South- South Cooperation: Lot of room to expand our oil trade with India, says the Energy Minister of Brazil

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January 27, 2021 6:36 PM

Our new biofuels policy, named Renovabio, became operational in the beginning of 2020. Renovabio is a credit carbon market where distributors need to buy de-carbonization credits (CBIOS) from biofuel importers/producers.

The Minister of State for Mines and Energy, The Federative Republic of Brazil, Admiral Bento Albuquerque meeting the Union Minister for Petroleum & Natural Gas and Steel, Shri Dharmendra Pradhan, in New Delhi on January 22, 2020. (Credit: PIB)

In 2020, India and Brazil had inked a MoU for cooperation in the field of Oil and Natural Gas. During the visit of the Brazilian President Jair Bolsanaro last January, ethanol was one of the issues on the agenda of talks. “Brazil and India are energy powers, with strong capabilities both in oil & gas and renewables,” Energy Minister Bento Albuquerque of Brazil tells Huma Siddiqui in his first ever interaction with the Indian media.

Following are excerpts:

How can Brazil help India achieve its target of 20 per cent blending of ethanol in petrol and 5 per cent blending of biodiesel in diesel by 2030?

In the case of ethanol, Brazil has a decades-long experience, which we are willing to share with our Indian partners. We are the largest producer of sugarcane ethanol, while India has the largest sugar industry in the world. We can certainly accomplish a lot together in this sector.

Our experience with ethanol since the 1970s helped us save more than two billion barrels of oil equivalent so far. This means 2 years of the total CO2 emissions of a major economy, not to mention savings made in import substitution of refined gasoline. ‘Proálcool programme’ was the stepping stone of our current mandatory blending of 27 per cent of ethanol to gasoline, which Brazil has been using since 2015. In addition, we are having extremely positive results in our national diesel engine-testing program with biodiesel blends of 15 per cent (b15), which we want to attain in 2023. Since March 2020, we have adopted the b12 national blending.

Our new biofuels policy, named Renovabio, became operational in the beginning of 2020. Renovabio is a credit carbon market where distributors need to buy de-carbonization credits (CBIOS) from biofuel importers/producers. If distributors commercialize more fossil fuels that contribute to global warming, they can buy CBIOS to compensate for their emissions. Renovabio stimulates innovation and investment to increase operational efficiency in biofuel production. If a process has less carbon intensity, more CBIOS may be issued per liter of biofuel production.

When I met Minister Dharmendra Pradhan, last year, I proposed we join our efforts and forces to make ethanol a global commodity. Blending is one of the ways that could help us reach our goals. We can share not only our technology, but first and foremost our 50-year experience and regulatory best practices we have collected so far.

We have already started to work on that. In February 2020, as I mentioned before, we organized an event called “Sustainable Mobility: Ethanol Talks” in New Delhi. It was a roadshow that allowed the exchange of experiences regarding the promotion of ethanol use and production. It also helped bring together the private sectors of both countries, with a view to a next step. We are planning a second edition of an event on ethanol this year, to be hosted by Brazil, most probably in a virtual format, so as to deepen our discussions around two main goals: enhancing our technical cooperation in ethanol production and use; and exploring new business opportunities.

What is the update on the MoU on Bio-energy cooperation that was approved in 2020?

When President Jair Bolsonaro visited New Delhi, one year ago, we decided, together with our Indian partners, to set an ambitious bilateral agenda in energy, among a number of other strategic sectors. I met with my counterparts in the ministries of Petroleum, Natural Gas and Steel; New and Renewable Energies; Road Transport and Highways, besides having visited the International Solar Alliance (ISA) and seizing the opportunity to address a very qualified audience of businessmen and government leaders. Different agreements were signed, covering a range of areas of mutual interest, including renewables, in which Brazil and India have recognized capabilities and ambitious goals.

Bioenergy has a proven contribution to road transport and industry de-carbonization – in which we both face many challenges. Technologies are already available which allow for increased productivity due to biotechnology research. Ethanol, Biodiesel, HVO and Biogas are drop-in fuels that can deliver substantial and even immediate results, reducing our carbon footprint, oil dependency and, let’s not forget, generating sustainability and high-quality jobs. Biomass can be competitively produced with high levels of sustainability, efficient use of natural resources, and with an extremely low carbon footprint.

Emerging biofuels and biomaterials are likely to change the landscape for de-carbonization in some hard-to-abate areas, such as aviation and shipping. The opportunities for bio-bunker in navigation and

Bio-kerosene in aviation should not be neglected. Interesting synergies with hydrogen also apply.

Despite all the challenges we faced last year, due to the pandemic, important steps were taken in our bilateral collaboration in bioenergy. We have already organized a mission to New Delhi, with representatives of public and private sectors, in order to present to Indian stakeholders the Brazilian ethanol sector. We are in the process of fulfilling the requirements for the establishment of a joint working group under the Memorandum of Understanding in bioenergy, and the Brazilian side is looking forward to beginning a more structured bilateral work in this area.

Recently, Essar group made a binding offer to Brazil’s Petroleo Brasileiro SA to buy the country’s second-largest oil refinery. What is the update?

Brazil is a major consumer of oil products, an important crude oil producer worldwide, and its oil products market is projected to grow steady in the next few years. Essar group is an important global investor, and we are obviously interested in having their investments in Brazil.

