Big-name companies at work in Brazil

By Holly Jessen | January 04, 2010
Posted Feb. 5, 2010

Several prominent fuel companies are working on partnerships in Brazil to produce ethanol and build pipelines.

The most recent news came from Shell International Petroleum Company Limited and Cosan S.A. The two companies signed a non-binding memorandum of understanding last week to form a $12 billion joint venture in Brazil for the production of ethanol and other related activities.

Other big-name companies have announced plans to build pipelines to transport ethanol. Petrobras, the Brazilian oil producer, formed a corporation with Japan's Mitsui Co. and real estate developer Camargo Correa S.A. This month, Uniduto planned to start a campaign to raise $1 billion for a proposed pipeline. The company is a Brazilian pipeline developer started by sugar cane and ethanol firms, Cosan, Crystalsev and Copersucar.

Shell and Cosan are now in negotiations to form a joint venture, according to a Shell press release. If the joint venture is successful, the two companies will work together to produce ethanol, sugar and power as well as in distribution and retail of transportation fuels.

Cosan will contribute sugar cane crushing capacity from 23 mills, retail sites and supply and distribution assets, controlling share in an ethanol trading company and net debt of about $2.5 billion, according to the company. Cosan will also contribute its 528.3 MMgy of ethanol production, with seven existing plants, two under construction and three more planed to be built in the next three to four years.

Shell's contribution to the joint venture will include its retail, supply and distribution assets in Brazil, its 50 percent share in Iogen, 14.7 percent share in Codexis and $1.625 billion in cash, paid over two years. Neither company will include lubricant activities in the joint venture, the press release said.

"[The] announcement demonstrates the continued importance of Brazil to Shell," said Mark Williams, Royal Dutch Shell's downstream director. "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. We see joining with Cosan as a way to grow the role of low-carbon, sustainable biofuels in the global transportation fuel mix. The joint venture would also enable Shell to set up a material and profitable bio-fuels business, with the potential to deploy next generation technologies."