Petrobras invests $240 million in two Sao Martinho ethanol units

Brazilian state-owned oil company Petrobras said yesterday that it is taking stakes in two ethanol units of the Sao Martinho Group through a $240-million investment, aimed at becoming a leading player in the global biofuels industry.

In an all-share deal, Petrobras will invest $240 million through a joint venture called PBio and take a 49-per cent stake in Sao Martinho's Boa Vista mill and SMBJ Agroindustrial project located in the state of Goiás, midwestern Brazil.
 
The deal will give Petrobras rights to 49 per cent output from the two units, which will boost its plans to reach a production target of 1.03 billion gallons by 2013.
 
The Boa Vista plant is located in Quirinópolis, state of Goiás, and has a current sugarcane crushing capacity of 2.5 million metric tons per year and with added investments that are already in place, the crushing capacity will reach 7 million tonnes annually by 2014/15.
 
The SMBJ Agroindustrial has been incorporated for the purpose of developing a new greenfield project to produce ethanol.
 
Since Brazil is a major producer and the world's biggest exporter of ethanol, derived from sugarcane, Petrobras had said last year that it plans to spend $2.4 billion to expand ethanol production and become a leader in the alternate fuel industry. (See: Petrobras to make $174.4-billion oil investments by 2013)  
 
Brazil's 30-year-old ethanol fuel programme is the world's first initiative for a sustainable biofuels economy with the most successful alternative fuel policy since the government made it mandatory in1976 for all light vehicles to run on a blend of ethanol with gasoline.
 
Since the past six months, Petrobras has spent about 2.6 billion reais in acquiring stakes in ethanol mills. In April, it made one of its biggest investments in biofuels, when it invested 1.6 billion reais to take a 46 percent stake in Acucar Guarani SA, Brazil's third-largest sugar maker by market value.
 
But Petrobras is not the only oil major to make a push in the biofuels sector as alternate fuels have ignited the interest of other global oil companies also.
 
Betting heavily on an alternate transportation fuel, Royal Dutch Shell Plc and Cosan S.A., Brazil's second largest and the world's fifth-largest producer of ethanol, announced plans in February 2010, for a $12-billion joint venture to produce and sell ethanol. (See: Shell and Brazil's Cosan to form $12 billion biofuels JV)  

The massive $12-billion joint venture between Shell and Cosan overshadowed British Petroleum's acquisition of a 50 per cent stake in 2008 for $59.8 million in Brazil's Tropical Bioenergia, SA, a $1 billion joint venture between Brazil's Santelisa Vale and Maeda Group to build a 115 million gallon a year ethanol refinery in Brazil. (See: BP takes 50 per cent stake in $1 billion Brazilian bio fuel venture, Tropical BioEnergia SA)