Biofuels Brazilian Market - Ibp Bf2008

7/31/2019 Biofuels Brazilian Market - Ibp Bf2008

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BIOFUELS BRAZILIAN MARKET:

CHALLENGES AND

OPPORTUNITIES

Armando Guedes Coelho

October/2008


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OVERVIEW


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21st Century:

Diversification of Energy Sources

Source: Nakcenovic, Grbler and MaConald, 1998


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Energy Supply

2006

Source: BP Statistical World Energy

Brazil World

206.5million tones of oilequivalent per year

10,878.5million tones of oilequivalent per year


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Consumption of Oil and its Products

Brazil (2007)

2000

103 boe/day

Fuel Oil8,84% Ethanol16,75%

Gasoline16,75%

LPGas 8,73%

Naphtha

8,93%

Diesel Oil 40%


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Reasons for the

use of Biofuels

Environmental Gains carbon sequestration lower emission in the consumption

Renewability

short cycle of production man-controlled process

Social Aspects

generation of jobs deconcentration of income


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Energy Balance

Energy contained in the fuel / Fossil energy used to produce it

Souce: World Watch Institute

ETHANOL

SugarCane

Wheat SugarBeet

Corn PalmOil

VegetableOil

Leftovers

Soybean Rapeseed


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THE ETHANOL ISSUE


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0

5

10

15

20

25

30

35

40

45

50

2000 2001 2002 2003 2004 2005 2006

Source: F.O. LICHT, UNICA., CARD. Preparation: Icone, Unica

Evolution of WorldProduction of Ethanol

Others

India

Brazil

USA

ChinaEU

Billionliters

For the purposes of comparison, the sum of the productions of the USA andBrazil represents about 600,000 bpd of ethanol.


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Source: Iowa stat and FO Licht

Projection of WorldProduction of Ethanol

Approximately 2 millions barrels per day


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0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

2001 2002 2003 2004 2005 2006

Evolution ofExportation of Ethanol

Note: e=estimation (data from Brazil and the USA were updated, South Africa was projectedbased on preliminary data from 2006; for other countries, exports were based on previousyears). For the European Union, only the off-block commerce was taken into account.

Saudi ArabiaChina

Brazil

Source: F. O. Licht, USITC, EUROSTAT and MDIC. Preparation: Icone, nica

60,000 bpd

Others

EU

C. Rica- Jamaica

South AfricaUSA

Billio

nliters


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Price of Anhydrous Ethanol in Brazil andin the USA and International Price of Oil

Source: LMC, Oct/2007

BRAZILethanol prices

EUAethanol prices

Oil prices

European Unionethanol prices

Feb07


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Productivity (liters per hectares)

Cost of Production (U$S cents per liter)

Source: IEA/2005

Source: F.O. Llicht

1 hectare = 2,47105 acres

Productivity and Cost of Ethanol2005

0 20 40 60 80

Brazil

Thailand

Australia

USA

China

EuropeSugarCane

Wheat

EU

SugarBeet

EU

Corn

USA

Cane

India

CassavaThailand

Cane

Cane

Cane

Corn

Corn

Wheat / Sugar Beet


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40

50

60

70

80

90

75/76

77/78

79/80

81/82

83/84

85/86

87/88

89/90

91/92

93/94

95/96

97/98

99/00

01/02

03/04

05/06

ton/hectare

2

3

4

5

6

7

M

illiters/hectar

e

sugar cane

(ton/hectare)

Source: UNICA

Ethanol and Sugar Cane:Growth of Production in Brazil

Ethanol

(liters/hectare)

For the purposes of memorization, in 2006 we produced 80 liters ofethanol, per ton of sugar cane.

Since 1976 there has been a growth of about 33% in ethanol productivity.

1 hectare = 2,47105 acres


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Evolution of Supply andDemand for Ethanol in Brazil

Production

Consumption

Exportation


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Tax Burden of FuelsRio de Janeiro

Baseline price: average price in Rio de Janeiro from Mar 9th to 15th, 2008 (Source ANP/SINDICOM)

38%

14%

8%

8%

33%

47%

18%

9%

26%

61%

14%

4%8%

13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GASOLINE ETHANOL DIESEL

PRODUCT MARGINS + COSTS CIDE PIS/COFINS ICMS

R$ 2,504 R$ 1,625 R$ 1,851

25%

49%35%


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Source: UNICAMP

Brazil: Proper soil and climate for

production of sugar cane without irrigation

High

Medium

LowImproper

Totally improper


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Evolution of theBrazilian Automotive Market

Sales of automobiles and light vehicles Otto cycle

0%

10%20%30%40%50%

60%70%80%90%

100%

jan/03

apr/03

jul/03

oct/03

jan/04

apr/04

jul/04

oct/04

jan/05

apr/05

jul/05

oct/05

jan/06

apr/06

jul/06

oct/06

jan/07

feb/07

jul/07

Gasoline

Ethanol

Flex

Source: ANFAVEA and Unica


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0

5

10

15

20

25

30

35

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Flex

Projection of theBrazilian Automotive Market

Source: Copersucar and Unica

Million

units

Estimated fleet of automobiles and light vehicles Otto Cycle


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Estimation of employment inthe production of sugar cane

2006/07 2010/11 2015/16 2020/21

Production sugar cane(million t)

299 370 457 544

Area with mechanical

harvesting(%)

40% 70% 100% 100%

Number of emplooyees 260.4 200.8 127.8 146.1

Note: estimation based on current use of hand labor. It does not includeemployees involved in the management of the production. Preparation: Unica.

