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| How the RenovaBio Law could affect Brazil's marine fuel industry |
| Market analyst Jordan Lewis tells Bunker Index about Brazil's new policy, which aims to increase the production and use of biofuels.
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| Sugarcane plants. Image credit: Pixabay CC0 Public Domain |
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Updated on 06 Apr 2018 14:41 GMT
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By Jordan Lewis
Brazil, a global leader in biofuel production, is looking to go even further in terms of its renewable energy goals with the recently enacted RenovaBio law. The new policy, which aims to increase the production and use of all biofuels, has a twofold effect of increasing energy security and complying with Paris Agreement targets for reducing greenhouse gas emissions.
Although many sectors within the country stand to benefit from this new law, particularly sugarcane mills and ethanol producers, its effects on the marine fuel industry is yet to be made clear.
An article published previously by Biofuels Digest reported that biofuels have historically been deemed unfit for marine transport due to significantly lower energy density as well as storage and water contamination issues. However, the enactment of the law can spur on ongoing research looking into ways to change that, while also bringing about economic benefits that can potentially boost Brazil's marine industry.
A brief history
Brazil has one of the most diversified energy portfolios today, with sugarcane ethanol production totalling 48 million tonnes of oil equivalent. The robust Brazilian biofuel sector has its roots in the 1973 oil crisis, during which time the Brazilian government launched the Proalcool (Pro-alcohol) policy that aimed to foster indigenous ethanol-based transport.
This chain of events raised national production of ethanol from 600 million litres in 1956 to 12.6 billion litres only a decade later. By 2017, Brazil became the world's second largest producer of biofuels, producing an estimated 26.7 billion litres of ethanol.
Brazil and marine fuels
So what does all this mean for Brazil's marine fuels industry, which is currently dominated by local energy firm Petrobras, and which also includes the recently rebranded Bunker One?
In 2016, academic partners in Brazil and the Netherlands began research into producing sustainable advanced biofuels for marine and jet transport. The research aims to find ways to overcome long-standing barriers to biofuel use in both jets and transport ships, citing Brazil's enormous potential for growth in marine biofuels. The groups intend to boost biofuel energy density and make storage and transfer safer for biofuels in bunkers through secure supply, quality control facilities, and infrastructural agreements by 2030. They have also cited biorefinery concepts as a major area of development for pushing for biofuels in marine and jet transport.
Today, Brazil's local marine fuel suppliers comply with Brazilian National Petroleum Agency (NPA) specifications. This research has the potential to encourage biofuel use for these suppliers. Although, until the results are conclusive, the direct effect of the RenovaBio law on the marine fuel industry remains to be seen.
An economic boon
On the other hand, some indirect effects of the new policy will surely be felt by the industry.
For instance, a welcome effect of the policy is the expected decrease in dependency on traditional hydrocarbon fuels, which has historically had a volatile effect on the Brazilian economy. FXCM explains that fluctuating global oil prices can negatively impact the local economy and the Brazilian real, even with the recent discovery of offshore oil reserves. This vulnerability is mirrored in other emerging economies like India and China, both of which are also putting in efforts to reduce oil dependency by investing in biofuel production.
China, for instance, is the third leading biofuel producer in the world, and is looking to follow Brazil's footsteps in terms of renewable energy production by 2020. In fact, as explained in a previous post here on Bunker Index, China is working with the United States in an effort to produce methanol, with each plant having an expected capacity of 1.8 million tons of methanol per year.
In this way, the country's marine fuel industry stands to benefit from the new law, as an appreciated Brazilian real will help them have more leverage in the global gas markets. Brazil's marine fuel players will be able to enjoy higher quantities for less money.
Despite these indirect benefits, the full effect of the new RenovaBio law is difficult to anticipate. Regardless, the country's leaders remain hopeful that policy, research, and praxis will intersect towards a better future for Brazil and the rest of the world. |
Jordan Lewis is a market analyst based in Massachusetts, US, who specializes in economics and finance. He is currently collaborating with a team to establish a consultancy startup. |
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