ISN Switzerland
09-15-06
Brazil leads Latin America's bio-fuel future
As the world seeks to reduce dependency on fossil fuels, some look to Brazil and
its sugar-based ethanol fuel program as a potential world leader in renewable
energy sources.
Editor's Note: This is the first in a three-part series by ISN Security Watch's
Carmen Gentile on bio-fuels. Part 2 of the series will appear on Wednesday, 20
September.
By Carmen Gentile for ISN Security Watch (15/09/06)
Latin America - led by Brazil - is rapidly becoming a world leader in renewable
energy sources like biofuels, a quest that has garnered the attention of countries
like the US and Britain.
Brazil - whose sugar-based ethanol fuel program dates by to the 1970s - is
leading by example for countries like neighboring Paraguay, where ethanol and
petroleum mixtures for vehicles has become more popular in recent years due to
climbing global fuel prices.
Cuba, meanwhile, is considering expanding its ethanol fuel output with the help
of a Spanish firm in hopes of climbing aboard the alternative fuel bandwagon that
Brazil is leading to worldwide prominence. The communist island's economy
reportedly grew 12.5 percent in the first half of 2006 in large part due to growing
sugar cane exports.
Brazil's decades of success with ethanol has recently prompted Britain to seek
an alliance with South America's largest country and economy to promote
increased sugar production in southern Africa, officials from both nations said
earlier this month.
South Africa and Mozambique are reportedly on the short list of candidate
nations for expanding the ethanol market in the region, according to ethanol
experts at the Food and Agricultural Policy Research Institute (FAPRI) at
Iowa State University.
"The commitment of both countries is to develop other [ethanol] supplier
countries," media quoted Brazilian Industry and Trade Minister Luiz Furlan as
saying earlier this week. "It's a product that needs to become more available to
(global) consumers."
British Secretary of State for Trade and Industry Alistair Darling, who was in
Brasilia in September for the project's launch, said that after test-driving one of
Brazil's "flex-fuel" cars - vehicles that run on either gasoline or a combination of
ethanol and petroleum-based fuel - he would "now confront any car manufacturer
in Europe who tells me that people won't buy cars powered by ethanol."
The secretary's endorsement bodes well for the future of ethanol in what is
projected to be a lucrative EU market for the oil-based alternative fuel. With oil
prices remaining relatively high compared to pre-war prices, many EU leaders
have expressed interest in finding an alternative to pump prices that in some
countries top US$5 a gallon by US standards.
Britain is reportedly keen on pairing up with Brazil because it is a proven leader
in the global ethanol market, exporting some 18 million tons of sugar in 2005.
"There is an increased interest in renewable fuels and Brazil is already a major
supplier on the global market," FAPRI ethanol analyst Simla Tokgoz told ISN
Security Watch.
Both nations are also reportedly looking into developing the infrastructure
necessary to enhance sugar production in both nations, noted fellow FAPRI
ethanol specialist Amani Elobeid.
"The viability is there," Elobeid said, adding that Britain was a leader among EU
nations investigating the feasibility of ethanol as a long-term solution to future
fuel needs and recognized Brazil as something of a pioneer in the field.
"Britain wants to diversify its sources for ethanol and are using Brazil's expertise
to do it," she said.
Brazil is already far and away ahead of Britain and other developed countries
when it comes to using other forms of organic-petroleum fuel blends like sugarbased ethanol fuels, making its use a matter of law. All Brazilian gasoline must
contain 25 percent ethanol and most vehicles produced in the country can run on
any mixture of the two fuels.
In the 1970s, Brazil's Pro-Ethanol Program subsidized sugar mills to produce
extra product specifically for the production of the bio-fuel in the wake of the oil
price spike experienced worldwide.
Three decades later, the sector is not only self-sufficient, but profitable and
looking to expand its exports. Last year, Brazil produced 13 million gallons of
ethanol, mostly for home use. However Brazilian energy officials are in talks with
several nations, including the US, China and India, to export 65 million gallons in
the coming years.
Alternative fuels like ethanol have experienced their own price increase in recent
months due to the increasing demand for them. That's good news for Brazil's
burgeoning sugarcane industry, whose small farmers and agro-businesses are
rushing to plant more fields.
Earlier this year, Brazil's federal energy company Petrobras signed an agreement
to carry out a feasibility study for a new US$225 million pipeline to carry ethanol
from the center-west state of Goia to the coastal state of Sao Paulo.
The pipeline would have a capacity to transport about 1 billion gallons of the fuel
annually to Petrobras' refinery where it would be mixed with gasoline. It would
also create new opportunities for ethanol exports through the state's ports,
Petrobras said in a statement.
Brazil's development and expanded output has caught the attention of US
officials, who noted during an April World Economic Forum meeting on Latin
America that Washington was searching for ways to "diversify" its fuel options
and looking to Brazil as an example of how to do it.
"We are embarking on a program to diversify our energy sources and change the
mix,” E. Anthony Wayne, US assistant secretary of state for economic and
business affairs, said in a statement. “And Brazil is a leader in ethanol
production."
Amid Brazil's success with traditional sugar-based ethanol, engineers there have
designed and developed a new type of diesel fuel that is mixed with various
vegetable oils, an innovation energy officials say will save the country millions on
imported diesel in the coming years.
According to the country's state-run energy firm Petrobras and President Luiz
Inacio Lula da Silva, the new bio-diesel mixture would put Brazil on the map
among those nations leading the alternative fuel revolution.
"Brazil can become the most important nation in the world for renewable energy,"
da Silva said during the new fuel's introduction in June.
Unlike other forms of bio-diesel, H-Bio is mixed by the fuel distributor and not at
the refinery, adding to the proposed savings, which Pertrobras said could total as
much as US$145 million a year once the new mixture hits the market.
Fuel experts like Al Mannato, the fuels issues manager at American Petroleum
Institute in Washington, says bio-diesels like the one created by Brazil certainly
have their advantages. "The pro is that it's [the vegetable-based portion of the
fuel] a renewable energy source," said Mannto.
He also noted that bio-diesels "have great lubricity characteristics," meaning they
aid in lubricating an engine while it's running, prolonging the engine's life.
There are drawbacks, however, the API expert notes, in that bio-diesels are
typically expensive to produce and have a tendency to gel in cold weather, which
would make them difficult to use in winter in the colder climes of North America
and parts of northern Europe.
Despite some drawbacks, the production of yet another alternative fuel is good
news for Brazilian drivers, who are hoping the savings will be noticeable at the
pumps, where fuel regularly goes for about US$5 a gallon by US standards, even
with the widespread use of ethanol.
Regardless, with the US and others keen on reducing dependency on fossil fuels
from the Middle East, ethanol from Brazil and other Latin American nations
appears poised to break into the global market.