So Paulo State


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Great Issues

About Ethanol

what volume of ethanol do we want to

produce?

what would be the logistic system fortransportation and distribution of ethanol?

what is the market we want to achieve?

human resources?

technology?

environmental and social relations?

ethanol chemistry?

by-products?

partnerships?


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The production of ethanol from sugar cane is the mostcompetitive: greater productivity, lower cost and with verypositive energy and environmental balances; reduced or no

competition or with food supply.

It represents a window of economic opportunity foremerging countries with agricultural-climatic conditions andplenty of hand labor, and rely with the best opportunity toexpand biofuels without affecting the prices of food and

ration, by the incorporation of new (agricultural andindustrial) technologies and increased integration farming cattle raising.

Main short-term challenges: ethanol as a global commodity(including the use of future markets) and bioelectricity.

The great challenge will consist in the development of newtechnologies for the production of biofuels, particularly inthe case of ethanol, in the use of celluloses as raw material.

Comments


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1952-First tests using ethanol-gasoline blended fuel


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THE BIODIESEL ISSUE


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World Production2004/2005

Source: USDA - United States Department of Agriculture

SUNFLOWER; 6%

PEANUT; 9%

COTTON; 11%

RAPESEED; 11%

SOYBEAN; 59%

OTHERS; 4%

OTHERS; 6%

SUNFLOWER; 5%

PEANUT; 3%

COTTON; 7%

RAPESEED; 11%

SOYBEAN; 69%

OTHERS; 9%

SUNFLOWER;

8%

PEANUT; 5%

COTTON; 4%

RAPESEED;

11%SOYBEAN;

32%

PALM; 28%

MAIN OIL SEEDS

MAIN PROTEIC

BRAINS

MAIN VEGETABLEOILS


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Source: ERB

Projection of WorldProduction of Biodiesel

Production of biodiesel in the world:

- 2007: 260,000 bpd

- 2012: 810,000 bpd


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Projection of WorldConsumption of Biodiesel

Consumption of biodiesel in the EU in 2012 will be around 275,000 bpd.

B

illionliters

Others

Malaysia

USAIndonesia


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Nowadays the European Union leads the world production of biodiesels,despite the relatively lack of arable lands in those countries.

Production of BiodieselIn the European Union

Source: European Biodiesel Board

the European consumption was approximately 8 million bpd diesel oil and the total

production of biodiesel was 100 thousand bpd, in 2006. In 2012 it will be 275,000 bpd.

Annual Production of Biodiesel (x 1,000 ton)

0

500

1000

1500

2000

2500

3000

2006 2005 2004 2003 2002

Germany France Italy Others

Installed Capacity of Production of

Biodiesel - 2007 (mil ton)

Others

37%

Italy13%

France8%

Germany

42%


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VEGETABLE

OIL INDUSTRY

FUEL

INDUSTRY

Systematic View of theProduction of Biodiesel

PRODUCTIONOF

BIODIESEL

OIL

SECTOR

ACRICULTURAL

SECTOR

The productionof biodiesel

integrates twototally distinct

productivechains (oil andagriculture)

COORDINATION

PROBLEMS


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Biodiesel in Brazil

he Government and the private sector have a lot to do so that thesuccess of the ethanol is repeated with the biodiesel.

he great issue in the biodiesel area in Brazil is the cost-effectivenessof its production, as well as its competition with other industrieswhich also consume vegetable oils (e.g. food)

RODUCTION- Involves a great number of producers

- Needs the organization of sustainable productive chains

LOGISTICS

- It is necessary to develop an efficient system of transportation

and distribution of the product

CONSUMPTION


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The BrazilianBiodiesel Program

Jan/2005 Jan/2008 Jul/2008 Jan/2013

2%

Authorized

Potential Market

800 millionliters/year

2%

Mandatory

Actual Market

1 billionliters/year

3%

Mandatory

Potential Market

1.5 billionliters/year

5%

Mandatory

Potential Market

2.4 billion liters/year

40,000 bpd equivalentin diesel


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Regional Demands for Biodiesel2008

Scenario 2008:1 billion liters/year

Participation in the

national consumption of

diesel in 2004

North

Northest

Center-South

90 million

liters/year

140 million

liters/year

770 million

liters/year


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Taxes Over DieselBrazil X Germany

The price of the Brazilian diesel and its taxation makes theproduction of biodiesel in Brazil less competitive.

75,30%

55,00%

45,00%24,70%

0%

20%

40%

60%

80%

100%

DIESEL BRAZIL DIESEL GERMANY

PRODUCT + MARGINS + COSTS TAXES

Germany

March/2005


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Final Comments

Biofuels will expand in the world due to consumerspressure (global warming) and interest of governments(public policies).

The great challenge will consist in the development ofnew technologies for the production of biofuels, particularlyin the case of ethanol, in the use of celluloses as rawmaterial.

The relaxation of the tributary system may represent afundamental cost reduction for the production of biodiesel.

Relaxation of the tributary system alone is not enought to

make the biodiesel competitive, but it is fundamental forits competitiveness.

It is likely, not to say almost certain, that the price ofbiofuels in the world market will follow the price of oil.


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It is not the strongest of the species that

survives, nor the most intelligent; it is the one

that is the most adaptable to change

Charles Darwin (1809-1892)


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Thank you !

Contact:

[email protected]

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Biofuels Brazilian Market - Ibp Bf2008