Brazil as a Strategic Supplier of Fuel Ethanol

1
Brazil as a Strategic Supplier of Fuel Ethanol
January 2005
2
Brazil is the Least Cost Producer of Sugar and
Ethanol
Index
SourceUNICA, F.O.Lichts
3
Productivity Gains
Center-South Region
85,00
7,50
7,00
80,00
6,50
75,00
6,00
70,00
kl/hectare
tc/hectare
5,50
65,00
5,00
60,00
4,50
55,00
4,00
50,00
3,50
45,00
3,00
40,00
2,50
75
80
90
00
04
Source UNICA
tcane / hectare
kl ethanol / hectare
4
Brazil has a Record of Expanding Production
Brazils Supply of Sucrose (in 000 tons)
55.67 Million tons
Sucrose is the raw material for sugar and ethanol
production
2004
Source Datagro
5
Ethanol Production in Brazil
million kl
Source Ministry of Agriculture, Livestock and
Food Supply
6
The Brazilian Ethanol Experience
- Brazilian ethanol, gasohol Flex-Fuel vehicles
- Imported gasohol vehicles and engines (includi
ng from Japan)
Ethanol in Gasoline (gasohol)
1977 4.5 1979 15 1981 20 1985 22
1998 24 1999 20 to 24 SINCE 2002 20 to 25


7
Brazil is the Largest Producer User

• Fuel ethanol demand represents 40.6 (average for
  Jan-Jul 2004) of Brazils 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.

8
Brazils Ethanol Exports are Rising(in 1000 kl)
3000
2500
2000
1500
1000
500
0
2002
2003
2004
Source Ministry of Development, Industry and
Foreign Trade
()January November 2004
9
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).

10
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).

FFV flexible fuel vehicle
11
World Crude Oil Supply Demand
The World is avid for a viable replacement to oi
l. 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.
12
Ethanol is Perceived as a Viable Alternative to
Oil
Shell International biomass ethanol is the be
st alternative to partially replace oil derivates
in the next decades, considering consumers
acceptability and strategic considerations.
13
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.

14
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 Owners Man
ual 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 bl
end that can be used with your vehicle is ethanol
blended at no more than 10 MITSUBISHI A mixtu
re of 10 ethanol and 90 unleaded gasoline may
be used in your vehicle.. TOYOTA If you use
gasohol in your Toyota be surethat it does not
contain more than 10 ethanol
Source Downstream Alternatives Inc
15
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.

16
Brazil has Capacity to Expand Production
17
Main Sugar Cane Areas in Brazil
N-NE (20 land) harvest sept/march
SUGAR CANE 60,000 producers
C-S (80 land)
harvest april/november
Source UNICA
18
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 plantations) (1
2) Available Area for expansion..... 90
Source Ministry of Agriculture, Livestock and
Food Supplies
19
Brazil has Capacity to Expand Production
2

• 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.
  

20
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.

21
Urban Pollution
2

• NOx emissions may decrease or increase marginally
  with low significance to air quality.
  
• 1 in the Australian study
• no increase in ambient NO2 in California with E6.

22
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.

23
Global Warming
2

• 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
24
Ethanol Logistics
Brazil has extensive know-how. According to
Transpetro / BR Most appropriate storage tank
s ? Fixed Roof. Ethanol can also be transporte
d 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.
25
Gasohol Blending Distribution Scheme
Preparation of ethanol-gasoline blends is simple
and
recommended to be made during truck loading
ANHYDROUS ETHANOL
GASOLINE
75
25
Automatic in line blending
Gasohol Blend
Fuel Station Storage Tank
26
Learning curve
Source Goldemberg, J., et alii, 2004
27
Ethanol is Competitive with Gasoline
Brazilian Exports of Gasoline and Ethanol
Source Ministry of Development, Industry and
Foreign Trade () January November 2004