ETHANOL IN BRAZIL EVOLUTION PHASES

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					ETHANOL IN BRAZIL: EVOLUTION PHASES
III
BRAZIL 20th and 2lst Centuries (several political moments) (from dictatorships to democracy) (from the intervention of Government to the market)

SUGARCANE (base)

Reduction of the effect of the high prices of the petroleum and of the external dependence of unstable sources Decentralized employments in the country, of low cost and in large volume Positive impact on the trade balance by the exports of sugar and reduction of imports of petroleum and deriveds by the production of ethanol

Environmental impact : - Substitution of the lead by the alcohol; - Substitution of the gasoline by the alcohol;- Reduction of the emissions of gases of the vehicles (CO; MC; Nox; etc.); - Reduction of the greenhouse effect (CO2 ) 1

P&D&D COMPETITIVENESS

BRAZIL: REGIONS AND SEASONALITY
North - Northeast Region 15% of total production Crop: October to March

Center-South Region São Paulo 62% of total sugarcane 76 % of Center-South region (sugar) 71 % of Center-South region (ethanol) 85% of total production Crop: April to December

2
Source: UNICA

BRAZIL: ETHANOL PRODUCTION
18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0
BEGINING E 100
EXTERNAL FACTORS

FALL: OIL PRICES

??

3 2 1
HYDROUS

5

4

TOTAL
ANHYDROUS

*

Note: (*) Projection
3

BEFORE PHASE 1975 The cane view as main product of sugarcane

1985 TO 1992 The ethanol view as priority product of sugarcane economy
100% CANE 70% TO ETHANOL 30% TO SUGAR

100% CANE

SUGAR (88%)
MARKET

MOLASSES AS BY-PRODUCT
RESIDUAL ETHANOL (12%)

(WITHOUT MOLASSES) MORE “ANHYDROUS” TO GASOHOL

100% CANE

1995 TO 2001 The priority view for energy and sugar markets as bases for the sugarcane agribusiness evolution

55% TO ETHANOL
50% ANHYDROUS 50% HYDROUS

45% TO SUGAR 50% I. MARKET 50% E.MARKET
4

- BRAZIL - THE FUEL ETHANOL PROGRAM DEVELOPMENT EVOLUTIONS´ BASES:
ETHANOL CARS AND BLENDS BLENDS, ETHANOL CARS, FLEXIBLE FUEL AND FUEL CELL

ETHANOL PROGRAM IMPLANTED
(BLENDS)

BLENDS AND ETHANOL CARS
2º OIL SHOCK

OBJECT: TO REDUCE OIL IMPORT

LOCAL ENVIRONMENTAL BENEFITS

GLOBAL ENVIRONMENTAL ENVIRONMENTAL BENEFITS PHASE BENEFITS

TRAN SITION

GLOBAL

WHEN?

AFTER 1975

80´S

90´S

NEAR FUTURE

5

%

Ethanol and Gasoline Utilization
80 70 60 50 40 30 20 10 0 75 77 79 81 83 85 87 89 91 93 95 97 99

% S u gar C an e for E th an ol

% E th an ol in O tto C ycle (total)

YEAR

6

SUGARCANE AGRIBUSINESS PROFILE BRAZIL (CROP 1999/2000)
• Sugarcane Growers – 60.000 (number) • Industrial Units in Operation (all private) – 106 ethanol producers – 22 sugar producers – 196 sugar & ethanol producers – 324 producers in total
7 Source: UNICA / Boletim de Produção do M.A.

Carburant Alcohol in Brazil
Total Alcohol Consumption: Represents: Represents: 200.000 barrels/day of gasoline equivalent 40% of the total consumption of the Otto cycle a saving in the order of 2 billion US$/Year (barrel of gasoline in the international market  25 dollars) 12,800.000 m3 16,000.000 m3 15,500.000 m3

Current Production : Installed Capacity: Highest Production Reached:

Current Consumption - Crop 99/00:
Highest Consumed Volume - Crop 96/97:

13,000.000 m3
13,700.000 m3
8

BRAZIL´S SUGAR CANE INDUSTRY

1. In Brazil there is only gasohol: Anhydrous alcohol mixed in all gasoline at 22% with a year consumption of 6.0 billion liters (by law, there is a band for ethanol use in gasoline - 20 to 24% + 1%). 2. Hydrated alcohol used in fleet of 3.0 million vehicles with a year consumption of 6.0 billion liters. 3. Infrastructure: Fuel alcohol, anhydrous & hydrated, distributed in over 26,000 retailing station in all brazilian states.

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BRAZIL´S SUGAR CANE INDUSTRY

• Sugar cane: 53% converted into Alcohol 47% converted into Sugar • Sugar: 50% domestic market (8.5 million mt) 50% exports (8.5 million mt)

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BRAZIL´S SUGAR CANE INDUSTRY

• Ethanol production´s capacity: 16.0 billion liters
• Ethanol production: 12.5 billion liters or 205,000 barrels of oil equivalent per day • Total production of sugar & alcohol: 40 million tons of sugar equivalent.

