Bioethanol and Biodiesel in Brazil JOAQUIM JOAQUIM DIB DIB COHEN COHEN Managing Managing Director Director –– Petrobras Petrobras Europe Europe Limited Limited Agenda :: :: General General View View of of Company Company :: :: Biofuels Biofuels Investments Investments :: :: Business Business Plan Plan –– 2007 2007 // 2011 2011 :: :: R R& &D D Projects Projects on on Biofuels Biofuels :: :: Downstream Downstream –– Investments Investments :: :: Final Final Comments Comments General View of Company Corporate Strategy The strategic positioning with regard to the 2015 Mission and Vision has not been modified. The Corporate Strategy began to give more visibility and focus in the positioning in Renewable Energies. Corporate Strategy Development Profitability Social and Environmental Responsibilities To lead the oil, natural gas,deoil by-products and biofuels in Latin America, acting as an Liderar o mercado petróleo, gás natural e derivados na América Latina, integrated energy company, with the integrada selective de expansion of petrochemical, renewable energy atuando como empresa energia, com expansão seletiva and international activity da petroquímica e da atividade internacional. Consolidate and extend the competitive advantages in the Brazilian and south-american markets of oil and oil byproducts. Develop the Brazilian market of natural gas and act in an integrated manner in the gas and electric power markets in South America. Selectively expand the international performance in an integrated manner with Company’s businesses. Selectively expand the performance in the petrochemical market. Expand participation in the fuel market, being the leader in the national production of biodiesel and increasing the participation in ethanol business. Operational Excellency in management, human resources and technology General View of Company An integrated energy company with a Gross Income of US$ 76.5 billion, US$ 10,3 billion in net income, US$ 17,6 billion in EBITDA (2005 BR GAAP) Exploration Exploration and and Production Production • Proven Reserves: 11,8 Billion boe (SEC 2005) • Oil and Gas Production: 2,22 million boed (2005) • 16 Refineries • Capacity: 2.214 mil bpd Refining, Refining, Transportation Transportation and and • Pipeline: 30.343 km • Vessels (Own fleet): 50 Trading Trading Distribution Distribution • 6.933 service stations (34% of the Brazilian market) • More than 850 centers in South America (Argentina, Uruguai, Paraguai, Bolivia and Colombia) Natural Natural Gas Gas • Gas Sales: 52 million cu.m/day Petroquímica Petroquímica • Ethylene Production: 460 thousand tons/year • Estirene Production: 250 thousand tons/year • Polyestirene Production: 120 thousand tons/year Petrobras in the World UK USA Nova York Japan Turkey Houston Iran China Libia Mexico Nigeria Colombia Venezuela Equador Peru BRASIL Tanzania Bolivia Paraguai Angola Singapore Rio de Janeiro Uruguai Argentina HEAD OFFICE SUPPLY MARKETING E&P GAS AND ENERGY AGENCIES Focused in Latin America and Atlantic Basin Business Plan – 2007 / 2011 Business Plan for 2007-2011 PN 2007-11 US$ 87.1 billion 56% 49,3 31,0 3% 1,8 2,3 3,3 3% 4% 23,0 7,5 26% 9% Upstream Downstream G&E Petrochemical Distribution Corporate Note: Includes International area Business Plan for 2007-2011 The oil products market in Brazil presents a high dynamism Thousand bpd 2500 2,117 3.1% a.a. 2000 1,766 1500 128 108 211 97 935 777 1000 282 237 500 0 LNG 315 368 201 224 2005 2011 Gasoline Naphta Does not include own consumption of refineries. Diesel* + Jet FuelOil Coke/Others * Includes biodiesel in 2011. Business Plan for 2007-2011 Total Production – Oil & LNG and Natural Gas 7.5% a.a. Mil bpd 4,556 278 Investment in E&P of US$ 49.3 billion in 2007-2011 7.8% a.a. 742 3,493 185 2,217 2.036 , 2,020 85 94 161 168 250 265 1. 540 2003 96 163 2,403 383 101 551 724 133 289 274 2. 812 1. 493 1. 684 2004 2005 1. 880 M eta 2006 Goal Oile o+ LNG Brazil Ól + LGN Br asi l Ól + LGN I nt e r nac i ona l Oile o+ LNG International 2. 