a decisive step in this direction four years ago with the creation of the subsidiary Petrobras Biocombustível (Petrobras Biofuel). The company’s Business Plan 2011-2015 predicts an investment of US$ 1.9 billion in expanding production of ethanol, with the construction of new mills and distilleries, the increase in milling capacity and renewal of plantations. Another US$ 1.3 billion will be invested in logistics and further US$ 300 million will be used in research and development of new technologies. The aim is to expand Petrobras’ production capacity (alongside with its partners) from the current 1 billion to 5.6 billion liters, reaching a 12% share in the domestic market in 2015 and, consequently, taking the leadership of the Brazilian market.
Petrobras acts in the ethanol segment since the 1970’s, at first participating in the Pró-Álcool (Pro-Alchool, Brazil’s federal government program to stimulate the use of ethanol as a fuel). The company began to invest more heavily in biofuel production in 2009 by acquiring 43.58% of Total Agroindústria Canavieira, a company which owns a sugarcane plant in Bambuí (state of Minas Gerais). The following year, Petrobras closed a new partnership, this time with the French group Tereos, acquiring 45.7% of Guarani company. With seven manufacturing plants in Brazil, all located in the state of São Paulo, and one in Mozambique, Africa, Guarani is the third largest processor of sugarcane in Brazil. Finally, also in 2010, Petrobras signed an agreement with the São Martinho group, forming the Nova Fronteira Bioenergia company, which controls the Boa Vista plant in Quirinópolis (state of Goiás). Along with these partners, two initiatives stand out: the expansion of the Boa Vista plant, which upon receiving investments of US$ 293.7 million until 2015, will increase its production capacity from 200 million to 700 million liters of ethanol; and the expansion of ethanol production and energy cogeneration in the Guarani production units, with investments over US$ 423.7 million made in the next three years.
“(Going to) the market for renewable energy is a natural path. Choosing ethanol seemed to be the most logical option, since it allowed us to work with liquid fuels, a field in which we have great expertise. Three pillars guided our investments: energy security, environmental issues – the reduction of greenhouse gas emissions – and social issues, generating new jobs and more income”, explains Ricardo Castello Branco, Petrobras Biocombustível’s ethanol director. “Boa Vista’s expansion will make it the largest sugarcane ethanol plant in the world. Besides that, we will double the annual production of Total’s unit in Minas Gerais. The investments made in the three partners of Petrobras Biocombustível will enable us to achieve, by 2015, a 12% share of the Brazilian ethanol market”, he adds.
Brazil is the world’s largest producer of sugarcane ethanol. According to Unica (Brazil’s national union of sugarcane producers), 20.5 billion liters of fuel were produced in the country in the 2011-2012 harvest. Almost the entire production was directed to the domestic market. Meeting the needs of the Brazilians is the natural way for local businesses, but the export potential of sugarcane ethanol is indisputable. “Brazil’s market has become very attractive for investments because of the pent-up demand and the growing fleet of flex-fuel vehicles. Ethanol is efficient and less polluting. It’s only a matter of time for it to become a widespread global commodity”, says Andy Duff, global specialist on sugar at Rabobank’s department of Research and Sector Analysis. Headquartered in the Netherlands, Rabobank is the world’s leading institution on financing and investment on segments related to sustainability and agribusiness.
An interesting perspective for Brazilian ethanol was opened in late 2011 when the U.S. Congress repealed the tax imposed on the biofuel from Brazil and suspended the subsidy to local producers. United States are the world’s largest producer of corn ethanol. The decision can still be changed, but it signals a positive prognosis for Brazilian exports. “When sugarcane ethanol was recognized as an advanced biofuel, it won a passport to travel the world”, said Marcos Jank, president of Unica, referring to the announcement by the U.S. Environmental Protection Agency in February 2010. According to the agency, the sugarcane fuel reduces in more than 60% the emissions of greenhouse gases in its total life cycle when compared to gasoline. That is enough for it to be considered an “advanced biofuel”. “It is time for Brazil and the United States, which together account for more than 80% of ethanol produced worldwide, show their leadership and work to create a true global market, comparable to the oil market,” adds the executive.
