The search for oil properties is taking India to biofuels as well. The ministry of petroleum has asked BPCL to work out a JV with other oil marketing companies
NEW DELHI: The search for oil properties is taking India to biofuels as well.
The ministry of petroleum and natural gas has asked Bharat Petroleum Corporation Limited to work out a joint venture with other oil marketing companies to pursue greenfield projects as well as acquisitions of ethanol businesses in Brazil.
The news shouldn’t worry the sugar lobby as this ethanol won’t be imported to India.
While asking public sector oil marketing companies to prospect for ethanol acreages in Brazil, the government doesn’t want this ethanol to be imported.
According to an official, “The primary reason for this is that the government may not permit ethanol imports for blending in petrol, keeping in view the interests of the sugarcane farmers in India.”
Oil companies have, therefore, been asked to look at selling it in Brazil and exporting it to third countries, sources said.
Brazil, the world leader in ethanol production, makes around 4.23 billion gallons directly from sugarcane. The country utilises 52% of its sugarcane production for this.
A feasibility study for taking up the first project in Brazil recently concluded that a project with an attractive internal rate of return of 18.9% in a conservative scenario, a net asset value of about $198 million (Rs 812 crore) and a payback period of seven years could easily be set up in Brazil.
Officials sources told DNA Money that the companies have been asked to examine risk factors such as Brazil’s land laws. Under a government notified ethanol-blending programme, 5% of it is being blended with petrol. For this programme, India is looking at ways of augmenting ethanol supply.
Though there were issues relating to ethanol pricing, oil companies consider that as long as international crude oil prices remain above $45 a barrel, ethanol production for blending with petrol was financially viable.
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