Shell is Taking Aim at U.S. Ethanol Market

Posted on February 2, 2010. Filed under: Advanced Biofuel, Blender's Tax Credit | Tags: , , |

By Steve Gelsi
MarketWatch
February 1, 2010

While a weak sugar harvest this year in Brazil may put a damper on ethanol exports, Royal Dutch Shell is taking aim both at the U.S. and European markets in its new joint venture with sugar giant Cosan.

Royal Dutch Shell executive Mike Williams said the oil major hopes to increase output from its Cosan joint venture to more than a billion gallons of ethanol a year, from about 500 million gallons now.

The sugar-based fuel could then be shipped to the U.S. or Europe, Williams said.

The new joint venture announced Monday would also target 792 million gallons of ethanol to the domestic Brazilian market.

“Our intention is to grow this business into a worldwide opportunity,” Williams said, according to a report by Dow Jones Newswires.

The prospects of more Brazilian ethanol in the U.S. hit a sore point with lobbying groups that support domestic supplies, already suffering from slack demand for car fuels.

Any imports into the U.S. would face an import tariff of 54 cents a gallon. Taking the sting out the cost, however, is a blenders tax credit of 45 cents a gallon offered to distributors who mix gasoline with ethanol.

Christopher Thorne, a spokesman with pro-U.S. ethanol group Growth Energy, said Brazil has been pushing to get the country’s sugar-based ethanol reclassified as an advanced biofuel to help circumvent the existing tariff.

Sugar futures touched a 29-year high of 30.4 cents a pound on Monday, before falling back, on expectations of a weak harvest after heavy rains.

Plinio Nastari, president of Brazilian consultancy Datagro, told Reuters that fungal disease is expected to hurt sugar output.

“This is the perfect illustration of why it makes no sense to become dependent on any foreign source of energy — whether it’s Middle East oil or Brazilian sugarcane ethanol,” the group said. “Between high sugar prices and a sugarcane crop shortage, Brazil can’t meet its own ethanol needs — let alone the ethanol needs of the United States.”

The U.S. imported about 12 million gallons of Brazilian ethanol in November, according to the Renewable Fuels Association,

“Brazil is having a supply issue themselves, and may be ready to import U.S. ethanol despite the 25% tariff Brazil puts on imports of ethanol,” said Matt Hartwig, a spokesman for the Renewable Fuels Association.

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Royal Dutch Shell and Cosan S.A. Sign US$12 billion Joint Venture in Brazil

Posted on February 2, 2010. Filed under: Advanced Biofuel | Tags: , , , |

RTTNews
February 1, 2010

Integrated petroleum company Royal Dutch Shell plc. (RDS-A: News ,RDS-B: News ,RDSA.L: News ,RDSB.L: News ) announced Monday that its unit, Shell International Petroleum Co. Ltd., has signed a non-binding memorandum of understanding or MoU with Brazilian sugar and ethanol company Cosan S.A. (CZZ: News ) in order to form an about US$12 billion joint venture in Brazil. The proposed joint venture will create one of the world’s largest ethanol producers, which will produce ethanol, sugar and power, as well as supply, distribute and retail transportation fuels.

The proposed biofuel joint venture would see both the companies consolidating certain of their existing assets in Brazil, which could dominate Brazil’s ethanol market. Brazil is a leader in biofuel production and consumption because of its abundant land and sugarcane production. The deal would enhance both companies’ growth prospects and market position in the retail and commercial fuels businesses in Brazil.

Both the companies will now engage in exclusive negotiations towards evolving a binding joint venture agreement. The transaction is subject to the creation of a final transactional documentation, due diligence, regulatory approvals and respective corporate approvals.

In a statement, Royal Dutch Shell’s downstream director, Mark Williams said, “Today’s announcement demonstrates the continued importance of Brazil to Shell. We’re looking forward to joining with a leading company in Brazil to meet the needs of retail and commercial fuels customers in that growing market.”

