Ministry of Mines and Energy
THE BRAZILIAN EXPERIENCE WITH
BIOFUELS
Marlon Arraes
Coordinator - Renewable Fuels Department
06.18.2007
Brazil Biofuels Experience: Summary
1. Introduction
2. Ethanol
3. Biodiesel
4. Final Remarks
WORLD ENERGY CONTEXT
 World economy growth
 Demand growth
 Climate change reality
 High prices for energy
 Refining capacity in the limit
 Geopolitical instability and conflict at important
energy supplier countries
 Strong dependency on non-renewable energy
sources
Brazilian Energy Policy
Law nº 9.478/1997
Objectives established by Law:
 To increase the share of biofuels in the national energy matrix;
 To protect the environment;
 To promote energy security with lesser external dependency;
 To protect the consumer best interests through regulation
mechanisms and surveillance at the Regulatory Agencies;
 To promote free competition.
BRAZILIAN ENERGY MIX - 2006
Sugarcane
13.8%
Wood and other
Biomass
13.0%
Other
Renewables
Sources
2.9%
RENEWABLE
SOURCES
44.5 %
Hydroelectricity
14.8%
Uranium
1.2%
Coal
6.3%
Natural Gas
9.4%
%
100
80
86
60
40
20
0
14
World
45
55
Brazil
Petroleum and
Derivatives
38.7%
218.7
MILLION
TOE
RENEWABLE
NON-RENEWABLE
Source: Brazilian Energy Balance (BEN,2007)
Ministry of Mines and Energy (MME)
CURRENT MATRIX OF VEHICLE FUELS - 2006
Diesel
48.9%
Diesel (Total)
48.9 + 54,5%
3.3 = (2005)
52.2%
54.5% (2005)

B2
3.3%
Gasoline A*
27.2%
0% (2005)
VNG
3.2%
25.6% (2005)
Anhydrous Ethanol
7.3%
Hydrated Ethanol
8.5% (2005)
Gasoline C
27.2 + 7.3 = 34.5%
34.1% (2005)
*
2.9% (2005)
9.9%
8.4% (2005)
Pure Gasoline – Before blending with ethanol
 Diesel blended with 2% of Biodiesel
Ethanol (Total)
7.3 + 9.9 = 17.2%
16.9% (2005)
ETHANOL
1925: First tests using
ethanol blends with gasoline
2006: Sustainability and
environmental benefits
1975: National Alcohol Program (Proalcool)
 Main goals at that time:
1. To introduce in the market the mixture gasoline-ethanol
2. To stimulate the development of pure ethanol motors
 Two types of ethanol used, produced and tested in Brazil:
anhydrous
hydrated
Mixed with pure gasoline (20 a 25%)
Directly used in Otto-cycle motors (100%)
1979: Manufacturers begin to sell
100% Ethanol Vehicle
Incentives established by the Pro-Alcohol in 1975
 Alcohol price lower than gasoline price
 Guaranteed remuneration to the producer
 Tax reduction for hydrous alcohol cars
The only remaining
incentive nowadays
 Loans for alcohol producers to increase their
capacity
 Gas stations were obligated to sell alcohol
 Maintenance of strategical alcohol stocks
Economic Agents of Sugar Cane Industry
Sugar Cane Agriculture Phase
• 1.000.000 jobs in the countryside
Sugar and Alcohol Industrial Phase
• 367 Industrial Plants
Regulatory Domain: Ministry of Agriculture
Regulatory Domain: Ministry of Mines and Energy / ANP (National Petroleum Agency)
Gas Stations
• 92% of total gas stations in Brazil
have an ethanol pump.