374 M eta Goal Projection M eta 2011 22015 015 G ás N aGas t u r aBrazil l Br asi l Natural GInternational ás N a t u r a lNatural I n t e r Gas na ci ona l Corporate Goals Production of Oil and LNG x Refining Throughput (Thousand bbl/day) 4000 , 3.554 3.201 , 3500 2.757 , 3000 2500 2000 2.013 , , 2.376 1.908 , 1500 1000 500 0 2006 Total Production of Oil and LNG bbl/day) Produção de Óleo e LGN Total(thousand (Mil bbl/dia) 2011 2015 Carga Fresca Throughput Processada Total (Mil bbl/dia) Total Refining (thousand bbl/day) The increase of the oil and LNG production and of the processed load of the refining assure the maintenance of a balance between the E&P and Downstream segments of the Company, as well as open options of vertical integration due to the materiality of these activities in Brazil and foreign countries. 11 Business Strategies Renewable Energy Investment 2007-2011 Goal 2011 Bio-diesel Plants Availability of 855 Thousand cu.m/year HBio (Bio-Refining) Vegetable oil Processing 1,033 Thousand cu.m/year Alcohol pipelines Alcohol Project Vessel Aeolic Energy Solar Energy Other Sources of Renewable Energy Export of 3.5 million cu.m/year of Ethanol Installed Capacity of Generation of Electric Power from 240 MW Renewable Sources Total investments in energetic development of renewable sources and biofuels of US$ 0.7 billion Downstream – Investments Downstream Challenges Biofuels Investments Land use in Brazil Type • Total country • Native Amazon Forest • Secondary Amazon Forest and Others • Native Forests • Pasture • Temporary Cultures • Permanent Cultures • Available land • Available land with low impact (*) Source: FAO, 2002 and EMBRAPA (*) Area (Mha) 851 370 180 6 197 59 7.6 263 90 Raw Material Comparison Raw Material Energy Output / Energy Input Wheat 1.2 Corn 1.3 – 1.8 Sugar Beet 1.9 Sugar Cane 8.3 (under Brazilian production conditions) Raw Material Production / ha (kg) Quantity of Ethanol / ha Energy Output / Energy Input Sugar Cane 85,000 7,080 liter 8.3 Corn 10,000 4,000 liter 1.3 – 1.8 Biodiesel In 2005, Biodiesel was integrated to the Brazilian energy matrix Legislation The Act 11097 of 13/01/05 Defines percentage and time for using biodiesel Provides that mandatory acquisition and use times may be accelerated and define criteria for acceleration 2005 2008 to to 2007 2012 2% upon authorization 2% mandatory 2013 on 5% mandatory Decree 5448 of May 2005 Higher percentages may be used, when authorized by ANP for test or use in: proprietary or specific vehicle fleets sea, river, or railroad transport electric power generation specific industrial process Biodiesel Estimated Demand Biodiesel Demand (Thousand cu.m/year) 3.000 2.571 2.500 2.666 2.771 2% Mandatory 2.000 1.500 ANP Public Sale 1.000 500 871 898 926 958 993 2008 2009 2010 2011 2012 5% Mandatory 620 240 0 2006 2007 Year 2013 2014 2015 Industrial Plants 3 Projects Being Implemented Quixadá Capacity: 171 thousand m3/year CE Investments: ~ US$ 60 million Inputs Family Agriculture: castor, cotton, and palm. Complementary: soy. Jobs Generations: Construction: 1,200 direct and 400 indirect Operation: 105 direct Raw material production:70,000 families Start up: 4 Q/2007 BA MG Montes Claros semi-arid region All Petrobras Biodiesel has Government Social Seal Biodiesel in Petrobras First phase of program: implementation of 3 biodiesel units in Northeast region and Brazilian semiarid. Each unit consists of a plant for multioleaginous species of 50 thousand tons/year. Production Route: Oil Oleaginous species considered: soybean, castor bean, cotton, and pinhão manso Species Location: • Quixadá (CE) • Candeias (BA) • Montes Claros (MG) Other phases: production units to be installed in other regions Goal: in 2011 produce 855 thousand cu.m/y Partnerships are being studied to implement other units Plants will be producing in January 2008 Biodielsel Distribution Already over 2900 stations offering Biodiesel January 2007 September 2006 October 2006 January 2007 October 2007 September 2006 B100 sales estimates up to Dec 2006: • 26,688 m3 for 3520 stations • 25,000 m3 for 3000 large consumers Biodiesel in Petrobras Considers units implementation flexible as to: • raw material (multi-oleaginous species); • routes: