Brazil to invest $25 bn for ethanol production

September 26th, 2008 - 6:55 am ICT by IANS  

Rio de Janeiro, Sep 26 (IANS) Brazil plans to invest $25 billion to build new ethanol plants in the country to meet the demand for alternative fuel that is expected to grow 150 percent in the next decade, Spain’s EFE reported.The state-owned Energy Research Corporation (EPE) has prepared a report that shows ethanol produced from sugarcane will overtake gasoline and become Brazil’s main fuel for powering automobiles.

The EPE is part of the country’s energy and mines ministry.

By 2017, Ethanol will account for nearly 80 percent of the total volume of liquid fuels consumed by light vehicles in Brazil, it said.

Ethanol is usually mixed with unleaded gasoline and can be pumped into vehicles at existing service stations.

“The demand for the fuel will grow at an annual rate of 11.3 percent between 2008 and 2017, surging from 20.3 billion liters (about 5.4 billion gallons) to 53.2 billion liters (about 14.1 billion gallons) in 10 years,” the EPE said.

To meet this growing demand, Brazil will have to expand its production capacity in the next 10 years, building 246 new sugar refineries and distilling plants, of which 114, or 46 percent, are already under construction or have been established, the report said.

EPE director Mauricio Tolmasquim said in a press conference that Brazil’s investment plans were firm and would not be affected by the global financial crisis, which has caused funding for projects around the world to dry up.

“There is no lack of investor interest, the crisis is not affecting these forecasts,” Tolmasquim said. “The prospects for demand are strong. Ethanol is very attractive for the consumer.”

Ethanol projects are profitable even if oil falls to $75 per barrel from its current level above $100 per barrel, the EPE director said.

In recent months, supporters of the alternative fuel have had to contend with criticism that food crops are being diverted to ethanol production around the world, causing food shortages and leading to price spikes that affect the poorest people in society.

Brazil, for its part, argues that barely one percent of its farmland is used to grow sugarcane for ethanol production and it has used the clean-burning fuel to replace 50 percent of its gasoline consumption.

Unlike the corn-based ethanol produced in the US, Brazil’s sugar-based fuel, according to the industry, is sustainable and profitable.

The Brazilian agricultural industry defends the use of biofuels and blames the food shortages in some countries on population growth, the drop in the value of the dollar and high oil prices, which raise transportation and production costs.

Brazil, the world’s largest producer and No. 1 exporter of ethanol made from sugarcane, has foreign sales of nearly 3.5 billion liters (396 million gallons) annually.

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