• Free
Prices Market
Exporters
• 3,42 Billion litters
exported in 2006
Fuel Distributors
• 160 Operating Distributors
• Only distributors may blend
ethanol with motor gasoline
Source = MAPA – MME – MDIC - 2006
SUGARCANE AGRO-INDUSTRY
Ethanol Figures (2006):





Production: 18 million m3
Production Capacity: 20 million m3
Cropped Area for ethanol Production: 3 million hectares
Exports in 2006: 3,4 million m3
Exports infrastructure: 4 million m3/year
As of 2010:




Investments* that will amount US$ 8.6 billion in 77 plants
Increase in the ethanol production (in comparison with 2006): 6 million m3
Expansion in the sugarcane cropped area: 2 million hectares
Expansion in exports infrastructure: to reach a capacity of 8 million m3/year
* Agricultural and Industrial phases
BRAZIL (Territorial Extension):
851
Total Agriculture Area:
383
of which:
Fertile and free areas for agriculture:
91
Present cropped area for ethanol:
3
(in million hectares)
Source: Ministry of Mines and Energy;
Ministry of Agriculture, Livestock and Food Supply - 2007
Ethanol in Brazil – Sugar Mills Location - 2007
NORTH-NORTHEAST REGION
79 INDUSTRIAL UNITS:
• SUGAR MILLS
8
• ETHANOL PLANTS
19
• ETHANOL AND SUGAR
52
9% of the ethanol production
Operating Sugarcane Mills
SOUTH-CENTRE REGION
288 INDUSTRIAL UNITS:
• SUGAR MILLS
8
• ETHANOL PLANTS
59
• ETHANOL AND SUGAR 221
91% of the ethanol production
Source: Ministry of Mines and Energy – Ministry of Agriculture, Livestock and Food Supply - 2007
Sugarcane Mills under
construction
Production in 2006:
17,8 billion liters
 11% (2005)
Center-South Region Crops Location – 2005/2006
Amazon Forest
More than
1,300 miles far from
the Amazon Forest boundaries
Pantanal
A Region that grows
sugarcane crops for
more than 30 years
Sugarcane Crops
CANASAT Project
Atlantic Forest of Brazil
Source: IBGE (Preservation Areas) and CTC (Sugarcane Crops)
2006: Total FFV – a Brazilian reality
 Any mixture of gasoline and ethanol can be used, from 0 to 100%;
 In 2006: The domestic flex-fuel vehicle sales represented 78% of all 1,824,266 light
vehicles sold in the same period (imports included);
 Total domestic flex-fuel vehicle sales (2003-2006): 2.67 million units)
9 multinational automotive manufacturers settled in Brazil
are producing nearly 100 different models of Total FFV
Source: Ministry of Development, Industry and Foreign Trade;
Brazilian Association of Automotive Vehicle Manufacturers - 2007
Ethanol in Brazil: Oil economy and environmental benefits
6
10 BEP
FUEL DEMAND FOR LIGHT VEHICLES IN BRAZIL
TOTAL DEMAND FOR LIGHT VEHICLES (GNV INCLUDED)
180
TOTAL DEMAND FOR LIGHT VEHICLES (WITHOUT GNV)
GASOLINE PRODUCTION
160
GASOLINE CONSUMPTION
140
Total
economy
ofmuch
813gasoline
millions
boe
This
curve
shows how
Accumulated
economy
of 8 would
years
to of
satisfy
fuel demand
for
or be
16necessary
months
thethepresent
Brazilian
of pure gasoline
national
consumption.
light vehicles.
120
100
+ US$ 61
billions
petroleum production.
+ US$ 16
billions
80
60
40
20
0
1970
IN THIS PERIOD, WITH THE ETHANOL USAGE, THE EMISSION
TONNES
OF
1974 OF 675
1978 MILLION
1982
1986
1990CO2 WAS
1994 AVOIDED
1998
2002
2006
YEAR
+
Total economy of 1,194 billion boe or 23 months of the
Source: Ministry of Mines and Energy - Brazilian Energy Balance – 2006
present Brazilian petroleum production..
and Laura Tetti – USP – 2002
US$ / Liter
Cost of Ethanol Production
EU - Wheat
USA - Corn
Australia
Sugarcane
Thailand
Sugarcane
Source: DATAGRO (in “New trends to the ethanol supply chain in Brazil”, Simoes, R.B., Master Thesis, Universiteit Van Tilburg, Holanda, Jul-2006)
Brazil
Sugarcane
Another Competitive Advantage of Brazilian Ethanol
Energy Balance of Ethanol Production
Trigo
Wheat
Corn
Milho (EUA)
Beet
Beterraba
Brazil
Sugarcane
Cana-de-Açúcar (Brasil)
0
1
2
3
4
5
Energy Output / Energy Input
Source: F.O.Licht (in “New trends to the ethanol supply chain in Brazil”, Simoes, R.B., Master Thesis, Universiteit Van Tilburg, Holanda, Jul-2006)
6
7
8
Ethanol Contribution to Hydrogen Economy
+
and ...
+
=
One step toward
Hydrogen Economy!
BIODIESEL
BRAZIL: Raw material diversity for production of Biodiesel
Castor Beans Sunflower
Soy
Palm Oil
Cotton
Biodiesel versus Ethanol: Different Reasons
 Ethanol (1975): basically economics.
