From: Reuters
Published April 23, 2008 12:37 PM

U.S.-Brazilian venture to turn cane into biodiesel

By Inae Riveras

SAO PAULO (Reuters) - U.S. company Amyris Biotechnologies and Brazilian sugar and ethanol group Crystalsev have formed a joint venture to produce and sell the first commercial diesel made from sugar cane instead of oilseeds like soy and canola., both sides said on Wednesday.

Amyris developed the so-called second-generation biofuels technology, using microorganisms to take juice extracted from crushing sugar cane and transform it into a biodiesel closely resembling the fossil fuel.

Brazil has been the world's largest producer of ethanol from sugar cane for nearly three decades and the country has more than 30,000 filling stations that market the biofuel.

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"We are making the first diesel from sugar cane in the world," Amyris President John Melo told Reuters on the sidelines of a news conference in Sao Paulo.

In sugar cane, Melo said, "Brazil has the most sustainable and economic raw material," adding the new diesel will be competitive as long as crude oil remains above $60 a barrel.

The companies did not specify the investment at the initial plant but said costs to build a diesel plant next to a regular sugar and ethanol mill would be of around $20-$30 million.

DIVERSIFICATION

The first commercial production unit will be built in partnership with one of Brazil's most advanced sugar and ethanol mills, Santa Elisa -- owned by Crystalsev's major shareholder, Santelisa Vale -- in Sao Paulo state.

The mill will supply 2 million tonnes of cane a year to the plant, which is expected to come on-line in 2010 and produce 10 million gallons of biodiesel in the first year of operation.

Total production within the first five years of operation is expected to reach 1 billion gallons, including the first plant and other units to be built.

"Our intention is this diesel to be part of a blend with conventional diesel, a complement not to replace it," Melo said. According to the company, the product maintains mineral diesel characteristics in a blend of up to 80 percent.

Amyris is negotiating with Brazil's National Petroleum Agency to get permission to market the new product.

Brazil launched in January a biodiesel program that now mandates a 2 percent blend in all retail diesel. The blend will rise to 3 percent on July 1 and to 5 percent by 2013.

Brazil is the world's largest cane ethanol producer and is forecast to harvest a record cane crop of about 550 million tonnes this season.

"It's our objective to seek out a value added product and diversification," said Crystalsev Chief Executive Rui Lacerda Ferraz.

"Today our production is based on arbitrage decisions between the price of ethanol and sugar. We are now going to be able to do arbitrage among five products," he said, referring to plans to eventually produce gasoline and aviation fuel from cane through a similar process.

Santelisa Vale is controlled by the Biagi family, which holds 67 percent of the group's capital, but also has minority partners including the investment arm of Brazil's BNDES development bank, BNDESPar, Goldman Sachs and the Junqueira family, which controls major cane milling assets in Brazil.

(Writing by Reese Ewing; Editing by David Gregorio)

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