With Petrobras’ divestment program, eight refineries and their corresponding logistics assets that are currently being sold. They can process 1.1 million barrels per day or a half of total Brazilian capacity. With that, we expect to promote competition and attract investments in infrastructure for oil production and logistics, also improving fuels offer and reducing prices to Brazilian consumers.

Proximity among oil producing fields on the Brazilian coast and the large and attractive Brazilian domestic market for oil commodities makes the local downstream segment in Brazil a unique and compelling investment opportunity.

According to Petrobras´ schedule, the process is currently undergoing a new round of binding proposals. In this new round, petrobras asked all participants which submitted binding proposals to make their final offers. The participants were not disclosed in the process. Petrobras expects to receive all these offers by the end of the first quarter of 2021.

During the first half of 2020, India was the third-largest importer of Brazilian crude oil, buying 1.9mt (million metric tons), behind China and the US. Brazil could be a good alternative solution for India’s energy security. Your views.

In the Latin American and the Caribbean context, Brazil ranks 1st in the production of oil. Crude oil is the main item of our exports of goods to India, equivalent to about a billion dollars of value exported in 2020, or as much as 42 per cent of the total amount of exports from Brazil to India in value. Meanwhile, more than 40 million barrels of crude oil were imported from Brazil in the last two years.

Our oil production is expected to increase dramatically in the coming years, reaching up to 5 million barrels a day by 2030, when Brazil will most likely become one of the five largest producers in the world, according to the international energy agency. In this context, there certainly is a lot of room to expand our oil trade with India.

Since you mentioned the concept of energy security, I would like to recall one of the messages I conveyed in my mission to India last January — for Brazil, energy security lies on the diversity of sources. That is why I usually say that, as far as energy is concerned, the future is bio, it is oil, it is gas, it is nuclear, it is wind & solar, it is coal. It is diversification. In this context, our natural complementarities can certainly take Brazil-India relations to a next level.

What is the status of research & development of renewable energy and second-generation biofuels?

This is a very good and timely question. Supporting R&D is an important part of a sound policy environment. As we mentioned, Brazil has specific public policies for R&D in 2nd generation biofuels and renewables in general.

As far as 2nd generation biofuels are concerned, we have two targeted policies: the current mandatory blending of 27 per cent of ethanol to gasoline and “Renovabio”, our flagship program, which is a market driven incentive mechanism. Renovabio stimulates investment in the 2nd generation as companies can provide more CBIOS per liter of biofuel than the 1st generation. We believe that in the near future we will have commercial production of 2nd generation biofuels. In addition, our contract for E&P has an R&D clause by which oil companies need to invest in research, development and innovation, including 2nd generation biofuels.

When it comes to the share of renewables in our power mix, I must recall that R&D has been incorporated into the reality of the electricity sector through legislation since the turn of the century, with the unbundling of that sector. Legislation provides for the mandatory application of 0.5 per cent of the net operating revenue of entities regulated in R&D. Over 10 percent of these resources are invested in alternative renewable sources projects and also cutting-edge programs, which vary from promoting efficient use of power until combatting power waste and monitoring environmental practices by means of the infrastructure of preexisting transmission lines.

As you know, we must be very careful not to backtrack in the bio-economy. Due to the pandemic, global biofuels production dropped for the first time in the last two decades, as a reaction to the economic impact of COVID-19 and response measures. A plunge in crude oil prices at the start of the pandemic made biofuels less competitive than traditional fossil fuels, exacerbating the situation for renewable alternatives.

This drop in the overall transport fuel demand brought lower greenhouse gas emissions in 2020, and an immediate air quality improvement in many cities. However, these short-term benefits stand to be quickly erased if we lose track of bioenergy recovery, one of the best and most available instruments for transport and industry de-carbonization.

Building a comprehensive, sustainable, smart and large-scale bioenergy strategy, including ethanol, biodiesel, biogas, bioelectricity, and new and advanced biofuels is both feasible and hugely beneficial, creating high-quality jobs, reducing greenhouse gas emissions, bringing development to rural areas and giving the country’s population more energy options and more energy security. This continued support must find its roots, of course, in sound and predictable public policies.

We know that India is already very advanced in the development of cellulosic, second generation biofuels, and with a national programme supporting the construction of a large number of advanced bio-refineries using different technology mixes. Brazil also stands to learn from this recent experience by India. This is only a single example of how much our countries can benefit from a closer cooperation in this area.

How can the two countries work together to market access and sustainability of biofuels, bio-electricity and biogas supply chain?

There is a lot we can learn from each other in this field. Brazil is ready to share the experience and technology accumulated by our ethanol and biodiesel industries. We use e27, e100 and b12 in all gas stations, that is to say more than 40 thousand gas stations. Our automobile industry has a solid knowledge on how to deal with biofuels.

Considering bio-electricity, our ethanol producers, who have a significant contribution for our system, have tremendously improved the technology to generate power. Biogas supply chain, for its turn, is being developed in Brazil, and we already have a solid regulatory framework to use bio-methane in vehicles and substitute NGV. In 2020, we inaugurated a plant that combines generation of biogas and ethanol production. We believe that this concept will be disseminated to other sugarcane ethanol producers as we have a great potential to use Vinasse, the final by-product of the biomass distillation for the ethanol production, to generate biogas.

As you see, there are several possibilities and avenues to explore under the Brazil-India partnership in the energy sector. What we have to do is to bring public and private sectors together, in order to identify and better explore our existing synergies and shared goals.

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