BIOFUELS IN BRAZILBIOFUELS IN BRAZIL

RIO6 / Rio de Janeiro RIO6 / Rio de Janeiro –– November, 2006November, 2006

MINISTRY OF AGRICULTURE, LIVESTOCK AND FOOD SUPPLY

Secretary of Production and Agrienergy

ALEXANDRE BETINARDI STRAPASSON

General Coordinator for Ethanol and Sugar Affairs

BRAZIL HAS A GREAT POTENTIAL FOR BIOFUELS PRODUCTION...BRAZIL HAS A GREAT POTENTIAL FOR BIOFUELS PRODUCTION...

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THE NATIONAL AGRIENERGY PLAN

- ETHANOL

- BIODIESEL

- AGRICULTURE WASTES

- ENERGETIC FORESTS

ETHANOL: AN ESTABLISHED FUEL IN BRAZILETHANOL: AN ESTABLISHED FUEL IN BRAZIL

A CLEAN, GREEN AND A CLEAN, GREEN AND

RENEWABLE ENERGYRENEWABLE ENERGY

THE BRAZILIAN SUGAR CANE AND THE BRAZILIAN SUGAR CANE AND ETHANOL EXPERIENCESETHANOL EXPERIENCES

1532: Martim Afonso de Sousa 1532: Martim Afonso de Sousa introducesintroduces sugar sugar canecane in in BrazilBrazil

1925: 1925: FirstFirst ethanolethanol poweredpowered vehiclevehicletestedtested in in BrazilBrazil

1979: 1979: FirstFirst commercialcommercial ethanolethanol movedmovedvehiclevehicle in in BrazilBrazil2003:2003:

FlexFlex fuelfuel motorsmotors arearelaunchedlaunched

BRAZILIAN ETHANOL PRODUCTION

0

5,000

10,000

15,000

20,000

25,000

30,000

64/65

66/67

68/69

70/71

72/73

74/75

76/77

78/79

80/81

82/83

84/85

86/87

88/89

90/91

92/93

94/95

96/97

98/99

00/01

02/03

04/05

06/07

08/09

10/11

12/13

Mill

ion

liter

s

1st Stage: sugar cane destined only for sugar

2nd Stage: hydrous ethanol.Governmental intervention on the market.

3rd Stage: anhydrous ethanol.

High sugar exports.

Oil prices stabilized

4th Stage: free market.Flex fuel vehicles.High international sugar and ethanol demands.Top oil prices.GHG emission targets.

Oil crisis

PROÁLCOOL Kyoto Protocol

hydrous

anhydrous

total

BRAZILIAN CROP-YEAR PERFORMANCES2005/2006 AND 2006/2007

SUGAR CANESUGAR CANE

CROP-YEAR 2005/06 CROP-YEAR 2006/07* Quantity %

Total Production 382,4 425,0 42,6 11,1%

Destined to Sugar 189,2 213,8 24,6 13,0%Destined to Ethanol 193,2 211,2 18,0 9,3%

Total Production 26,20 29,50 3,30 12,6%

Domestic Consumption 10,20 10,50 0,3 2,9%Exporting 17,25 19,50 2,3 13,0%

Passage Stock 1,95 1,45 -0,5 -25,6%Total Production 15,80 17,25 1,5 9,2%

Domestic Consumption 13,50 13,50 0,0 0,0%Exporting 2,50 3,50 1,0 40,0%

Passage Stock 0,84 1,09 0,3 29,8%

Variation between Crops 05/06 and 06/07

Sugar Cane (million tons)

Sugar (million tons)

Ethanol (billion liters)

ProductionProduction

Source: SPAE/MAPA - 12/07/06

* Foresight

SUGAR CANE PERFORMANCES IN BRAZIL

Crop-Year 2000/01 2001/02 2002/03 2003/04 2004/04 2005/06Sugar cane production for all

purposes (Million ton)

326,1 344,3 363,7 389,9 416,6 421,8

Planted Area (Millon ha) (1) 4,88 5,02 5,10 5,50 5,69 5,87

Sugar cane to sugar and ethanol production (Million ha) (2) 254,9 292,3 316,1 357,3 381,4 382,4

