Brazilian companies to push for cellulosic ethanol

SAO PAULO, Oct 14 (Reuters) - A group of Brazilian companies and industrial organizations will set up a joint venture to finance research in cellulosic ethanol, a director at the Sao Paulo Industry Federation (Fiesp) said on Tuesday.

The initiative includes Brazil's leading sugar and ethanol producer, Copersucar, the country's Sugar Cane Industry Association, Unica, and the local subsidiary of commodities giant Bunge (BG.N: Quote, Profile, Research, Stock Buzz).

Brazil's largest industrial conglomerate, Votorantim; Itausa (ITSA4.SA: Quote, Profile, Research, Stock Buzz), the holding company of Itau bank; and Brazil's Co-operatives Organization (OCB) will also participate in the project, which should be signed in the coming weeks, Fiesp Director Benedito Ferreira said.

"They will create a special purpose entity to do research on cellulosic ethanol," Ferreira said on the sidelines of a seminar promoted by Fiesp.

"We're raising money and (the government's crop research agency) Embrapa will do the technical research. It will also search for partners, including abroad," Ferreira said.

Brazil and other countries such as the United States and Canada are rushing to develop biofuel from biomass sources such as switchgrass or wood chips, a process with technological obstacles that are gradually being overcome.

Sugar cane is seen as a competitive raw material for cellulosic ethanol as it has a lot of biomass, which is now burned to produce thermal and electric energy. Cane leaves and other parts could be used to produce ethanol instead.

Brazilian producers say that the cost of transporting raw material like grasses and wood to mills is one of the biggest problems confronting the project. But with cane, this cost is already absorbed by the mill's traditional process.

"This (cellulosic ethanol) is the future. The Americans are investing a fortune and want to partner with us because we have cane," Ferreira said without giving more details.

He said the amount of money to be invested in the project would be defined after a business plan is completed.