ethylic or methylic; Location: • Transesterification: considers product flow logistics; • Extraction: close to transesterification and/or close to oleaginous production; Technology: • Industrial units of up to 50 thousand tons/year, with worldwide consolidated technology Challenges Availability of oil and seeds: • Raw material (oleaginous species) in adequate quantity and quality to produce biodiesel Commercial and logistics chain for new product • Distance between producing plants and final consumer market Product quality • According to raw material and production • Biodiesel stability New uses for by products • New markets for other products generated in production process HBIO Process- Diesel Oil Production from Vegetal Oil in Refinery HBIO HBIO is a process of: • Oil Refining that uses vegetable oil as raw material to get diesel oil. • Hydrogenation of the mixture diesel + vegetable oil HBIO Process in Refinery OIL ATMOSPHERIC DISTILLATION atmospheric residue VACUUM DISTILLATION Gas-oil FCC DIESEL FCC Existing HDT DIESEL Process HBIO Vacuum Residue DELAYED COKING OTHER FRACTIONS OF DIESEL VEGETABLE OIL DIESEL DD DIESEL COKE Cargo Options for HBIO Process Castor-Oil Plant Sun-flower Soy African Oil Palm Cotton Likely Output of Culture 1,500 kg/ha 1,500 kg/ha 3,000 kg/ha 20,.000 kg/ha 3,000 kg/ha Percentage of Vegetable Oil 47% 42% 18% 20% 15% 4.000 450 Vegetable Oil Production (kg/ha) 705 630 540 Production in 2005 in Brazil cu.m/y 90,000 SOURCES: Embrapa, MDA, IBGE, CONAB 23,000 5,600,000 151,000 CENPES HAS ALREADY TESTED IN A PILOT • CASTOR-OIL PLANT – SOY – BABASSU • PALMISTE (SEED OF PALMA) • OURICURI 315,000 Potential of HBIO Use Goal 2011 – 1,033 thousand cu.m/year of vegetable oil Total Investiments in 10 Refineries US$ 60 MM Short Term – 2006 / 2007 HBIO in four refineries • Use of up to 256 thousand cu.m/year of vegetable oil •Payment Balance • Volume equal to 15% of imports of Diesel • Reduction of US$ 145 million/year in imports Potential of HBIO Use Medium Term (2008) HBIO in one additional Refinery • Use of up to 425 thousand cu.m/year of vegetable oil, as from December • Volume equal to ~ 25% in Diesel Imports • Reduction of US$ 240 millions/year in imports R&D Petrobras Projects on Bio-fuels HBIO – Vegetable oil hydrogenation Biodiesel Non-conventional bioethanol Lignocellulosic bioethanol Castor oil seed cake bioethanol Synthetic bio-fuel (BTL) Biodiesel - Petrobras experimental plants in Guamaré (RN) Technology: methyl & ethyl transesterification Raw Materials: castor bean and soybean oil and seed Plant 1: Oil Route: • Operating, batch-producing • Seed is crushed for extracting oil to be used in biodiesel production • May produce 6 thousand tons/year Plant 2: Route Seed: • In this route, oil is extracted directly from seed, without crushing • May produce 12 thousand tons/year PS1 Petrobras Lignocellulosic Bioethanol Research Raw material: sugar cane bagasse Proprietary process Successful ongoing bench-scale experiments Patent issued End of tests: 4thQ 2006 Pilot plant start-up: 1sQ 2008 Demonstration plant start-up: 3rdQ 2010 Folie 34 PS1 PETROBRAS S.A.; 24.05.2004 HBIO - Current Stage and Next Steps Current Stage • Soybean oil industrial test performed in 3 refineries (REGAP / REPAR and REFAP) Results: Viability confirmed • Patent applications filled Next Steps • Analyze processing conditions in other refineries • Continue CENPES analyses (including other vegetal oils and non refining soy oil) Potential H-Bio Use 2006-2007 • H-BIO in 4 refineries – using up to 256 thousand m3/year of vegetable oil • 9.1% of total soy oil export • Equivalent to 15% of Diesel imports 2008 • H-BIO in 5 refineries • Using up tp 425 thousand m3/year of vegetable oil • 15.1 % of total soy oil export • Equivalent to 25% of Diesel imports Main advantages: • No waste • Simple logistics • Improves diesel quality • Flexible vegetable oil source HBIO and Biodiesel – Complementary Processes PS2 Synthetic bio-fuel (BTL) GTL small pilot-plant on stream since 1st Q 2004 High yield FT Catalysts patented (2004-2005) Combinatorial Catalysis Unit on stream since 