11

Fuel Ethanol in JapanFuel Ethanol in Japan

XII JAPAN-BRAZIL Joint Economic Committee MeetingCNI - Nippon Keidanren

March 6, 2006 - Sao Paulo

Takao OmaeMitsui & Co., Ltd.

22

World Ethanol Production, Share by ApplicationWorld Ethanol Production, Share by Application

9.6

12.6

3.2

12.1

14.7

3.4

14.3

14.7

3.7

16.2

16.1

3.8

19.2

16.7

3.9

0

20

40

60

80

100

120

2002 2004 2006 2015

USA Brazil China India France Russia Others

Bevarage15%

Industiral8%

Fuel77%

(Unit: million kl)

34.139.2 41.3

45.050.1

Production/EstimationProduction/Estimation Share by ApplicationShare by Application

SourceSource：：Estimation / Estimation / F.O.LichtF.O.Licht

34.76.8 3.6

Beverage Industrial15%

Fuel85%

20052005 : : 45.045.0 million million klkl

20152015 Estimation:Estimation: about about 110404million million klkl

8915

105

54 million kl

of additional Fuel demand

33

Japan-ETBE0.84 million kl in 2010(0.36million kl Ethanol equivalent)

Japan-ETBE0.84 million kl in 2010(0.36million kl Ethanol equivalent)

E3: 3% Ethanol Blended Gasoline

E10: 10％Ethanol Blended Gasoline

ETBE: Ethyl Tertiary Butyl Ether

Europe (sugar beet, wheat, barley）-E5,E10 implemented: Sweden, Poland-ETBE implemented: Germany, France, Spain-Production: 4.7 million ｋｌ (2006)-Biofuel 5.75% in 2010 (22 million kl)

10% and over in2030 (38 million)

Europe (sugar beet, wheat, barley）-E5,E10 implemented: Sweden, Poland-ETBE implemented: Germany, France, Spain-Production: 4.7 million ｋｌ (2006)-Biofuel 5.75% in 2010 (22 million kl)

10% and over in2030 (38 million)

Philippine (sugarcane, Molasses)-E5 Obligation from 2009

Thailand （cassava, molasses)-E10 Obligation by 2007

Philippine (sugarcane, Molasses)-E5 Obligation from 2009

Thailand （cassava, molasses)-E10 Obligation by 2007

Brazil (sugarcane)-E20-25、E100 (FFV) Implemented-Production:16.7million kl (2007)-Export : 3.0 million kl (2006)

Brazil (sugarcane)-E20-25、E100 (FFV) Implemented-Production:16.7million kl (2007)-Export : 3.0 million kl (2006)

Use of Fuel Ethanol in the WorldUse of Fuel Ethanol in the World

USA (domestic corn + import)-E10 implemented in many states-Production:19.2million kl(2006)-Import：2.5million kl(2006)-Renewable, Alternative Fuel

35 billion gal (133 million kl) in 2017

USA (domestic corn + import)-E10 implemented in many states-Production:19.2million kl(2006)-Import：2.5million kl(2006)-Renewable, Alternative Fuel

35 billion gal (133 million kl) in 2017

China (domestic corn, rice etc)-E10 tests in 9 Provinces-Production: 3.9millionｋｌ (2006)

China (domestic corn, rice etc)-E10 tests in 9 Provinces-Production: 3.9millionｋｌ (2006)

Canada (grain)E5 obligation by 2010

Canada (grain)E5 obligation by 2010

India (sugarcane)-E5 implemented in 9 states

India (sugarcane)-E5 implemented in 9 states

44

Ethanol Ethanol Production & Consumption in BrazilProduction & Consumption in Brazil

2.74

15

02468

10121416

Now 2013

(million Vehicles)Flex Fuel Vehicles in Brazil

17.4

14.3

35.7 28.7

0

10

20

30

40

mill

ion

KL

Now 2013

Ethanol Production & Consuption

Ethanol Production Ethanol ConsumptionSource: ANFAVEA

3.7

21.6

50.2

78.1 82

0

20

40

60

80

100%

2003 2004 2005 2006 Jan2007

Flex Fuel Vehicle Sales

55

Advantage of Sugarcane of BrazilAdvantage of Sugarcane of Brazil【Brazil】

Dominant competitiveness of the production cost

Adequate climate condition for sugarcane cultivation

Unused area 50 times more than the current sugarcane plantation area where it is easy to expand the production

Huge unused area which is 9 times more than Japan with no destruction of Tropical Amazon Forest.