 Reasons for biodiesel (today):
 Economic: high crude oil prices again, but Brazilian dependence is now
very low
 Social: needs for jobs and permanent settlement of families in
countryside
 Environmental: to introduce another renewable and friendly fuel
Crude Oil Prices
2003: Biodiesel Program
1975: Pro-Alcohol is launched
Biodiesel: Regulatory Framework
 Law 11.097/2005: Establishes minimum percentages to mix
biodiesel to diesel, besides the monitoring on the introduction
of this new fuel into the market.
2005
to
2007
2008
to
2012
From 2013
on
2%
2%
5%
Authorized
Potential Market:
840 million Liters/year
Mandatory
Mandatory
Sound Market:
1 billion Liters/year
Sound Market:
2,4 billion Liters/year
SOCIAL FUEL CERTIFICATE: How it works?
If the biodiesel producer wants to have
the Social Fuel Certificate, it must:
1) Buy regularly a minimum amount of raw material that comes
from the household agriculture (small farmers, according to
previously defined criteria); and …
2) Provide the appropriate technical assistance: certificated
seeds, rural technicians, best practices etc.; and …
3) Sign a contract with each small farmers in terms that must
be regarded as proper by a rural workers’ union.
BIODIESEL: FEDERAL TAXATION POLICY
Law n° 11.116/ 2005
DIESEL
CIDE + Pis/Pasep and Cofins
218
218
BIODIESEL
General Aliquot
Agribusiness: Castor Oil
151
or Palm Oil + North,
Northeast ans Semi-arid
General Household
Agriculture Aliquot
Household Agriculture +
Castor Oil or Palm + North, 0
Northeast and Semi-arid
70
-68%
-31%
Social Fuel Certificate
Benefits (Detaxation)
-100%
50
100
150
200
R$ / m3
CIDE: A Federal Tax that is present on fuels. It is an abbreviation form of “Contribution of Intervention in the Economic Domain”
PIS/PASEP and Cofins: A Federal Tax for social security
Biodiesel: CIDE is not present + Tax on Industrialized Products has zero aliquot
250
BIODIESEL: Producers in Commercial Operation and Projects
Forecast (As of Dec/2007)
CREATED JOBS = 1 MILLION
(Household Agriculture = 205 THOUSAND FAMILIES)
Nowadays more than 4,900 gas stations are
selling biodiesel in Brazil
•
Number of
Plants
Installed
Capacity
(MM L/year)
• AUTHORIZED BY ANP
19
664
• IN AUTHORIZATION
PROCESS (ANP)
22
1,137
5
288
19
948
65
3,038
UNDER CONSTRUCTION
• NEW PROJECTS
TOTAL
Source: Survey by MME/SPG (Jan/2007)
Key to Symbols:
In Commercial Operation
In Authorization Process (ANP/RF))
Under Construction
New Projects
FINAL REMARKS
GLOBAL CHALLENGE
ENERGY PRODUCTION
X
AND
FOOD PRODUCTION
GLOBAL CHALLENGE
ENERGY PRODUCTION
X
AND
FOOD PRODUCTION
BRAZIL
In millions of hectares
AREA
(EXTENSION)
PERCENTAGE
BRAZIL (TOTAL)
851
100%
ARABLE AREA
383
45%
AVAILABLE FOR
EXPANSION
91
11%
SUGARCANE AREA
FOR ETHANOL
3
OILSEED CROPS FOR
B2 and B5
1,7 to 4,0
(24% of arable area)
0,35%
(0,8% of arable area)
0,2 to 0,47%
(0,4% to 1% of arable
area)
Biofuels: perspectives in the near future...
 World growing demand
 More rigorous environmental concerns
 Increase in international trade
 Improvement on productivity and on energy balance
of biofuels:
• Biodiesel: new oilseeds (6.000 L/ha) versus traditional crops (600 L/ha)
• Ethanol: new production methods (bagasse/cellulose hydrolysis)
The achieve of this technology will bring:
Energy AND Food Production, not versus!
Biofuels = Commodity?
Commodities general characteristics:
 Patterns in a context of international trade
Compatible Specifications
Possibility of delivery on due dates settled between buyers and
sellers
Negotiation with traders
Possibility of storage or sale in standard units of trade
liter, barrel, m3 ...
But it requires to be a common product and
negotiated in an international environment
A market to be established itself.
