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Shell Plans To Boost Ethanol Production In Brazil

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How Royal Dutch Shell Intends To Boost Ethanol Production In Brazil

Bidness Etc looks at the progress Shell is making in the joint-venture with with Cosan Limited to boost ethanol production in Brazil over the next ten years

By: MICHEAL KAUFMAN
Published: Dec 30, 2014 at 7:19 am EST

The joint-venture between Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and Cosan Limited(USA) (NYSE:CZZ), called Raizen, plans to spend nearly $1 billion on building ethanol production facilities to increase its biofuel output by 50%, according to the Financial Times (FT).

Cosan Limited intends to build eight ethanol plants over the next ten years, for an estimated cost of $930 million (2.5 billion reais). The plants will produce cellulosic ethanol fuel using sugarcane waste as its primary raw material, the most efficient source of biofuel. The first of eight plants was completed last week, and has an annual capacity of 40 million liters. After the completion of all plants, the company expects biofuel output to increase 50%.

Several ethanol producers in Brazil struggle to break-even, such a significant investment from Shell will boost morale of the industry. The commercial viability and prospects of second-generation ethanol have been enhanced after years of research and experiments.

Production of alternative fuel from biodegradable waste has been long touted as a landmark for the fuel industry. It promotes efficiency and productivity, while offering environmental benefits. Experts claim that the ethanol fuel model is sustainable only in Brazil as the country has advanced agricultural technology and vast acres of land.

As far as the cost is concerned, producing second-generation cellulosic oil is more costly than that of ethanol, produced from other sources. Raizen’s Agro-Industrial Director, Joao Alberto Abreu, expects costs to decrease over time as enzymes needed for production become more easily available.

Brazil is the biggest ethanol producer in the world and one of the biggest exporters of biofuel. Many ethanol producers have been struggling for the past few years but there are encouraging signs as domestic demand for ethanol is on the rise, while the opportunity to export cellulosic ethanol might grow in the near future.

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