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CROP SEASON: 2001 / 2002
SUGAR: PRODUCTION AND CONSUMPTION (mm ton)
PRODUCTION CONSUMPTION EXPORTS (FREE MARKET)

WORLD
BRAZIL BRAZIL/WORLD

128.0
18.5 14.5%

130.0
10.0 8.0%

33.0
8.5 25%

ETOH: PRODUCTION AND CONSUMPTION (mm m3)
PRODUCTION CONSUMPTION EXPORTS (FREE MARKET)

WORLD
BRAZIL BRAZIL/WORLD

33.0
12.4 37%

33.0
12.0 37%

3.0
0.4 13.5%
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ENVIRONMENTAL IMPACTS
 As a result of using ethanol, Brazil became the first country to totally eliminate the use of tetraethyl lead blended to gasoline.

Lower levels of carbon monoxide (CO) emission and hydrocarbons (HC) and nitrogen oxide (NOx), less reactive and not as harmful to the atmosphere.
 Because the production of sugar cane and the use of ethanol and bagasse, avoids the release of 12,7 million tons of carbon annually (in the form of CO2) in Brazil. This corresponds to 20% of all fossil fuels CO2 emissions in the country. Based on it, is clear the possibilities to reduce the greenhouse gas emissions in the energetic sector.

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AGRI-INDUSTRIAL PRODUCTIVITY (sugar / ha)
RI-STAB (t sugar/ha) 10,0

Sources: IBGE, MIC-IAA, AIAA, UNICA

9,5
9,0

SÃO PAULO
y = 0,1193x - 2,3917 R2 = 0,9224

Average 1996/98 8,93 t aç./ha

8,5 8,0 7,5 7,0
6,5
Average 1996/98 7,57 t aç./ha Average 1980/82 7,11 t aç./ha

6,0
5,5
Average 1980/82 5,43 t aç./ha

BRAZIL
y = 0,1238x - 4,4915 R2 = 0,9304

5,0 80 82 84 86 88 90 92 94 96 98 14
Crop Season

MORE MILLED TON OF CANE PER INDUSTRIAL UNIT

BRAZIL - CENTRE/SOUTH REGION (85% OF ALL BRAZILIAN PRODUCTION) Sugarcane production - million ton Number of units Ton of cane per unit Only sugar units

CROP SEASON 90/91 95/96 00/01 222,4 375 0,593 27 251,4 338 0,744 24 257,6 324 0,795 22

Only ethanol units
Ethanol and sugar units

180
168

120
194

106
196
15

ETHANOL COMPETITIVENESS IN C/S - BRAZIL (NO TAX)

ANHYDROUS SELL´S PRICE - US$ / B
INTERNATIONAL GASOLINE IN BRAZIL (CIF)

SCEN 1 26,00(1)

SCEN 2 31,00(2)

32,00

60,00(4)

(1) PRODUCTION COST (AVERAGE) - C/S REGION (2) ACTUAL MARKET PRICE (3) 1 US$ = 2,50 R$ (4) GOVERNM. USES SPECIAL TAX IN GASOLINE

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Alternatives for Fuel Ethanol Usage
POTENTIAL USAGE DIESOHOL
blends from E3 to E15 – experimental stage

FUEL CELL – research stage DI Otto Engines (neat / blend) – research stage

17

NEW AUTOMOTIVE TECHNOLOGIES FOR THE USE OF ALCOHOL

ADDITION OF ALCOHOL IN DIESEL

It has begun an addition test program of a mixing (MAD8) of until 8% of
alcohol plus 2% of supplements (AEP102), which comes from soybean, in the urban fleet of Curitiba. The initial tests has presented promising results. CELL FUEL VEHICULAR MOTORS It has been agreed the accord contracts terms for the development of the of cell fuel, regarding the use of hydrated alcohol, which interests Brazil the most, seeking automotive applications.
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How a fuel cell works
One only cell consists of a conjunct of membrane/electrode and 2 plaques with 2 streams both sides. The hydrogen flows through the streams to the anode, where the catalyzer layer promotes the separation between the protons and electrons. The air flows through the streams to the cathode. The hydrogen protons that cross the membrane (PEM), combine with the air oxygen resulting in pure water. The electrons come back through the external circuit producing electric energy. The hydrogen can be supplied directly to the cell (stocking on board) or can be supplied by natural gas, ethanol, methanol or gasoline, through a chemical process.

The fuel cell technology was considered the most proper alternative to substitute the internal combustion motor, once it offers no emissions and a efficient use of alternative fuel.

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FLEX-FUEL VEHICLES - ALCOHOL/GASOLINE In Brazil, tests mixing gasoline and hydrated alcohol were concluded successfully. For the commercial phase implementation, it is foreseen a stated period of one year and a half until two years.