Over 100 years of know-how in the use of Fuel Ethanol for Automobiles

【Sugarcane】Possible to be cultivated widely in Tropical, Sub Tropical Areas

Strong resistance

Possible to increase production by breed improvement

Advantage of productivity per hectare, which is 3 times more than corn

Less competition against food application compared with other raw materials

Energy generation by bagasse is possible by using residue of sugarcane Possible to stably obtain Carbon Credit

Land area of Brazil851million hectare

Natural Area463million hectare

Possible Agriculture Development Area

388 million hectare

Current Cultivation62 million hectare

Sugarcane Planted Area6.3 million hectare

Land area of Brazil851million hectare

Natural Area463million hectare

Possible Agriculture Development Area

388 million hectare

Current Cultivation62 million hectare

Sugarcane Planted Area6.3 million hectare

Ethanol Production Cost (premise Brazil=100)

262

424

150 137161

100

219

107

0

100

200

300

400

500

Brazil

USA

Eurpoe

Colombia

Latin America

IndiaPakistan

Thailand

(Source: Agra CEAS)

Future expected development Savanna area

“Cerrado”

66

Recent Foreign Investment in BrazilRecent Foreign Investment in Brazil

Cargill / USA origin Major Grain Company

In June 2006 announced acquisition of Sugar & Ethanol Mill in Sao Paulo called CEVASA

Bunge /Holland origin Major Grain CompanyIn January 2007, made proposal for acquisition of the 3rd largest Sugar & Ethanol Mill, Vale do Rosario

Louis Dreyfus / French origin Major Grain Company

In February 2007, Agreed with the Tavares de Melo Group on acquisition of Sugar & Ethanol Business in Brazil, which made Louis Dreyfus become substantially 2nd largest Sugar & Ethanol producer Brazil.

Mr. George Soros / USA

In February 2006, made investment to Mote Alegre, Sugar & Ethanol mill in Minas Gerais State

77

Situation of JapanSituation of Japan

August 2003• Revision of fuel regulation allowing 3% Ethanol blending to gasoline • Potential demand 1.8 million KL

August 2003• Revision of fuel regulation allowing 3% Ethanol blending to gasoline • Potential demand 1.8 million KL

April 2005• Government Approval of Biofuels for Transportation in the Kyoto Protocol

Target Achievement Plan• 0.5 million KL crude oil equivalent Biofuels (equivalent to 0.85 million KL

of Ethanol) by 2010

April 2005• Government Approval of Biofuels for Transportation in the Kyoto Protocol

Target Achievement Plan• 0.5 million KL crude oil equivalent Biofuels (equivalent to 0.85 million KL

of Ethanol) by 2010

February 2007• Discussion in Biomass Nippon Comprehensive Strategy Promotion

Committee• Discussion on 6 million KL of Bio Fuel Use

February 2007• Discussion in Biomass Nippon Comprehensive Strategy Promotion

Committee• Discussion on 6 million KL of Bio Fuel Use

January 2006• Petroleum Association of Japan• ETBE use of 0.84 million KL (0.36 million KL ethanol equivalent) by 2010

January 2006• Petroleum Association of Japan• ETBE use of 0.84 million KL (0.36 million KL ethanol equivalent) by 2010

88

Activities of Japanese Private Sector in BrazilActivities of Japanese Private Sector in Brazil

1. MitsuiMOU with Brazilian Partners to secure stable supply and economical efficiency

• March 2005:MOU with Petrobras, CVRD to search best logistics solution

• April 2006MOU with Petrobras to study on production & marketing of Ethanol (Business & Price Model, Project Selection)Mitsui has intention to invite reliable Japanese partners to the project

• February 2007MOU with Petrobras, Camargo Correa to study on Ethanol Pipeline

1.1. MitsuiMitsuiMOU with Brazilian Partners to secure stable supply and economical efficiency

• March 2005:MOU with Petrobras, CVRD to search best logistics solution

• April 2006MOU with Petrobras to study on production & marketing of Ethanol (Business & Price Model, Project Selection)Mitsui has intention to invite reliable Japanese partners to the project

• February 2007MOU with Petrobras, Camargo Correa to study on Ethanol Pipeline

2. Itochu• Technical Cooperation Agreement with CODEVASF, CAMPO• Feasibility Study on Ethanol and Bio Diesel

2. Itochu• Technical Cooperation Agreement with CODEVASF, CAMPO• Feasibility Study on Ethanol and Bio Diesel

3. Marubeni• Establish JV with Agrenco• Plan to invest in production of Bio Diesel

3. Marubeni• Establish JV with Agrenco• Plan to invest in production of Bio Diesel