BP to quadruple Brazil sugarcane capacity

By PAUL KIERNAN

Global oil giant BP’s Brazilian biofuels division plans to quadruple its sugarcane-crushing capacity in the next five years as it seeks to capitalize on the growing market for ethanol, the company confirmed.

BP Biocombustiveis, which operates three sugarcane mills in Brazil, aims for crushing capacity of 30 million tpy of sugarcane by 2017, up from 7.5 million tpy currently, local newswire Agencia Estado reported Tuesday, citing an interview with company President Mario Lindenhayn. 

A BP Biocombustiveis press official confirmed the information.

According to the report, BP Biocombustiveis expects to reach the goal by expanding its existing mills and building three new ones.

Possible acquisitions aren't figured into the 30-million-ton estimate but haven't been ruled out.

Lindenhayn said that in 2011, BP invested around $750 million to expand to 100% its stake in Tropical Bioenergia, which has one sugarcane mill in central Goias state, and CNAA, which owns two functioning mills and one greenfield project in Minas Gerais and Goias.

In addition to expanding industrial capacity, BP Biocombustiveis and other Brazilian sugar and ethanol producers face an ongoing challenge to obtain enough feedstock.

A number of factors related to weather and irregular investments in the sector caused Brazil's main center-south sugarcane crop to fall 11% last year from the previous year.

"In the crop that's ending now, our crushing only amounted to 5 million tons," Lindenhayn said, according to Agencia Estado.

BP Biocombustiveis is currently investing to expand by 35% its sugarcane acreage for the upcoming 2012-13 harvest, which will begin in April.

BP Biocombustiveis owns 80% of the sugarcane it crushes to produce sugar and ethanol, while the remaining 20% is purchased from suppliers.

Sugarcane-based alcohol is a major fuel source in Brazil, where around half of the domestic auto fleet have flex-fuel engines capable of running on pure hydrous ethanol.

Regular gasoline in Brazil contains a 20% mixture of anhydrous ethanol.


Dow Jones Newswires

Image courtesy of BP p.l.c.

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