Petrobras to invest in 20 ethanol mills by 2012

RIO DE JANEIRO, Sept 26 (Reuters) - Brazil's state-run oil company, Petrobras (PETR4.SA), said on Wednesday it would start approving its first five partnerships to produce ethanol next week with mills in Goias and Mato Grosso states.

Seeking to take advantage of growing demand for alternative sources of energy, the company intends to have a 20 to 30 percent share in 20 ethanol distilleries, together with Japanese trading house Mitsui (8031.T).

"Our idea is to have an average output of 200 million liters of ethanol from each (of the five) plants (per year, from 2010)," Petrobras downstream director, Paulo Roberto Costa, said in a news conference.

Total investments in the five units are estimated at $1 billion, including sugar cane plantation and electric energy cogeneration from the burning of the cane bagasse.

The second five new partnerships will likely be announced by the year-end and another 10 next year, Costa said.

"We will need at least another 15 projects (besides the five already selected) to reach the 4 billion liters of ethanol forecast in our strategic plan by 2012," he said.

Petrobras has been studying around 40 mill projects since the beginning of the year to start its ethanol production, with an eye on exporting mainly to the Japanese market. The company is already a strong player in ethanol transport and distribution in the domestic market.

Despite Petrobras' bright ethanol exports forecast in the long term, this year's overseas sales will fall short of its goal, due mainly to infrastructure problems in Nigeria and Venezuela's choice of an oil-based additive in gasoline instead of Brazilian ethanol, the company said in August.

Talks to export the biofuel to Venezuela were resumed during the visit of Venezuela's president, Hugo Chavez, to Brazil last week, Costa said.

"We sent some cargoes to Japan and, recently, to the United States, but we are still discussing with Venezuela," he said.