Sugar per ton of sugar cane (Kilos) 132,8 131,5 137,8 139,4 137,5 137,7

Sugar per hectare (ton) 8,88 9,02 9,83 9,89 10,07 10,18

Ethanol per ton of sugar cane (liters) 78,3 77,5 81,2 82,2 80,8 81,2

Ethanol per hectare (thousand liters) 5,23 5,32 5,80 5,83 5,92 6,00

Source:

(1) Brazilian Institute of Geographical Statistics - IBGE

(2) Ministry of Agriculture, Livestock and Food Supply - MAPA

WHY ETHANOL? WHY ETHANOL?

- RenewableRenewable energyenergy;;

-- Safe Safe andand efficcientefficcient;;

-- EasyEasy to to produceproduce in in largelarge scalescale;;

-- LowLow pollutantpollutant;;

-- GenerateGenerate newnew jobsjobs, , speciallyspecially in in thethe rural rural areaarea;;

-- EasilyEasily to to indroduceindroduce in in thethe cosumercosumer marketmarket ((purepure oror mixedmixed withwith gasolinegasoline););

-- Sugar Sugar canecane hashas highhigh productivityproductivity andand minimumminimum environmentenvironment impactsimpacts;;

-- RelativelyRelatively lowlow productionproduction costscosts (~ US$ 0,30/L at (~ US$ 0,30/L at thethe millmill, , withoutwithout taxes);taxes);

-- TheThe sugar sugar canecane wasteswastes are are importantimportant productsproducts ((bagassebagasse cancan bebe usedused to to generategenerate heatheat andand electricityelectricity, , includingincluding to to thethe gridgrid / / VinassesVinasses cancan bebe usedused as as a a fertilizingfertilizing););

-- LowLow consumptionconsumption of of externalexternal energyenergy in in thethe productionproduction processprocess..

ENERGY EFFICIENCY OF ETHANOL IN BRAZIL ENERGY EFFICIENCY OF ETHANOL IN BRAZIL

ETHANOL

CO2

8.3Sugar Cane21.9Sugar Beet1

1.3 – 1.8Corn11.2Wheat1

Energy output / Energy inputRaw material

1 F.O. Licht, 2004.2 Macedo, I et al., 2004 – Under Brazilian production conditions.

- High photosynthesis efficiency (C4 crop).

- Possibility for using the sugar cane by-products in the production process, avoiding external energy sources.

COCO--GENERATION WITH SUGAR CANE BAGASSE GENERATION WITH SUGAR CANE BAGASSE

CURRENT POWER: 2.000 MW

(700 MW are exported to the grid)

ACTUAL MEASURED POTENTIAL:

3.000 MW to 14.000 MW

Depending of the technology applied in the generation process.

- Possibility to obtain carbon credits from CDM Projects (Kyoto Protocol)

- Complementary to the hydraulic generation in the Brazilian Center-South Region

THE USES OF VINASSES IN BRAZIL

Good fertilizant: high amount of potassium (K2O)

Vinasses can be applied on the soil by irrigation

A new technology is being developed in Brazil: to dehydrate and transform vinasses into a new commercial product

THE FLEX FUEL CAR THE FLEX FUEL CAR –– A NEW DOMESTIC ETHANOL DEMAND A NEW DOMESTIC ETHANOL DEMAND

• Flex-Fuel Engine: allows the use of Ethanol or Gasoline in any concentration of these fuels

• Current Manufactures: VW,GM, Ford, Fiat, Renault, Peugeot and Citroen

• Sales of Flex-Fuel Vehicles:

- 2003: 48.000 units

- 2004: 330.000 units

- 2005: 865.000 units

- 2006 (October): 1.100.000 units

Around 80% of the new light-dutyvehicle sales in Brazil are flex fuel.

DOES BRAZIL HAVE THE CONDITIONS TO EXPAND DOES BRAZIL HAVE THE CONDITIONS TO EXPAND ITS SUGAR CANE PRODUCTION WITH SUSTAINABILITY?ITS SUGAR CANE PRODUCTION WITH SUSTAINABILITY?

