Brazil as a Strategic Supplier of Fuel Ethanol: Brazil as a Strategic Supplier of Fuel Ethanol January 2005


Brazil is the Least Cost Producer of Sugar and Ethanol: Brazil is the Least Cost Producer of Sugar and Ethanol Index Source:UNICA, F.O.Lichts


Slide3: 40,00 45,00 50,00 55,00 60,00 65,00 70,00 75,00 80,00 85,00 75 80 90 00 04 tc/hectare 2,50 3,00 3,50 4,00 4,50 5,00 5,50 6,00 6,50 7,00 7,50 kl/hectare tcane / hectare kl ethanol / hectare Productivity Gains Center-South Region Source: UNICA


Brazil has a Record of Expanding Production: Brazil has a Record of Expanding Production 2004 55.67 Million tons Source: Datagro Sucrose is the raw material for sugar and ethanol production Brazil’s Supply of Sucrose (in 000 tons)


Slide5: Ethanol Production in Brazil million kl Source: Ministry of Agriculture, Livestock and Food Supply


Slide6: The Brazilian Ethanol Experience - Brazilian ethanol, gasohol andamp; Flex-Fuel vehicles - Imported gasohol vehicles and engines (including from Japan)


Brazil is the Largest Producer & User: Brazil is the Largest Producer andamp; User Fuel ethanol demand represents 40.6% (average for Jan-Jul 2004) of Brazil’s total Otto cycle fuel demand, in gasoline equivalent. In the USA 11.5 million kiloliters of production account for only 2.3% of Otto cycle fuel demand.


Brazil’s Ethanol Exports are Rising(in 1000 kl): Brazil’s Ethanol Exports are Rising (in 1000 kl) Source: Ministry of Development, Industry and Foreign Trade (*)January – November 2004 0 500 1000 1500 2000 2500 3000 2002 2003 2004*


Fuel Ethanol in the World: Fuel Ethanol in the World Fuel ethanol production and use is in expansion worldwide. In 2005, production is expected to reach 38.27 million kl. 16 million kl from Brazil (42%).


Ethanol-Gasoline Blend Use: Countries with ethanol-gasoline blend programs: USA (E-10 and for FFV E-85), Canada (E-10 and for FFV E-85), Sweden (E-5 and for FFV E-85), India (E-5), Australia (E-10), Thailand (E-10), China (E-10), Colombia (E-10), Peru (E-10), Paraguay (E-7) and, of course, Brazil (E-20 / E-25 and for FFV any blend). Ethanol-Gasoline Blend Use FFV: flexible fuel vehicle


Slide11: World Crude Oil Supply andamp; Demand The World is avid for a viable replacement to oil. Concerns are increasing from the explosive rise in energy consumption of so-called emerging economies, in particular the largely populated countries of China and India.


Slide12: Ethanol is Perceived as a Viable Alternative to Oil Shell International: biomass ethanol is the best alternative to partially replace oil derivates in the next decades, considering consumers acceptability and strategic considerations.


Reasons for Adoption of Ethanol-Gasoline Blends: Reasons for Adoption of Ethanol-Gasoline Blends Effective and environmentally-sound way to complement gasoline supplies; Miscibility with gasoline is good; Durability of gasoline is not affected by ethanol; Vehicle performance is maintained; Vehicle drivability is kept or improved; Good materials compatibility Vehicle durability is maintained.


Slide14: E10 Warranty International car manufacturers provide full warranty coverage for vehicles that use E5 blends in Sweden and E10 blends in the USA and Canada Examples of statements found in the 'Owner’s Manual' for 2003 japanese brands (similar to those stated by US, European and other manufacturers): HONDA: 'You may use gasoline containing up to 10% ethanol by volume' MAZDA: 'The common gasoline blend that can be used with your vehicle is ethanol blended at no more than 10%' MITSUBISHI: 'A mixture of 10% ethanol and 90% unleaded gasoline may be used in your vehicle…..' TOYOTA: 'If you use gasohol in your Toyota be sure…that it does not contain more than 10% ethanol' Source Downstream Alternatives Inc


Positive Impacts: Positive Impacts Employment - 0.9 million direct and another 0.9 million indirect jobs. Sugar cane ethanol has proven to be one of the few effective sustainable development strategies to: mitigate poverty in developing countries address two main problems faced by the developed world: the need to find a viable replacement to oil control urban pollution and mitigate greenhouse gas emissions.


Brazil has Capacity to Expand Production: Brazil has Capacity to Expand Production


Slide17: SUGAR CANE ~ 60,000 producers C-S (80% land) harvest: april/november N-NE (~20% land) harvest: sept/march Source: UNICA Main Sugar Cane Areas in Brazil


Expansion Area in the “Cerrado” Region: Expansion Area in the 'Cerrado' Region Brazilian Cerrado (million hectares) Total Area ………………........... 204 Area good for agriculture...... 137 Area in use for cattle raising... (35) Occupied area (forests andamp; plantations) (12) Available Area for expansion..... 90 Source: Ministry of Agriculture, Livestock and Food Supplies


Brazil has Capacity to Expand Production: Brazil has Capacity to Expand Production Brazil is ready to help supply ethanol import needs of Japan. Other nations/producers will most likely become ethanol suppliers -- Thailand, Australia, Guatemala, Peru, Argentina, and Paraguay. 2


Urban Pollution: Urban Pollution Studies have found (Australia) that the use of E10: Decreased CO emission by 32%; Decreased HC emission by 12% ; Decreased toxic emissions of 1-3 butadiene (19%), benzene (27%), toluene (30%) and xylene (27%); Decreased carcinogenic risk by 24%. In the USA, wintertime CO emissions have been reduced by 25% to 30%.


Urban Pollution: Urban Pollution NOx emissions may decrease or increase marginally with low significance to air quality. 1% andgt; in the Australian study; no increase in ambient NO2 in California with E6. 2


Global Warming: Global Warming IPCC: 'the XXth century has been reported as the hottest in the last 1000 years and the last decade was the warmest of the century'. During past 20 years, ~25% of man-made CO2 emissions were due to fossil fuel use in transportation. The use of biofuels could reduce CO2 emissions by a factor of five, provided a high proportion of renewable energy is used.


Global Warming: Global Warming Anhydrous ethanol use saves 2.7 kg CO2 equivalent/liter of ethanol. Sugar cane yields the best energy balance in production of ethanol. Source: Macedo, I. et alii, F.O. Lichts 2004 2


Ethanol Logistics: Ethanol Logistics Brazil has extensive know-how. According to Transpetro / BR : Most appropriate storage tanks  Fixed Roof. Ethanol can also be transported through pipelines, sharing or not with oil products. Estimated investment in the unloading, blending, loading and expedition systems is US$ 360/kl of needed storage capacity. Most equipment used for oil products are compatible with ethanol.


Slide25: Preparation of ethanol-gasoline blends is simple and recommended to be made during truck loading Gasohol Blend Gasohol Blending andamp; Distribution Scheme Fuel Station Storage Tank ANHYDROUS ETHANOL GASOLINE 75% Automatic in line blending 25%


Learning curve: Learning curve Source: Goldemberg, J., et alii, 2004


Ethanol is Competitive with Gasoline: Ethanol is Competitive with Gasoline Brazilian Exports of Gasoline and Ethanol Source: Ministry of Development, Industry and Foreign Trade (*) January – November 2004