Petrobras favors corn over cane for ethanol, may exclude Raizen, sources say
Brazil’s Petrobras is leaning toward corn-based ethanol over sugarcane as it considers re-entering the biofuels sector, citing lower production costs and rising corn output, especially in northern regions. Talks remain preliminary, with no concrete deals. Raizen, a major sugarcane ethanol producer, faces losses and debt amid stagnant cane output.
RIO DE JANEIRO, Aug 18 (Reuters) – Brazil’s Petrobras (PETR3.SA), opens new tab is leaning toward corn as the raw material for a renewed foray into ethanol, potentially sidelining sugarcane and beleaguered sugar producer Raizen (RAIZ4.SA), opens new tab, three Petrobras sources familiar with the matter said, citing preliminary evaluations.
Energy company Petrobras, majority-owned by Brazil’s government, has previously said its potential return to ethanol would involve buying minority stakes in other companies, similar to past investments.
While sugarcane ethanol has not been definitively ruled out, corn ethanol is gaining favor in Petrobras, the sources told Reuters over the weekend, citing falling production costs driven by corn crop growth and rapid expansion in the industry. Sugarcane ethanol output, however, has stagnated amid competition for the raw material from the sugar industry.
Petrobras is also eyeing increased corn output in Brazil’s northern regions, where ethanol supplies are low but corn production is rising, the sources said.
“We’re closer to corn than cane. The outlook is better. We’re talking to several corn producers,” one of the sources said, without naming any companies that Petrobras was talking to.
Petrobras said in a statement that it has no planned investments in ethanol or distribution of the fuel with Raizen.
Two other Petrobras sources said discussions about re-entering the ethanol sector remain in early stages.
“The return to ethanol is certain, but there’s nothing concrete with anyone,” one of those sources said, warning to expect delays to any eventual deal.
The company sources spoke on condition of anonymity because they were not authorized to speak to the media.
Raizen, a joint venture between Cosan (CSAN3.SA), opens new tab and Shell (SHEL.L), opens new tab that produces sugar and sugarcane ethanol, was hit by bad news last week when it reported a swing to a first-quarter loss and mounting net debt.
On Monday, Raizen shares rebounded from a 16% drop last week, fueled by reports over the weekend suggesting that Petrobras may be considering a stake in the company.
Raizen said it would not comment on the matter when asked about those reports.
“They want to sell to us, but talks haven’t even started here,” one of the Petrobras sources said, referring to Raizen.
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Source : Reuters
