Brazil Petrobras Starts Work On $3.3 Billion Ethanol Pipeline

RIO DE JANEIRO -Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, started work Tuesday on a $3.3 billion pipeline project that will link sugar cane fields to the country's industrial hub.

The 850 kilometer pipeline will have the capacity to transport 21 million cubic meters of ethanol per year, starting in north central Brazil's Goias state to Minas Gerais and Sao Paulo states. The pipeline is expected to be completed by 2014.

The venture marks Petrobras's continued emergence in the biofuels segment, where the company wants to become an important player in one of the world's largest ethanol markets. A majority of Brazilian light vehicles are flex-fuel, operating on any combination of gasoline or ethanol.

In May, the company's Petrobras Biocombustivel unit agreed to pay about $1 billion for a 45.7% stake in sugar group Guarani, Brazil's fourth-largest miller of sugarcane. Petrobras wants to raise ethanol output to 2.6 billion liters per year by 2014, up from about 900 million liters currently.

The first section of the pipeline will be a 202-kilometer link between Ribeirao Preto and Paulinia in Sao Paulo state. The section is expected to be completed by 2012.

Petrobras and a consortium that includes sugar groups Cosan Industria e Comercio SA (CSAN3.BR), Copersucar and Uniduto as well as closely held construction firms Odebrecht and Camargo Correa are to build the pipeline.

source: foxbusiness