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UNCLAS BRASILIA 001774 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV TNGD KSCA EAGR BR
SUBJECT: BRAZIL BIOFUEL UPDATE, AUGUST 2006 
 
USD 1 BILLION BIODIESEL BOOST 
----------------------------- 
¶1.  A consortium headed by the French bank, Societe Generale, has 
announced a USD 1 billion outlay in projects to expand the ethanol 
market in Brazil.  The bank estimates it will invest USD 20 billion 
in the ethanol sector over the next five years.  Furthermore, it has 
declared its intention to increase its 10% share of the consortium's 
overall investment in the next couple of years. 
 
SEVEN NEW STATES WILL USE LESS POLUTIVE DIESEL 
--------------------------------------------- - 
¶2.  By the end of the month, the Brazilian parastatal oil company, 
Petrobras, will be selling a less pollutive form of diesel in seven 
additional state capitals.  The new fuel, which is already sold in 
five of the most polluted cities of the country, emits 75% less 
sulfur than conventional diesel.  The company has invested USD 750 
million into the creation of the environmentally friendly fuel that 
was first sold in commercial scale in 2005.  Petrobras has allocated 
an estimated USD 1.7 million through 2010 to reduce the amount of 
sulfur in diesel. 
 
EXTENSION OF THE ETHANOL DUCT 
----------------------------- 
¶3.  In September 2006 Petrobas and the state government of Mato 
Grosso (MT) will sign a memorandum of understanding (MOU) to extend 
the Sao Paulo - Goias ethanol duct.  The pipeline will link 
producers in MT with the port of Ilha D'Agua in Sao Paulo.  When 
finished, the duct will be 1,300 km long and have the capacity to 
transport four billion liters of ethanol per year.  Petrobas is 
still analyzing the cost of the extension.  Increasing demand makes 
the project all the more viable.  There are currently two million 
flex cars (cars that can run both on ethanol and gasoline) on the 
road in Brazil, and these cars account for 77% of the vehicles sold 
this year (2006).  Once finished, the pipeline should decrease the 
transportation cost of ethanol by sixteen times, according to Igor 
Montenegro, president of the ethanol industries syndicate from the 
state of Goias. 
 
CARS AND BUSES THAT RUN ON ELECTRICAL POWER 
------------------------------------------- 
¶4.  Automobile makers are developing cars that can run on electrical 
energy.  The first prototype should be ready by year-end.  Initial 
estimates put the cost for the vehicle between USD 20,000 and 
25,000, although prices are expected to fall over the next five 
years.  In the state of Sao Paulo, the bus company Electra already 
has 38 hybrid buses (that run on both diesel and electricity) and 
expects to increase its fleet to 119 busses over the next few years. 
 Automakers are also testing the viability of electric-ethanol cars. 
 
 
BIO-OIL BEING PRODUCED IN BRASILIA 
---------------------------------- 
¶5.  The federal University of Brasilia (UnB) has developed a new 
renewable fuel called bio-oil.  The fuel is made of vegetable oil. 
According to researchers from UnB, bio-oil and conventional diesel 
are very similar and engines that run on either fuel have equal 
efficiency.  Bio-oil, however, does not emit sulfur.  One advantage 
of the new fuel when compared to the biodiesel is that the former 
does not need the addition of ethanol or petroleum.  Researchers 
involved in the projects believe that bio-oil could be used for 
communities that are located in remote areas of the country and have 
difficulties acquiring regular diesel. 
 
THREE TIMES MORE GAS 
-------------------- 
¶6.  Brazil could triple its 320 billion cubic meter natural gas 
reserves, according to Petrobras' Director Ildo Sauer.  Sauer 
affirmed, during a speech, that recent discoveries could amount to 
an additional 820 billion to 1 trillion cubic meters of gas 
reserves.  If these numbers are confirmed, Petrobras would have 
enough natural gas to supply the country's demand for the next 30 
years.  Petrobras estimates Brazil's national consumption will reach 
121 cubic meters by 2010.  Of that Brazil will produce 71 million 
cubic meters and Bolivia 30 million , while other countries will 
supply and 20 million cubic meters in its liquid form.  The company 
plans to invest USD 22 billion in gas production by 2011 and its 
main goal is to become as independent as possible of Bolivian 
natural gas. 
 
SOBEL