Grainnet

Brazil Government Could Move Up 5% Biodiesel Goal to 2010

SAO PAULO, Brazil -- Brazil is studying the possibility of moving up an obligatory 5% mix of biodiesel in the country's diesel fuel to 2010, three years earlier than mandated by law, according to a report in local Agencia Estado newswire on July 20.

While a 5% mix, also known as B-5, will require roughly 2.4 billion liters of biodiesel, the mix could be worth instituting by 2010 given the current growth of the industry, said Nelson Hubner, the executive secretary of the Mines and Energy Ministry, at a biodiesel conference in Rio de Janeiro.

Each percentage point of a biodiesel mix will save the country the equivalent of $140 million, added Roberto Ardenghy, the supply chief of the National Petroleum Agency, or ANP, according to the report.

"I don't see the necessity of waiting that long for B-5, once the quality standards that are demanded are met," agreed Maria das Gracas Foster, the president of Brazil's state-owned oil firm Petrobras SA subsidiary, Petrobras Distribuidora, in the report.

While Brazil is a net oil exporter, the country still imports roughly 2 billion liters of diesel oil to meet its fuel needs.

By January 2008, the country will require a mandatory 2% biodiesel mix in all its diesel fuel, or roughly 800 million liters.

The production of that volume was contracted at four government biodiesel auctions between November and July.

Nevertheless, domestic interest in the sector continues to fire up, as world oil prices have soared past $70 per barrel and the country's grain sector is beset by escalating input costs, a strengthening Brazilian real, and slumping export margins.

By the end of 2007, Brazil should have roughly 1.7 billion liters of industrial capacity to produce biodiesel, according to estimates by local Safras & Mercado consultancy.

"And there are more projects on the drawing board," said Miguel Biegai, a Safras & Mercado consultant.

Biegai estimates that the country should produce at least 1 billion liters of biodiesel by the end of next year, much of it from soy oil.

For more information, call Grace Fan, Dow Jones Newswires, at 55-11-3145-1489 or e-mail brazil@dowjones.com