Following a memorandum of understanding this year, Petrobras started discussions with the Chinese company, which is interested in buying ethanol produced in Brazil and sell in other markets, Ricardo Castello Branco, director of Petrobras Biocombustivel, said in an interview in Tokyo.
Branco said Petrobras was also looking at selling "ethanol as petrochemical feedstock to produce what we call green products" though he declined to identify the Chinese company.
"We are approached by a number of companies but we signed an MOU with a Chinese company earlier this year," said Branco, adding that the talks were only at "an initial stage."
In December last year, Petrobras and PetroChina agreed to carry out a six-month study into the prospect of producing ethanol in Brazil for export to China. The two companies were conducting the study to see if a Brazil-China ethanol joint venture could help meet China's goal of increasing the use of ethanol in gasoline, Petrobras had said in a statement then.
OFFTAKE LINKED TO EQUITY STAKES
Petrobras was looking at the potential of equity partners whose offtake would be liked to the stakes held, Branco said, adding: "This is the model that is very interesting to us."
The company has been partnering "traditional producers" in Brazil, Branco said, adding that the "only reason for bringing in foreign companies is to see if they could be offtakers."
Petrobras has been holding talks with Japanese and South Korean companies over the past few years, he said, and had signed an MOU with a South Korean firm, though he again refused to identify it by name. It had been in talks with Japan's Mitsui as well, Branco added.
"We are still looking at opportunities with Mitsui for collaboration for the model, which combines offtake and investment," he said.
In an interview with Platts in October 2009, Petrobras CEO Jose Sergio Gabrielli said that Petrobras and Mitsui had dissolved their joint venture with Italuma for a 200 million liters/year (1.26 million barrels/year) ethanol plant.
Petrobras plans to hike its ethanol production to 2.6 million cubic meters/year by 2014 at a budget of roughly $2 billion under its five-year investment plan, Branco said. Its production target for 2010 is 900,000 cu m, he added. Petrobras planned to hike its ethanol exports to 1.05 million cu m/year by 2014, Branco added. The export target for 2010 is 449,000 cu m, he added.
As Petrobras looks to Asia and Europe as possible destinations for its ethanol exports, the US remains its major buyer.
"Asian markets are important to us," Branco said. "Japan is the market we are expecting to see [a lot of] growth in. We are looking at the EU regulations [for biofuels too]."
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