Brazil ethanol pipeline projects may join forces

By Roberto Samora

SAO PAULO (Reuters) - Operators of three, separate billion-dollar Brazilian ethanol pipeline projects said on Tuesday they are open to coordinating efforts to bring the biofuel from new distant production areas to the main local consumer and export markets.

"There are good and bad points with each of the (pipeline) projects," said Alberto Guimaraes, president of pipeline project PMCC, the joint venture of the state-run oil company Petrobras, Japan's trading company Mitsui and local construction company Camargo Correa.

"Naturally, I see the rival companies, not merging, but in partnerships," he said from the sidelines of the Ethanol Summit in Sao Paulo.

PMCC, that should link Uberaba in Minas Gerais state, to the sugarcane and refining center of Paulinha in Sao Paulo state, and then to an export terminal in Sao Sebastiao and Ilha d'Agua in Rio de Janeiro is due to start operating in 2010.

Investments in the project, which should be completed in 2012 and transport 12 billion liters a year, should reach $1.5 billion. Brazil's center-south should produce about 28 billion liters of ethanol this season.

The pipelines would improve the profit margins for ethanol producers, who are limited to moving the biofuel by railway at best and trucks in the most expensive case.

Brazil has some limited multiuse pipelines through which mills and fuel distributors ship ethanol but they only serve a fraction of the domestic market and are unusable for the export market as impurities from other fuels like gasoline are unacceptable in outbound shipments to international buyers.

Brazil's cane industry is increasingly opting to expand in more remote areas in the land-locked center-west, to find cheaper and more abundant land. This makes pipelines all the more essential for getting the fuel to the main consumer markets in the big cities and to the ports.