August 22, 2010

United States and Brazil to Expand Energy Cooperation

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

When President Obama visited Brazil in March, one of the topics of discussion between President Obama and President Rousseff was the expansion of cooperation between the two countries in the field of energy. One of their joint goals is to expand biofuel production and to create an international market for ethanol outside of their two countries.

Daniel Poneman, the number two person in the U. S. Energy Department, recently spent three days in Brazil meeting with officials from the Ministry of Mines and Energy developing a joint strategy for the "commoditization" of ethanol. The meetings were part of the Strategic Energy Dialogue that included discussion on biofuels, renewable energy, petroleum and natural gas, energy efficiency, and nuclear energy. These meeting were an offshoot of the Memorandum of Understanding signed between the two countries in 2007 that pledged cooperation on research and development of ethanol and the opening up of outside markets.

As part of this process, the two countries are also cooperating on the establishment of norms and standards for ethanol that are required if the fuel is to expand beyond its base in Brazil and the United States.

Brazil has recently been unable to meet the domestic demand for ethanol during the intra-harvest period, but Poneman feels that is a temporary situation and not an impediment to transforming ethanol into a commodity that can be traded worldwide. He also emphasized the importance of developing the second generation of ethanol produced from cellulose and not just corn or sugarcane in order to meet the expected international demand for the fuel.

Future demand for ethanol will be met with cellulosic ethanol and in order to accelerate the research and development of the fuel, the Obama administration recently announced US$ 510 million in credits and incentives for cellulosic ethanol production and the development of advanced biofuels made form algae, animal residue, or other organic materials. In order to increase the demand for the fuel, Obama also announced plans to increase the use of renewable fuels by the American military. Boeing and Embraer are already cooperating on research and development of biofuels that can be used in aviation.

The discussions between the two countries were not confined to just biofuels, the Americans are very interested in the huge petroleum field discovered off the southeastern coast of Brazil which is expected to transform Brazil into one of the major exporters of petroleum to the United States. Purchasing petroleum from Brazil would be very advantageous for the United States because it would help to avoid all the entanglements associated with petroleum from the Middle East.