NECESSARY LAND AREA FOR TOTAL
SUBSTITUTION (IN VOLUME) OF OIL CONSUMPTION
Consumption
Necessary Land
Area for Biofuels (*)
Billion
103
Barrels/Day Liters/Year
103 hectars
REGION
Total North America
Total S. & Cent. America
Total Europe & Eurasia
Total Middle East
Total Africa
Total Asia Pacific
TOTAL WORLD
REGION
TOTAL WORLD
1.443,6
277,2
1.181,0
333,0
160,3
1.390,4
481.200
92.390
393.676
111.012
53.445
463.456
82.459
4.785,5
1.595.179
% of the
Land Area for agriculture land
Agriculture area necessary for
biofuels
103 hectars
Total North America
Total S. & Cent. America
Total Europe & Eurasia
Total Middle East
Total Africa
Total Asia Pacific
24.874,6
4.775,9
20.350
5.739
2.763
23.957
%
Total Land
Area of the
Region
% of the total land
area necessary for
biofuels
103 hectars
%
591.707
614.147
813.973
297.968
1.135.372
1.528.715
81%
15%
48%
37%
5%
30%
2.016.412
1.834.172
2.738.369
391.390
2.786.664
2.909.449
24%
5%
14%
28%
2%
16%
4.981.881
32%
12.676.457
13%
Source: Data for oil consumption - British Petroleum
Data for land areas - FAO
(*) Average biofuels production: 3 thousand liters per hectare
HEY! WHAT ARE
WE WAITING FOR?
NECESSARY LAND AREA FOR TOTAL
SUBSTITUTION (IN VOLUME) OF OIL CONSUMPTION
AMERICA
CONSUMPTION
Necessary Land Area
for Biofuels (*)
Country
Land Area
for
Agriculture
% of the agriculture
land area
necessary for
biofuels
Total Land
Area of the
Country
% of the total
land area
necessary for
biofuels
103 hectars
103 hectars
%
103 hectars
%
COUNTRY
USA
Canada
Mexico
Total North America
Argentina
Brazil
Chile
Colombia
Ecuador
Peru
Venezuela
Other S. & Cent. America
Total S. & Cent. America
103
Barrels/
Day
20.655,5
2.241,3
1.977,8
24.874,6
421,3
1.818,5
257,5
230,4
148,2
138,8
553,2
1.208,0
4.775,9
Billion
Liters/
Year
1.198,7
130,1
114,8
1.443,6
24,4
105,5
14,9
13,4
8,6
8,1
32,1
70,1
277,2
399.580
43.359
38.261
481.200
8.150
35.180
4.981
4.457
2.866
2.685
10.701
23.369
92.390
Source: Data for oil consumption - British Petroleum
Data for land areas - FAO
(*) Average biofuels production: 3 thousand liters per hectare
416.902
67.505
107.300
591.707
128.747
263.600
15.242
42.051
7.250
21.210
21.640
114.407
614.147
96%
64%
36%
81%
6%
13%
33%
11%
40%
13%
49%
20%
15%
916.192
909.351
190.869
2.016.412
273.669
845.942
74.880
110.950
27.684
128.000
88.205
284.842
1.834.172
44%
5%
20%
24%
3%
4%
7%
4%
10%
2%
12%
8%
5%
NECESSITY OF AGRICULTURAL LAND AREA ACCORDING
NECESSIDADE DA ÁREA AGRÍCOLA MUNDIAL EM FUNÇÃO DO RENDIMENTO
PRODUCTIVITY OF DIFERENT
RAW MATERIALS
AGRÍCOLA
SUBSTITUIÇÃO TOTAL DO PETRÓLEO, 50%, 25% e 5 %
Different sceneries for oilMUNDO
substitution (5%, 20%, 50%, 100%)
of necessary
(%)
% daProportion
área agricola necessária
para
biocombustíveis
land area for biofuels
agricultural
180%
SOYA (600 l/ha)
5%
20%
50%
100%
160%
SUNFLOWER (880 l/ha)
PEANUTS (866 l/ha)
140%
120%
CASTOR OIL
(500-1.000 l/ha)
100%
80%
JATROPHA
(2.000l/ha)
SUGARCANE (*)
(5.000 l/ha)
60%
CELULOSIC
ETHANOL (*)
(7.000 l/ha)
PALM OIL
(5.000 l/ha)
40%
20%
0%
600
1.000
2.000
3.000
4.000
5.000
6.000
7.000
Produção (litros/hectare)
Production
(l/ha)
13,7 %
CONCLUSION
 Biofuels do contribute to:
 Energy security;
 Improvement of environment conditions in urban areas;
 Creation of jobs and income in rural areas;
 Economic development.
 However, in order to achieve this reality, it is required:
 Governmental decision with adequate public policies
 Global efforts towards creation of biofuels international market
Governmental policies do exert strong influence on climate for
investment because they can produce immediate impacts over costs,
risks and barriers to competition.
THIS CHANGE IS POSSIBLE
THANK YOU!
Marlon Arraes
Coordinator - Renewable Fuels Department