NEW AREAS OF SUGAR CANE NECESSARY TO SUPPLY THE EXTERNAL SUGAR AND INTERNAL ETHANOL DEMAND FORESIGHTED FOR 2013:

~ 3 million hectares

TOTAL SUGAR CANE CULTIVATED AREA IN BRAZIL TODAY:

~ 6 million hectares (less than 1% of the Brazilian territory)

NORTH/NORTHEAST REGION

15% of national sugar cane production

CENTER-SOUTH REGION

85% of national sugar cane production

WHERE DOES BRAZIL PRODUCE SUGAR CANE?WHERE DOES BRAZIL PRODUCE SUGAR CANE?

SLOPE > 12%

AMAZON REGION

ATLANTIC FOREST

TOTAL AREA WITHOUT ENVIRONMENTALRESTRICTIONS . . . . . . . . . . . .

437,2 MM hectares

AREA WITH SLOPEABOVE 12% . . . . . . . . . . . . . . 75,6 MM hectares

TOTAL AVAILABLE ANDSUITABLE LAND . . . . . . . . . . 361,6MM hectares

PANTANAL(SWAMPLAND) SLOPE

> 12%

SLOPE

< 12%

HOW TO EXPAND SUGAR CANE WITH SUSTAINABILITY?

AREAS FOR EXPANSION

Caption:High

Middle

Low

Improper

.

.

Source: UNICAMP & CGEE/MCT

ADEQUATE SOIL AND CLIMATE FOR SUGAR CANE PRODUCTION IN BRAZIL ADEQUATE SOIL AND CLIMATE FOR SUGAR CANE PRODUCTION IN BRAZIL –– WHITOUT IRRIGATION REQUIRED WHITOUT IRRIGATION REQUIRED --

THE ETHANOL INTERNATIONAL DEMAND IS INCREASINGTHE ETHANOL INTERNATIONAL DEMAND IS INCREASING

YEARS Million US$ F.O.B. Liters (Billion) Average US$/m³

1997 54 0,146 370,091998 36 0,118 301,211999 66 0,407 161,702000 35 0,227 153,072001 92 0,346 266,572002 169 0,759 222,862003 158 0,757 208,562004 498 2,408 206,682005 766 2,592 295,31

Source: Secex (Alice System)

And so are the brazilian exports...

The Brazilian aim is to transform ethanol in a great commodity, together with other countries

WHERE AND HOW THE EXPANSION IS HAPPENNIG ?

Source: UNICA – April 2006

North-Northeast 10 2 0 8 0

South-Centre 79 9 28 38 4

BRAZIL 89 11 28 46 4Source: UNICA

REGION TOTAL

MILLS

Restarting activities

Under construction Projected

Under analyses

Forecast until 2010

Current Brazilian capacity: 355 mills

BIODIESEL: A PRODUCT FOR THE FUTURE

Source: MAPA/Embrapa

Sunflower

Peanut

Cotton seed

Castor

Soybean

Palm Tree

Biodiesel mixed with diesel

2005-2007: 2% authorized

2008-2012: 2% mandatory

2013...: 5% mandatory

THANK YOU!THANK YOU!OBRIGADO!OBRIGADO!

Alexandre Betinardi Strapasson

+ 55 61 3218-2147 / 3218-2194

alexandrestrapasson@agricultura.gov.br

www.agricultura.gov.br

...LEADING TO A RENEWABLE ENERGY MIX...LEADING TO A RENEWABLE ENERGY MIX

BRAZILIAN ENERGY MIX

WORLD ENERGY MIX

Source: MME/BEN, 2006

Biomass; 29,7%

Coal; 6,4%

Natural gas; 9,3%

Hydraulic and Electricity; 15,0%

Oil and Oil Products; 38,4%

Uraniun; 1,2%

Biomass; 11,2%Coal; 24,1%

Natural gas; 20,9%

Hydraulic and Electricity; 2,1%

Oil and Oil Products; 35,3%

Uraniun; 6,4%

Share of renewable energy in the total primary energy: 45%

Share of renewable energy in the powergeneration: 85%