Every year, between November and March ethanol becomes a disputed topic between Brazilians. Usually, the discussion goes around the well-known effects of shortage in fuel supply, consequence of seasonality production of sugar cane. The consequences follow the general principles underlying the trends in normal commodities in any economy – lower supply results in higher prices and less consumption. This time of year consumers exercises with more frequency the right to decide between which fuel to purchase – ethanol or gasohol (gasohol refers to the blend of gasoline and ethanol commercialized in Brazil as alternative to pure ethanol).
This year another topic on ethanol became hot issue. It refers to the launch of the Raiz Energia (translated to English it would be something like “Energy Root”) or Raizen. Raizen is the result of a Joint Venture between Royal Dutch Shell and the Brazilian Cosan S.A.
You might ask “Shell and Who else”? Yes, everyone knows Shell, one of multiple Dutch world brands, but who is Cosan? If you also are not familiar, don’t get depressed, even Brazilians don’t know this company that well and prefer to focus their attention on the final products of Cosan – ethanol, sugar or the co-generated electricity. Cosan is behind several other products (e.g. lubricants, logistics) and brands (e.g. Esso, Mobil, Uniao). The company was founded in 1936 in Piracicaba and is one of the supporters of the extraordinary expansion of sugarcane culture in the State of Sao Paulo in the 1970’s and 1980’s and the extensive professionalization of the sector in the following years. Today the company runs 23 production facilities throughout Brazil, operates 4 ethanol refineries and 2 port terminals (http://www.cosan.com.br).
Raizen born as the one of the top five companies in total revenues in Brazil (the second largest energy company after the Brazilian oil Company, Petrobras). According to Raizen estimation, the new company will be responsible for the production of over 2.2 billion liters of ethanol per year to supply the domestic and international markets. This statement is relevant for the quantity of liters (approximately 15% of total hydrous ethanol consumed in Brazil in 2010. Source: ANP) and also for the target on international markets, a long dream between ethanol producers and government.
The focus on international market is the backbone of Raizen. In his inaugural speeach the company CEO announced the plan to consolidate ethanol as an international commodity. Another evidence is the fact that several products and services provided locally by Cosan were not included in the portfolio of Raizen.
Experience in all stages of fuel life cycle and powerful lobbying capacity are also some of the main characteristics of the new company. Shell displays a respectable voice between Europeans oil industry and Cosan step towards internationalization is strongly supported by Brazilian government and industry federations. Brazilian authorities stick on the expected dividends of economic and political effects of ethanol industry growth; companies target the gains of providing a fuel with competitive prices and strong environmental appeal to markets heavily dependent on oil.
The launch of Raizen is creating expectations in the international ethanol market. It is worth it to watch the next progresses.
Luciano Freitas
Sideriver environment 