As part of the proposed 50:50 joint venture, Shell will contribute its 2,740 petrol stations and other fuel-distribution assets in Brazil as well as US$1.625 billion in cash, payable over two years, while Sao Paulo, Brazil-based Cosan will contribute 1,730 retail sites as well as supply and distribution assets.
 
Additionally, Cosan will contribute its sugar cane crushing capacity of about 60 million tonnes per year from 23 mills, as well as its ethanol production capacity of about 2 billion liters per year. Cosan will also bring in US$2.5 billion of net debt into the joint venture balance sheet. Further, Shell would contribute its 50% stake in Codexis and 14.7% stake in Iogen, two ventures exploring next-generation biofuels technologies.

With annual production capacity of about 2 billion liters, the joint venture would enhance both companies’ growth prospects and market position in the retail and commercial fuels businesses in Brazil. The joint venture would have a network of about 4,500 retail sites and a total annual throughput of about 17 billion liters, with further prospects of growth and synergies.

“Cosan’s vision is to become a global leader in clean and renewable energy. Our size, degree of sophistication and stage of development means we need a partner that not only shares our vision, but also has access to international markets to help us deliver our growth potential,” Cosan’s chairman, Rubens Ometto Silveira Mello added.

RDS-B closed Monday’s regular trading session at $54.53, up $1.15 or 2.15% on a volume of 0.67 million shares, higher than the three-month average volume of 0.63 million shares. CZZ closed at $8.60, up $0.80 or 10.26% on a volume of 2.11 million shares, higher than the three-month average volume of 1.80 million shares.

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Brazil Temporarily Reduces Ethanol Content in Gasoline from 25% to 20%

Posted on January 14, 2010. Filed under: Advanced Biofuel, Hydrous Ethanol | Tags: , |

Brazil Temporarily Reduces Ethanol Content in Gasoline from 25% to 20%
Green Car Congress
January 13, 2010

The Brazilian government has rolled back the anhydrous ethanol blend level in gasoline from 25% to 20% for a period of 90 days, effective 1 February. The decision to roll back the blend level was announced following a meeting attended by executives from the Brazilian Sugarcane Industry Association (UNICA).

Blend reductions are not new in Brazil, UNICA said; the last reduction occurred in March of 2006, when the percentage fell from 25% to 20%. The blend level was raised to 23% in November of that year, and fully reinstated at 25% in July of 2007.

Under Brazilian federal law, the anhydrous ethanol content of all gasoline sold in the country must be between 20% and 25%. The blend range is set by an interagency board (Conselho Interministerial de Acucar e do Alcool, or CIMA). The 5% reduction in the blend is expected to result in an additional 100 million liters (26.4 million gallons) of hydrous ethanol available per month, or around 7% of the current monthly demand.

Hydrous ethanol is pure ethanol (E100) used in flex-fuel vehicles, which run on any mix of ethanol and gasoline. The blend reduction involves anhydrous ethanol, which is the type of ethanol that is mixed with gasoline. While hydrous ethanol contains about 5% water content, anhydrous ethanol is virtually water-free. Hydrous ethanol is the more popular fuel in Brazil.

“The government’s reasons for the temporary reduction are understandable, but the move must be limited to the 90-day period only. Because of high prices, consumers who own flex-fuel vehicles are already shifting from hydrous ethanol back to gasoline, so there is no risk of pumps going dry.

Dropping the blend requirement is unlikely to change the dynamics of the cane industry, which will continue to produce more ethanol and more sugar year after year. All that changed this year was the pace of that increase because of unseasonable rains that affected the harvest.”

—UNICA’s Technical Director, Antonio de Padua Rodrigues

Padua noted that the government should be praised for its open dialogue with the industry and for setting a timeframe for the measure, with reinstatement of the 25% blend happening as the sugarcane industry launches what will be the largest sugarcane harvest in Brazil’s history.

The Brazilian Sugarcane Industry Association (UNICA) represents the top producers of sugar and ethanol in the country’s South-Central region, especially the state of Sao Paulo, which accounts for about 50% of the country’s sugarcane harvest and 60% of total ethanol production. In 2008, Brazil produced an estimated 565 million metric tons of sugarcane, which yielded 31.3 million tons of sugar and 25.7 billion liters (6.8 billion gallons) of ethanol.

