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Marcelo Mancini Stella

Vice-president of ETH Bioenergia (Odebrecht Group)


Growth requires discipline

The first decade of the 21st. Century consolidated the trend of major countries of the world to seek new sources of raw materials and to diversify the energy matrix, whether due to an ecological demand for sustainability, or imminent high oil prices. This translated into a major opportunity to increase the demand for ethanol in the world, as fuel or as an alternative source of raw material for green plastics and even of ETBE.

When observing the global scenario of the demand potential for ethanol, considering the new U.S. norms for renewable fuels, the norms on low emissions in California, the norms on adding ethanol to gasoline in Europe, the initiatives being undertaken in China and Japan, we project an increase potential of up to 40 billion liters of ethanol in the world by 2015, not considering Brazil.

Brazil’s leading role is undisputed. Ethanol has been used in Brazil for more than 30 years, the competitive advantages we have in comparison with other producing countries and other cultures are in fact quite impressive.

However, more competitiveness can be expected, through the mechanization of the entire harvesting and planting processes, totally integrated operations, the optimization of the use of water, new sugarcane varieties of much higher productivity, raw material flexibility due to cellulosic ethanol, transgenetics that we still have not explored, breakthrough technologies in fermentation, i.e., an entire set of opportunities, brought about by evolutionary technologies or breakthrough technologies, will result in much higher competitiveness and productivity for Brazilian ethanol.

Concerning the projected ethanol demand in Brazil, in 2010 we have a fleet of 25.8 million vehicles, of which about 50% are “flex” (dual-fuel) vehicles. By 2016, we should be reaching more than 50 million vehicles, of which 80% are expected to be “flex”. In 2016, the potential demand for ethanol as fuel is expected to reach 60 billion liters.

Concerning the opportunities to use ethanol in other applications, such as green plastics, polyethylene, PVC, PET and others, and also as raw material for ETBE, we start from a consumption of less than 500,000 m3, in 2010, and reach in excess of 2 billion liters beginning in 2015 and 2016. Taking into consideration only the demand projections for Brazil in 2016, without considering the international potential, we may state that additional 5 million hectares of plantations will be needed, with investments of more than US$ 50 billion.

Brazil will meet this demand through productivity, but above all, through sustainability. Brazil has 851 million hectares, of which 330 million are suited for agriculture. Of these, we currently have plantations on 18%, i.e., 60 million hectares. Sugarcane accounts for 2.4%, i.e., 8 million hectares, whereas grazing lands make up almost 50% and degraded grazing lands almost 10%. 

We have a growth potential of 111 million hectares, not considering the area made available that currently comprises grazing lands. Thus, Brazil is capable of meeting this demand without diminishing the production of food, deforesting or occupying environmentally sensitive areas. All this leads us to a scenario of macro-strategies with many opportunities.

First: there is increasing international concern about energy safety and CO2 emission rates.
Second: ethanol is on the Brazilian strategic agenda; it is already a matter of State and no longer of Government.

Strong domestic demand growth, along with international expansion, the potential growth in the use of electric power obtained from biomass, the deep-going transformation of the industry, the entry of new players, the feasibility of important logistics systems, involving pipelines, waterways, terminals, the increase in oil production costs, and, as a counterpart thereto, the expected cost reduction of ethanol, in combination with very high innovation and technological breakthrough, are very significant potential topics in the future.

Based on that, Odebrecht, in 2007, decided to enter the sugar and ethanol based energy industry, to that end establishing ETH Bioenergia, which started out by acquiring two existing mills in the states of São Paulo and Mato Grosso do Sul.
ETH’s competitive strategy is based on four pillars. The first is to produce in centers that warrant scale and allow intensive use of technology. The second is to completely mechanize the planting and harvesting processes.

The third is the production of energy from biomass, allowing setting up a very important supplementary financial equation for the business. The final one is to focus intensively on commercial integration, seeking competitive logistics solutions. ETH is organized in centers. One of them in São Paulo – Alídia and UCP; one in Mato Grosso do Sul – Eldorado and Santa Luzia; another, comprising Morro Vermelho-GO (recently inaugurated), Alto Taquari-MT (inauguration in 2010), Água Emendada-GO and Costa Rica-MS (inauguration planned to 2011) and the fourth center comprising Rio Claro-GO.

With these nine mills, ETH will, in 2012, reach an output of more than 3 billion liters of ethanol and the generation of more than 2.7 GWh of electricity. In ETH’s view, sustainability must be complete, it transcends the vision of environmental sustainability. In out view, sustainability has six vectors. Regardless of ranking by importance, the first is financial discipline – a company on such an accelerated growth path must be highly disciplined financially.

The second is health and safety in the  industrial and agricultural areas – we aim at achieving  health, safety and environment ratings customary of the world leaders in the chemical and petrochemical industries. The third is heavily focusing on environmental sustainability – ETH maintains environmental responsibility programs in all areas in which it has activities. The fourth is corporate governance – ETH is preparing for an IPO in one or two years and therefore its entire corporate governance structure is adapting to this model to be implemented.

The fifth is the relation to its staff – people at the core of the Odebrecht culture, providing them the opportunity to get personally and professionally involved. The sixth is social responsibility – in all areas in which ETH has activities, the company operates social programs with the communities, involving authorities, residents and community associations. Thus, with these six vectors, we believe ETH will be a sustainable company that will produce and sell sustainable energy.