 Ford has developed flex-fuel vehicles prototypes for the new Fiesta model, with a Zetec-ROCAM 1.6 motor and also informs that would produce the model in 1.0 version with no big problems. BNDES(National Bank of Economic and Social Development) has been consulted about the possibility of financing this development in a industrial scale, receiving

preliminary approval of the Bank. Lately, Ford is making practicability
economic studies of the flex fuel version and conveniently will present the project to BNDES
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Volkswagen has also tested successfully several vehicles prototypes of Gol, using the BOSH technology and lately is waiting Government’s statements about this topic.  Equally, Fiat is studding the topic together with Magneti Marelli, which has developed a cheaper system and gave guaranties of exclusive supplies to Fiat for two years.

 Last, Chevrolet also did studies and tests using this technology.

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Description for a Brazilian Fuel Cell Concept

FUEL CELL WITH ETHANOL REFORMER Production of Hydrogen from Ethanol reforming for Fuel Cell Systems

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WHY ETHANOL IS THE RIGHT RAW MATERIAL FOR HYDROGEN?

• ETHANOL IS A RENEWABLE ENERGY SOURCE • ETHANOL IS A CLEAN, SULPHUR FREE FUEL • THE CO2 CYCLE IS NEUTRAL • ETHANOL USE IS GROWING WORLD-WIDE (USA, CANADA, MEXICO, SWEDEN, THAILAND, INDIA)

• ETHANOL/WATER RATION CAN BE ADJUSTED FOR OPTIMUM REFORMING
• TECHNOLOGY MAY BE ELIGIBLE FOR CDM (CLEAN DEVELOPMENT MECHANISM) = UNITED NATIONS PROGRAM FOR CO2 TRADE
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ETHANOL CONSUMPTION IN BRAZIL
18,0

17,0
16,0 Billion Liters 15,0 14,0 13,0 12,0 11,0

SELLING 15% E100 CARS

NOT SELLING E100 CARS

10,0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 24
Years

Fuel Ethanol Usage: Driving Forces
STRATEGIC • Renewable & Produced from domestic sources • Lower dependence on imported oil • Trade Balance • Supply of electric energy to the public grid SOCIAL • Jobs in rural areas • Low investment per job • Large number of jobs ECONOMIC • Diversification and better rural rent • Competitive & High value co-products • Agribusiness development & Economic growth • Reduces external debt & negative externalities
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Fuel Ethanol Usage: Driving Forces
ENVIRONMENT & PUBLIC HEALTH • Reduces Greenhouse gases
• • • • • Reduces air pollution High biodegradability in water & soil Relative low toxicity MTBE substitute Waste minimization

TECHNICAL
• Octane booster • Anti-icer
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AND WHAT WE LEARN?

1. FLEXIBILITY IN INDUSTRY IS A VERY IMPORTANT ISSUE FOR ALL SUGARCANE PRODUCERS; 2. COORDINATION BETWEEN STAKEHOLDERS IS FUNDAMENTAL (BY GOVERNMENT) TO ACHIEVE RESULTS, THROUGH PUBLIC POLICIES; 3. COMPETITIVENESS IS BASIC! 4. ETHANOL MUST BE AN INTERNATIONAL ENVIRONMENTAL COMMODITY
27

FINAL REMARKS
Fuel Ethanol should be viewed as a sound energy alternative. Its main characteristics are in line with Sustainable Development needs: High performance & versatile energy source Environmentally friendly & safe Renewable Energy efficient

Driver of social & economic development
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Machines and Equipments for the Sugar and Alcohol industry

 Brazil is considered an expert in technology process domain, engineering system and equipments fabrication.
Main equipments produced by brazilian industry: machine to plant sugar cane machine to gather sugar cane sugar cane conveyer alcohol distiller centrifuge boiler and other equipments energy generator equipments treatment of residual material equipments to move materials pump and moto pump industrial valves industrial compressors quality control equipments

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Existent measures to stimulate increasing of alcohol consumption:

IPI decreased for alcohol automobiles
capacity higher than 1.000 cm3 until 2000 cm3 : tax of 14% for the alcohol ones and 16% for the gasoline ones. Capacity higher than 2000 cm3 : tax of 20% for the alcohol ones and 25% for the gasoline ones. “Green” Fleet: Law Nº 9.660, from 06.16.98 – “Green fleet” - taxis only get IPI decreasing for alcohol vehicles and settle an obligation to buy alcohol vehicles to government fleets. Alcohol anhydrous addition to gasoline :

 Law nº 10.464/2002 settle 25% as the limit of addition of alcohol anhydrous to gasoline
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Measures that could stimulate increasing of alcohol consumption: addition of alcohol to diesel;

fuel cell vehicle motors.
flex-fuel vehicles – alcohol/gasoline

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Alcohol Vehicles Sales in Brazil
25.000 22.986 20.000 18.335

15.000
Unity

10.947 10.000 7.647 5.000 1.120 1.224 0 1996 1997 1998 1999 Year 2000 2001 2002 (Jan-July) 10.292

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