4th Q 2005 Start-up cold prototype unit for fluid dynamic tests: 4th Q 2006 Start-up GTL 1 bpd pilot plant: 4th Q 2007 Start-up integrated biomass gasification pilot plant: 2nd Q 2008 Start-up 300 bpd demonstration plant: 4th Q 2011 Folie 38 PS2 PETROBRAS S.A.; 24.05.2004 Ethanol Ethanol: 30 years of experience Fuel Ethanol Program Evolution Ethanol Program Implanted (BLENDS) Gasohol and Ethanol Cars (2nd oil shock) Program for oil imports reduction 70’s 80´S Program of Emission Controls (PROCONVE) Gasohol and Flex fuel Cars Renewable Hydrogen Environmental Benefits 90´S 00´S Future Facts about Ethanol Market in 2005 • Ethanol global market is 46.5 Billion Liters (2005) • Ethanol as a Fuel is 30.6 Billion Liters (67% of total ethanol production) • Today the ethanol consumption is 2.6% of gasoline MKT • 10% of ethanol in gasoline will represent 118 Billion Lt ~ = 1 Ton Sugar Cane SUGAR 153 KG BAGASSE (50% UMIDADE) 276 KG LEAVES (*) (15% HUMIDY) 165 KG 1 Ton-Field 1718 x 103 KCAL 1.2 boe 608 x 103 KCAL 598 x 103 KCAL 512 x 103 KCAL 1718 x 103 KCAL 1 boe 1,386 x 103 KCAL thousand (m³/ton) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 80/81 81/82 82/83 83/84 Anhydrous 84/85 85/86 86/87 88/89 90/91 91/92 93/94 Total Crop Year 92/93 94/95 95/96 96/97 97/98 98/99 99/00 00/01 02/03 03/04 04/05 05/06 06/07 2006/07 Estimates 01/02 Ethanol Production Hydrous 89/90 Brazilian Ethanol Production 87/88 Flex-Fuel Vehicles Consumer wants to decide the fuel at the gas station Fuel price is one the most important factor Consumer is aware of pollution and renewable fuels Today cars manufacturer is producing 80% of FFV in Brazil LIGHT VEHICLES TOTAL SALES units 150,000 Ethanol Gasoline 140,000 FFV 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 Feb-06 Mar-06 Jan-06 Dec-05 Nov-05 Oct-05 Sep-05 Aug-05 Jul-05 Jun-05 May-05 Apr-05 Mar-05 Feb-05 Jan-05 Nov-04 Dec-04 Oct-04 Sep-04 Aug-04 Jul-04 Jun-04 May-04 Apr-04 Mar-04 Feb-04 Jan-04 Dec-03 Nov-03 Oct-03 Sep-03 Aug-03 Jul-03 Jun-03 May-03 Apr-03 Mar-03 Feb-03 10,000 Jan-03 • • • • 0 Driving Forces for Fuel Ethanol Adoption Reduction of the oil dependence Energy diversification Agribusiness development Kyoto Protocol Carbon Credit Opportunities Ethanol Investiments Goal: Export 3,5 MM cu.m/year in 2011 Logistic to export – New investments in pipelines, water way and vessels (US$ 454 MM) Ethanol Logistic to Export New Ethanol Pipeline (800 km) New Water Way for Ethanol Ethanol Export Capacity 8.0 Millions cu.m/ year in 2012 Marine Terminal Rio de Janeiro Marine Terminal São Paulo Petrobras Partnerships to Introduce Ethanol as a Fuel PDVSA– march / 2005 Implement the fuel ethanol program in Venezuela. Today Petrobras is supplying ethanol and providing technical assistance in logistics and blending know-how Introduction of E10 in Nigerian Market in order to create a market for Ethanol production in Nigeria. NNPC– may / 2005 Introduction of E10 in South Africa in order to create an internal market for Ethanol production (E10). Central Energy Fund – september / 2006 Final Comments Final Comments The progressive absorption of heavy oil valorizes the national production. National Industry’s call for its qualification in order to meet the terms of the enterprises at competitive costs. Need to qualify work force and technological development by the National industry, aiming competitive costs. PETROBRAS shall keep on investing to adjust the profile of the production to the profile of the demand of oil products and for the production of clean fuels. The Petrobras HBIO process is a technological breakthrough which yields renewable fuels. It is based on wide renewable feed stock availability and existing refining infrastructure, providing social, economic and environmental sustainability of Petrobras´ downstream operations. It also emerges as a competitive advantage to our company. PETROBRAS shall keep on investing to develop fuel ethanol international markets, improving brazilian exportation infrastructure and researching new production technologies (lignocellulosic process). dib.cohen@petrobras-pel.com www.petrobras.com.br