Oil PSUs in $600 m Brazil foray
Public sector undertakings in the petroleum sector are ready to do the samba in Brazil. They are eyeing a big opportunity in ethanol, which is emerging as a key blending item or alternative to curb the use of fossil-fuel based organic fuels facing government restrictions and public criticism as the world steadily mounts pressure to check global warming spurred by carbon emissions.
State-owned oil marketing companies are considering an investment of $ 600 million in the South American country to set up an ethanol project with a manufacturing capacity of 500 million litres. Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd and Indian Oil Corp
plan to invest jointly in equal shares for ownership/leasing of land acreages, production units and related infrastructure, according to an
official plan made available to Hindustan Times. “The proposed investment will be made for a combination of acquisition and greenfield projects,” states the detailed plan submitted by the public sector enterprises to the Petroleum Ministry. The ethanol production in Brazil will be primarily meant for the domestic market in Brazil, with an option to export to third countries.
Louis Dreyfus Commodities Bioenergia and Infinity, two large integrated groups, have emerged as top potential partner candidates forthe oil companies to join hands with for ethanol production. Smaller greenfield players identified in Brazil are Rezek and Goiasa.
The term sheet and a non-binding memorandum of understanding have been agreed on between the oil companies on the one hand and LDCB, Infinity and Rezek on the other, the plan said.
The initial $ 600 million investment involves buying 15 to 35 per cent equity stakes in one of the larger groups and 50 per cent or more stakes in some of the running mills of the larger groups/or greenfield projects of smaller candidates. Most of the investments will be made through equity participation.