[Donaldson Tan]

 By Andrei Khalip

RIO DE JANEIRO, Brazil (Reuters) - Brazil's state oil company Petrobras said on Friday it would introduce a pioneering low-sulphur diesel producing technology involving vegetable oils at two refineries by 2008.

Petroleo Brasileiro SA Supplies Director Paulo Roberto Costa told a news conference the so-called H-Bio technology will combine diesel fractions from distillation, cracking and retarded coking with soy oil and hydrogen as raw materials to churn out high-quality diesel with mineral fuel qualities.

"It's a groundbreaking technology and we've asked for patents. Vegetable oil substitutes diesel fractions and adds value ... It's a revolution for Brazil, and I'm sure it's going to spread in the world from here," Costa said.

"We'll be planting diesel from now on. It's a very positive marriage between agriculture and oil," he said, adding that the plan should give "an extraordinary boost" to the farm sector in world commodity powerhouse Brazil.

Brazil is already a world pioneer in mass use of sugar cane-based ethanol in cars and in blends with gasoline and some sector experts say it could with time become a "Saudi Arabia" of organic fuels as the world looks increasingly for alternatives to petroleum.

Costa said the high quality diesel plan, which should raise Brazil's output and allow the country to reduce imports of the fuel, would run parallel with regular biodiesel output programs and traditional petroleum diesel production. Brazil will blend 2 percent biodiesel with all normal diesel starting 2008.

Petrobras has already tested the process at its Regap refinery in Minas Gerais state, using a blend of soy oil as much as 18 percent jointly with mineral raw materials and hydrogen in the hydrotreatment unit.

"Economically, the test was very positive, showing a very interesting price composition. Basically, it was cheaper (than normal process)," Costa said. 

  Petrobras plans to use 10 percent soy oil in the two refineries where the technology will be installed next year and in 2008. The program should be expanded to five refineries in the following few years, with tentative vegetable oil usage of 5 percent. That could rise depending on the availability of vegetable oils.

Ten percent non-mineral oil usage at two refineries requires 256,000 cubic meters of soy oil per year, which makes up about 10 percent of Brazil's soy oil exports. At the same time, that would reduce diesel imports by 10 percent of last year's total of 2.5 million cubic meters, Costa said.

Brazil exports gasoline but is short on diesel.

As opposed to biodiesel, which requires special transesterification plants and additional storage capacities, the new process can be carried out at existing refineries next to soy producing areas, and only needs additional amounts of hydrogen, which is already used in the process.

The refineries in the southern states of Parana and Rio Grande do Sul, which are both big soy producers, will be the first to have the technology in addition to Regap, where the tests have been conducted.

Costa said other vegetable oils, such as cotton, palm and sunflower, can be used in the process, but soy oil is the favourite because Brazil produces huge quantities of it. Last year, it produced 5.6 million cubic meters of soy oil.

"The prices will have to be agreed with producers. It's a new thing for us and for them... We're already following the prices of ethanol, now we'll monitor soy prices in Chicago, too," Costa said.

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Brazil is already a world pioneer in mass use of sugar cane-based ethanol in cars and in blends with gasoline and some sector experts say it could with time become a "Saudi Arabia" of organic fuels as the world looks increasingly for alternatives to petroleum.

It's true, but a little time ago the ethanol fuel to cars became economically unviable. The ethanol fuel was subsidized by Federal Government and then, for any reason that I don't remember, it's expired. The bifuel cars' owners were furious because of spend more for a car like this... and they can't use ethanol (the ethanol fuel's price is almost that the gasoline's price but the efficiency's the smallest)

[Donaldson Tan]

I thought it was Shell that lobbied the Brazillian government to end the subsidy for ethanol fuel and also stop federal funding for bio-ethanol fuel research few years ago.

[Unsichtbar]

I thought it was Shell that lobbied the Brazillian government to end the subsidy for ethanol fuel and also stop federal funding for bio-ethanol fuel research few years ago.

I did a quick search:

This story initiated in 1975 when the Federal Government created the ProAlcool (National Plan of the Alcohol Fuel). It objectified to liven up the external dependence of pretroleum that it influenced the economy strongly. The ProAlcool started in decline in 90's because of the pretoleum's price started to go down. (+)
The crisis that I cited last post it initiated this year. The pretoleum's price reached the bigger values of last 20 years and then the demand for ethanol increased: the cane sugar's price goes up. (+)