January 16, 2019 / 3:38 PM / 2 years ago

Brazil ethanol pipeline owner eyes corn-based fuel makers

SAO PAULO, Jan 16 (Reuters) - Logum, the company operating Brazil’s sole ethanol pipeline, is looking to expand the system into central Brazil to reach more plants and possibly the nascent corn-based ethanol industry, which is expected to grow.

Chief Executive Wagner Biasoli told Reuters Logum has secured financing for an expansion to link new mills in the state of Minas Gerais, boost delivery to Sao Paulo state and reach total capacity of 6 billion liters per year.

Next up are the center-west states Goiás and Mato Grosso, some of the largest grain producers in the country, he said, adding that new biofuel incentives taking effect in 2020 should help to boost demand for ethanol.

Logum is joint owned by state oil company Petróleo Brasileiro SA along with sugar and ethanol producers Raízen and Copersucar. The co-owners closed a deal late last year to buy out engineering firms Odebrecht and Camargo Correa, increasing their stakes from 20 percent to 30 percent each. Financial details were not disclosed.

The exit of Odebrecht and Camargo Correa, two companies ensnared in Brazil’s largest-ever corruption scandal, opened the way for state development bank BNDES to extend a credit line of 1.8 billion reais ($483.64 million) for the expansion.

The next frontier is corn-based ethanol.

“I’ve been to Mato Grosso last week. We are looking at the possibility to extend our pipeline to Cuiabá,” said Biasoli, referring to the capital of Brazil’s top grains state.

Biasoli cited market forecasts of corn ethanol growing to 1 billion liters in Mato Grosso this year from 300 million liters in 2018. “The state is expected to reach 5 billion liters in the next three to five years,” he said.

There are several projects under way to produce ethanol from corn in Mato Grosso, a state that has sharply increased its corn output. The movement is changing the Brazilian ethanol industry, which has long been focused on sugar cane.

Logum currently moves 2.5 billion liters of ethanol per year, mainly from the Ribeirão Preto region to Sao Paulo and Rio de Janeiro markets. It also moves ethanol to ships on the Rio coast for export or supplying northeast Brazil.

Transportation costs have been one of the major hurdles to expanding ethanol output in central Brazil. Current production is mostly sold locally instead of being trucked some 2,000 kilometers (1,250 miles) to southeastern markets and export terminals. ($1 = 3.7218 reais) (Reporting by Marcelo Teixeira Editing by Susan Thomas)

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