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We’ll Never Pump Enough Oil

Posted on June 15, 2009. Filed under: Blender's Tax Credit, Field-to-Pump | Tags: , , , , |

We’ll never pump enough oil

BY GAL LUFT
Miami Herald

June 13, 2009

 

This week America transitioned from analog to digital television broadcasts, ushering what could be described as an open standard for television. This means that consumers will have a choice between buying a digital set or signing up to cable or satellite service and keeping their old antenna by installing a signal-dumbing converter box which allows them to get analog signal.

Without the converter, an analog TV began showing snow on the screen starting as of Friday morning. Regardless of whether the shift is a good idea or not — it probably is as it allows better spectrum usage — it is sad commentary of our priorities as a society. Strategic as Congress may imagine television is in our lives, it is not nearly as important as transportation.

Yet, the same Congress that mandated consumer choice in television reception modes denies us choice in transportation fuels: our cars, trucks, ships and planes can run on nothing but petroleum.

Such choice at the pump is neither more difficult nor more costly to achieve than choice at the screen. In Brazil, more than 80 percent of the new cars are flex fuel vehicles capable of running on any combination of gasoline and alcohols like ethanol and methanol. To make a new car flex fuel costs an automaker an extra $100 or less.

All that is needed is a chip and corrosion resistant fuel line. To convert our television, Congress has already allocated nearly $2 billion in taxpayer money to provide $80 worth of coupons per household to subsidize conversion boxes. Brazilians may not have as sophisticated television system but they can choose among fuels.

Last year, when oil prices were at their three-digit level more alcohol was sold in Brazil than gasoline, and the Brazilian economy was hardly touched by the oil crisis. At the same time, with no such fuel choice Americans shelled out hundreds of billions of dollars for foreign oil, a monumental loss of national wealth that popped the mortgage bubble and brought the United States to the brink of economic collapse.

Brazil’s success story hasn’t escaped the eyes of our leaders. President Obama pledged numerous times to pass a law that would mandate flex-fuel engines in all automobiles in order to break oil’s virtual monopoly over transporation fuel. Secretary of Interior Ken Salazar, while still in the Senate, was the lead sponsor of legislation that would have ensured new cars sold in the United States offer fuel flexibility. Energy Secretary Steven Chu has also spoken on the merits of this policy. But judging from its recent actions Congress is not on board. What seems to be the signature energy legislation of the 111th Congress, the American Clean Energy and Security Act, (also known as the Waxman-Markey cap-and-trade bill) does almost nothing to break oil’s monopoly in transportation fuels and provide Americans the kind of choice they have in choosing a television set, a cup of coffee or any other consumer product.

A provision that could have made a difference, an Open Fuel Standard to ensure 50 percent of new cars are flexible-fuel capable of running on any blend of alcohol and gasoline was watered down to meaninglessness by the House Energy and Commerce Committee. Such a standard which could enable consumers to choose a fuel alternative at the pump next time gasoline prices rise to $5 a gallon was rejected by Chairman Henry Waxman due to pressure by the automakers.

The same distressed GM and Ford that, time after time, appeared before Congress asking for taxpayer money and promising that they would make 50 percent of their cars flex-fuel vehicles by 2012, ordered their lobbyists to scuttle any legislation that would require them to do just that.

Oil prices are rising, and pain will again be felt at the pump. Saudi Arabia’s oil minister Ali Naimi has recently predicted $150-a-barrel oil within three years.

Yet, as if nothing was learned from the previous oil shock of last summer, we continue to roll onto our roads 10 million new cars annually that can run on nothing but petroleum each with an average street life of 16 years. We are in for a shock, and when it comes we’ll again be able to view Americans’ vulnerability contrasted with Brazilians’ resiliency.

Only this time, we’ll be watching on our digital sets.

Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS). He is co-author of Energy Security Challenges for the 21st Century (2009).

 

 

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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    About

    Renergie created “field-to-pump," a unique strategy to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies.

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