A decree approved in September 2009 by Brazil’s presidency created the Agro-Ecological Sugarcane Zoning (ZAE Cana), regulating the sustainable production of sugarcane in Brazil and indicating the most suitable regions for plantation. Nature preservation and the minimization of deforestation are among the priorities of ZAE Cana, which defines the areas where is possible to expand the planting of sugarcane for ethanol production without the use of irrigation.
Past, present and future
The sugarcane industry’s roots go back to the beginning of colonization in Brazil. The favorable climate and the vast availability of land contributed to make sugarcane culture the foundation of the country’s economy during the so-called sugarcane cycle, begining at the 16th century. Ethanol from sugarcane began to gain importance as a fuel in the late 1920’s, when it was mixed with gasoline. It began to be regarded as an alternative to petroleum derivatives during the 1973 world supply crisis. The launch of Pró-Álcool (National Alcohol Programme) in the late 1970s marked the beginning of an energy program based on ethanol. By 1989, government incentives had helped to build a fleet of about 4 million vehicles that ran on ethanol (a third of the total Brazilian fleet at the time). On the path to become a global commodity, the development of the so-called cellulosic (or second-generation) ethanol will be crucial. The main benefit will be to increase the amount of ethanol produced without expanding the raw material planting fields. The strategy to get there includes the use of waste, such as sugarcane bagasse.
While in the United States the research is focused on corn waste, Brazil bets on second-generation ethanol are concentrated in bagasse and straw, cellulose sources that account for two thirds of the plant’s energy potential. “Petrobras started its studies in 2004. The main advantage of the bagasse is logistics. As it is a byproduct of sugarcane that is already available at the plant, there is no need for deployment of infrastructure for collection and transportation” explains Juliana Vaz Bevilaqua, coordinator of the Technology Management at Petrobras Biocombustível. “Today, a very good plantation produces 8,000 liters of ethanol per hectare. With second-generation ethanol, the goal is to increase production by 40% without additional planting”, adds Castello. Today, the bagasse and straw are used to generate steam and electricity in power plants, making the units self-sufficient in energy. Some plants also export excess energy to the national grid.
To accelerate the research for the production of second-generation ethanol, Petrobras firmed a partnership with U.S. company KL Energy Corporation (KLE), which was already testing cellulosic ethanol made out of wood. Petrobras invested US$ 11 million in 2011 in order to adapt to the KLE plant in Upton (USA) to use bagasse as a raw material and to validate, through testing, the production of cellulosic ethanol. Moreover, Petrobras and KLE will develop a project for a industrial scale second-generation ethanol plant that will be fully integrated into a sugarcane plant belonging to Petrobras in Brazil. The plant should be ready to operate in 2015.
Technological progress will allow the use of sugarcane as a raw material for new products in various areas of industry. André Bello de Oliveira, manager of Technical Support in Ethanol at Petrobras Biocombustível, faces the prospect with optimism and predicts that sugarcane will follow a path similar to that of oil. “In the past, petroleum was processed to replace whale oil in the production of kerosene. Whatever was left would become waste. Now, more complex refining allows to take advantage of it all. What were the sugarcane mills in the past? Factories with human labor and animal traction making sugar. With the Pró-Álcool program, we began to produce ethanol. Today, it is possible to obtain various types of sugars and alcohols, as well as fertilizers, different types of proteins and even lysine and acids in general from sugarcane”, he says. For the future, the prospects are even wider, with the emergence of biorefineries – units capable of producing fuels, polymers and chemicals from biomass, through procedures similar to those used in oil refineries – allowing a greater utilization of sugarcane and its waste, in a diverse and integral way.
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By: Vinicius Medeiros
Photos: Stefan Hess