No matter what projection is made for Brazil, growth of the population’s income becomes apparent, and with it, growth of the number of people that are now capable of buying a car or motorcycle. Said growth is even higher than that of the economy itself. Flexible (flex)  vehicles will make up the larger portion of the new car fleet, and even considering that the projection is a conservative one, we will experience considerable growth in ethanol demand for automotive use.

If we assume that 25% of the flex fleet will run on ethanol, in 2019 we will reach a demand of 34 billion liters. In the 50% growth scenario, this figure will increase to 52 billion. The 10-year energy plan foresees consumption in excess of 60 billion liters of ethanol by 2020. Surely this will depend on how competitive ethanol will be in comparison with gasoline. Petrobras’ consulting firms project that by 2015 the price of a barrel of oil will be in the range of U$170 (the highest amount) and US$ 60 (the lowest amount).

Petrobras is assuming conservative figures between US$ 80-95 as the basis for its studies and projections. I believe this amount will be above said range, close to US$ 100/barrel. The scenario I see for the future is that of high oil prices, and sooner or later this will affect the domestic market, thereby making competition by ethanol production feasible.

Petrobras is committed to sustainable development. For this reason, years ago the company set (and has since annually reasserted) sustainable development as one of the pillars of its strategy, along with the production of oil and gas – in a sustainable manner, placing the company among the five largest oil producers in the world –, along with its refining activities – assuring supply for the domestic market and leadership in distribution –, along with natural gas activities – its most recent business, which has grown considerably –, and also along with petrochemical activities.

The fifth pillar, supporting its strategic vision, engages the Petrobras system in developing activities in the biofuels segment in Brazil and abroad, in a manner integrated with all other operations of the Petrobras system.

This integration results in some orientations, of which I emphasize seeking to do this in a way such as to assure technological control over the sustainable production of biofuels, in a manner synchronized with the business’ strategies. I am talking about second generation fuel, and other sugar and sugarcane derivatives, through to products of high aggregated value.

Between 2011 and 2015, Petrobras will invest US$ 225 billion, 2% of which in biofuels. It may appear to be little, but it represents US$ 4.1 billion, of which US$ 1.9 billion for ethanol, US$ 1.3 billion for ethanol logistics, US$ 600 million for biodiesel, and US$ 300 million for R&D. We also have production targets, involving the companies in which Petrobras Biocombustível is a stakeholder, so that by 2015 the system will produce 5.6 million cubic meters of ethanol and 855 million cubic meters of biodiesel. This will place us among the five largest global producers of biofuels in 2020.

Nowadays we have 15 units, directly operated by Petrobras, or in which the company is a stakeholder. We operate five biodiesel plants – with 2 important projects in the State of Pará that use the palm plant in combination with reforestation, brought about in degraded areas, with a productivity of 5,000 liters per hectare. In the two projects, 4,000 hectares have been planted, aiming at the domestic and European markets.

In terms of ethanol, we operate via 3 joint ventures in Brazil, totaling 10 plants. The first business venture was with Total Agroindústria, a project with a very large
growth potential, currently being duplicated, with full-scale crushing activities set to begin in 2013-14. The next association occurred with the company Guarani, a Brazilian company belonging to the French Tereos group, which operates 7 plants in Brazil and forms a sugarcane cluster of about 200,000 hectares.

This associated company also manages a project in Africa, in Mozambique, and comprises a plant that before only produced sugar. The molasses is exported to Europe. We are in the process of setting the right economic conditions so that this plant may produce ethanol, aimed at developing the local national market. Mozambique currently imports all its oil products.

We are also in a third association with the Nova Fronteira company of the São Martinho group, which operates Usina Boa Vista in Quirinópolis. A greenfield project with a high potential is currently under development.

We are investing R$ 780 million in the expansion of assets at the Guarani company, jointly with the Tereos group, to increase the crushing and energy exporting capacity. At Usina Boa Vista, of Nova Fronteira, the world’s largest ethanol-from-sugarcane plant, investments total R$520 million, and we will increase the crushing capacity, already for the 2014-15 harvest, from 2.35 to 8 million tons, increase the installed power capacity from 80 to 155 MW, and energy output from 265 to 600 GWh, among other operational investments.

The fact that Petrobras is participating, as a co-owner, in existing plants does not mean that we are not bringing new ethanol into the system. We contributed growth leverage to these companies, which otherwise might not have occurred to the same extent, had they operated by themselves.

In a scenario prior to our entry and after the approved investments materialized, in the Total company partnering represents an increase in sugarcane crushing capacity from 1.2 to 2.4 million tons, in Guarani from 17.4 to 24.5 and in Nova Fronteira, from 2.3 to 8.0. With respect to the production of ethanol, in Total we went from 103 to 204 million liters, in Guarani from 455 to 925 and in Nova Fronteira, from 121 to 600.

With respect to the energy generation capacity, in Total we went from 32 GWh to 86, in Guarani from 255 to 1,172, and in Nova Fronteira, from 121 to 600. Thus, we are actually talking about considerable increases of the crushing capacity, of ethanol production, and of energy exports. All in all, this year we are planting 60,000 hectares of sugarcane, with even more growth next year, on account of the already approved investments.

Technology is an important factor in how Petrobras views biofuels. In ethanol, since 2004, we have invested in a self-managed second generation ethanol project, together with a U.S. company in South Dakota, in what is a pilot plant that was originally set up to process wood, and which receives sugarcane bagasse delivered by train, for the sake of performing tests.

At the experimental  evel, the results were very good, with 300 liters per ton of dry bagasse, which will allow us, after a short period, to have a basic project of an industrial plant in synergy with an existing plant. The figures will show if we can begin immediately or if we need to wait a little to make this operation possible.

We are also investing in jet fuel (biojet) production, based on sugars. This is a fuel that lacks a validated substitute, but has a market that is the fastest growing of all liquid fuels. Whoever gets there first will reap the benefits of this fantastic market and that’s why we will invest in it.

The best, most efficient and cheapest source of renewable carbon available is sugarcane, so one can think in terms of value chains for the production of lubricants, chemical and pharmaceutical products, and start doing everything that can possibly be done with carbon, based on renewable carbon, applying sugarcane chemistry. We are investing to improve first generation ethanol processes.

This represents marginal gains, but we can envision an aggregating effect in terms of efficiency, eco-efficiency and better use of water and other resources.

We are also working on the diversification of raw material for ethanol. For example, the São Martinho company is harvesting sorghum in the off-season, in what is an effort to learn, and will be a major factor in aggregating value to existing capacity. In supporting all these initiatives, we have made important and growing investments in synthetic and molecular biology, since we believe that this will provide us the opportunity to more quickly achieve results.

With respect to expansion based on productivity and sustainability, in what is a view of the future on how one may produce new ethanol by applying technology and innovation, we believe we may leave the current average of 6,670 liters per hectare, to achieve a gain of 830 liters with renovation, more than 2,000 liters using technology, more than 900 liters with the economically feasible off-season harvest, and in excess of 1,600 liters by partially using sugarcane bagasse. Using all the technology currently already available, one can talk about achieving around 12,000 liters of ethanol per hectare.

This is what one calls vertical growth, growing the same planted area, which makes sense from the economic and environmental point of view.