Brazil ethanol pipeline owner eyes corn-based fuel makers

Avante

16/01/2019 15:33

By Marcelo Teixeira
    SAO PAULO, Jan 16 (Reuters) - Logum, the company operating
Brazil's sole ethanol pipeline, is looking to expand the system
into central Brazil to reach more plants and possibly the
nascent corn-based ethanol industry, which is expected to grow.
    Chief Executive Wagner Biasoli told Reuters Logum has
secured financing for an expansion to link new mills in the
state of Minas Gerais, boost delivery to Sao Paulo state and
reach total capacity of 6 billion liters per year. 
    Next up are the center-west states Goiás and Mato Grosso,
some of the largest grain producers in the country, he said,
adding that new biofuel incentives taking effect in 2020 should
help to boost demand for ethanol.
    Logum is joint owned by state oil company Petróleo
Brasileiro SA  PETR4.SA  along with sugar and ethanol producers
Raízen and Copersucar. The co-owners closed a deal late last
year to buy out engineering firms Odebrecht and Camargo Correa,
increasing their stakes from 20 percent to 30 percent each.
Financial details were not disclosed.
    The exit of Odebrecht and Camargo Correa, two companies
ensnared in Brazil's largest-ever corruption scandal, opened the
way for state development bank BNDES to extend a credit line of
1.8 billion reais ($483.64 million) for the expansion. 
    The next frontier is corn-based ethanol.
    "I've been to Mato Grosso last week. We are looking at the
possibility to extend our pipeline to Cuiabá," said Biasoli,
referring to the capital of Brazil's top grains state.
    Biasoli cited market forecasts of corn ethanol growing to 1
billion liters in Mato Grosso this year from 300 million liters
in 2018. "The state is expected to reach 5 billion liters in the
next three to five years," he said. 
    There are several projects under way to produce ethanol from
corn in Mato Grosso, a state that has sharply increased its corn
output. The movement is changing the Brazilian ethanol industry,
which has long been focused on sugar
cane. urn:newsml:reuters.com:*:nL8N1PP6KR urn:newsml:reuters.com:*:nL2N1QA17F  urn:newsml:reuters.com:*:nL1N1UT1GU  urn:newsml:reuters.com:*:nL2N1W50KG
    Logum currently moves 2.5 billion liters of ethanol per
year, mainly from the Ribeirão Preto region to Sao Paulo and Rio
de Janeiro markets. It also moves ethanol to ships on the Rio
coast for export or supplying northeast Brazil.
    Transportation costs have been one of the major hurdles to
expanding ethanol output in central Brazil. Current production
is mostly sold locally instead of being trucked some 2,000
kilometers (1,250 miles) to southeastern markets and export
terminals.
   ($1 = 3.7218 reais)

 (Reporting by Marcelo Teixeira
Editing by Susan Thomas)
 ((marcelo.teixeira@tr.com; +55 11 5644 7707; Reuters Messaging:
marcelo.teixeira.thomsonreuters.com@reuters.net - https://twitter.com/tx_marcelo))