Fuel Ethanol in Japan Fuel Ethanol in Japan XII JAPAN-BRAZIL Joint Economic Committee Meeting CNI - Nippon Keidanren March 6, 2006 - Sao Paulo Takao Omae Mitsui & Co., Ltd. 1 1
World Ethanol Production, Share by Application World Ethanol Production, Share by Application Share by Application Production/Estimation Production/Estimation Share by Application (Unit: million kl) Industiral 120 8% Bevarage 105 3.6 15% 6.8 34.7 100 2005 : 2005 : 45.0 45.0 million million kl kl 80 Fuel 77% 60 50.1 45.0 39.2 41.3 34.1 40 54 million kl 3.9 3.8 of additional Fuel demand 3.7 3.4 16.7 16.1 3.2 14.7 20 Beverage Industrial 14.7 12.6 15% 19.2 16.2 14.3 12.1 9.6 15 0 89 2002 2004 2006 2015 U S A B r a z i l C h i n a I n d i a F r a n c e R u s s i a O t h e r s 2015 Estimation: 2015 Estimation: about about 104 04million million kl kl 1 ： Source ： Estimation / F.O.Licht F.O.Licht Source Estimation / Fuel 2 2 85%
Use of Fuel Ethanol in the World Use of Fuel Ethanol in the World Europe (sugar beet, wheat, barley ） Europe (sugar beet, wheat, barley ） USA (domestic corn + import) -E5,E10 implemented: Sweden, Poland Canada (grain) USA (domestic corn + import) -E5,E10 implemented: Sweden, Poland Canada (grain) -E10 implemented in many states -ETBE implemented: Germany, France, Spain E5 obligation by 2010 -E10 implemented in many states -ETBE implemented: Germany, France, Spain E5 obligation by 2010 -Production: 4.7 million ｋ ｌ -Production:19.2million kl(2006) (2006) -Production: 4.7 million ｋ ｌ -Production:19.2million kl(2006) (2006) -Import ： 2.5million kl(2006) -Import ： -Biofuel 5.75% in 2010 (22 million kl) 2.5million kl(2006) -Biofuel 5.75% in 2010 (22 million kl) -Renewable, Alternative Fuel 10% and over in2030 (38 million) -Renewable, Alternative Fuel 10% and over in2030 (38 million) 35 billion gal (133 million kl) in 2017 35 billion gal (133 million kl) in 2017 China (domestic corn, rice etc) China (domestic corn, rice etc) -E10 tests in 9 Provinces -E10 tests in 9 Provinces -Production: 3.9million ｋ ｌ (2006) -Production: 3.9million ｋ ｌ (2006) Japan Japan -ETBE0.84 million kl in 2010 -ETBE0.84 million kl in 2010 (0.36million kl Ethanol equivalent) (0.36million kl Ethanol equivalent) India (sugarcane) India (sugarcane) -E5 implemented in 9 states -E5 implemented in 9 states Brazil (sugarcane) Brazil (sugarcane) -E20-25 、 E100 (FFV) Implemented -E20-25 、 E100 (FFV) Implemented Philippine (sugarcane, Molasses) Philippine (sugarcane, Molasses) -Production:16.7million kl (2007) E3: 3% Ethanol Blended Gasoline -Production:16.7million kl (2007) -E5 Obligation from 2009 -E5 Obligation from 2009 -Export : 3.0 million kl (2006) E10: 10 ％ Ethanol Blended Gasoline -Export : 3.0 million kl (2006) Thailand （ cassava, molasses) Thailand （ cassava, molasses) ETBE: Ethyl Tertiary Butyl Ether -E10 Obligation by 2007 3 3 -E10 Obligation by 2007
Ethanol Production & Consumption in Brazil Production & Consumption in Brazil Ethanol Flex Fuel Vehicle Sales % 100 82 78.1 80 50.2 60 40 21.6 20 3.7 0 2003 2004 2005 2006 Jan 2007 Ethanol Production & Consuption Flex Fuel Vehicles in Brazil (million Vehicles) 40 16 15 14 35.7 28.7 30 12 m illion KL 10 17.4 8 20 6 2.74 14.3 4 10 2 0 0 Now 2013 Now 2013 4 4 Source: ANFAVEA Ethanol Production Ethanol Consumption
Advantage of Sugarcane of Brazil Advantage of Sugarcane of Brazil 【 Brazil 】 Land area of Brazil Land area of Brazil 851million hectare � Dominant competitiveness of the production cost 851million hectare Natural Area Natural Area 463million hectare � Adequate climate condition for sugarcane 463million hectare Possible Agriculture cultivation Possible Agriculture Development Area Development Area 388 million hectare � 388 million hectare Unused area 50 times more than the current Current Cultivation sugarcane plantation area where it is easy to Current Cultivation 62 million hectare expand the production 62 million hectare Sugarcane Planted Area Future expected Sugarcane Planted Area 6.3 million hectare � Huge unused area which is 9 times more than 6.3 million hectare development Japan with no destruction of Tropical Amazon Savanna area “Cerrado” Forest. � Over 100 years of know-how in the use of Fuel Ethanol for Automobiles 【 Sugarcane 】 � Possible to be cultivated widely in Tropical, Sub Tropical Areas Ethanol Production Cost (premise Brazil=100) � Strong resistance 500 E u r p o e (Source: Agra CEAS) � Possible to increase production by breed 424 400 improvement � Advantage of productivity per hectare, which is 3 U S A 300 times more than corn 262 L a t i n A m e r i c a 219 � T h a i l a n d Less competition against food application compared 200 C o l o m b i a with other raw materials 161 150 B r a z i l 137 107 I n d i a � 100 Energy generation by bagasse is possible by using P a k i s t a n 100 residue of sugarcane � Possible to stably obtain 5 5 Carbon Credit 0
Recent Foreign Investment in Brazil Recent Foreign Investment in Brazil � Cargill / USA origin Major Grain Company In June 2006 announced acquisition of Sugar & Ethanol Mill in Sao Paulo called CEVASA � Bunge /Holland origin Major Grain Company In January 2007, made proposal for acquisition of the 3 rd largest Sugar & Ethanol Mill, Vale do Rosario � Louis Dreyfus / French origin Major Grain Company In February 2007, Agreed with the Tavares de Melo Group on acquisition of Sugar & Ethanol Business in Brazil, which made Louis Dreyfus become substantially 2 nd largest Sugar & Ethanol producer Brazil. � Mr. George Soros / USA In February 2006, made investment to Mote Alegre, Sugar & Ethanol mill in Minas Gerais State 6 6
Situation of Japan Situation of Japan August 2003 August 2003 • Revision of fuel regulation allowing 3% Ethanol blending to gasoline • Revision of fuel regulation allowing 3% Ethanol blending to gasoline • Potential demand 1.8 million KL • Potential demand 1.8 million KL April 2005 April 2005 • Government Approval of Biofuels for Transportation in the Kyoto Protocol • Government Approval of Biofuels for Transportation in the Kyoto Protocol Target Achievement Plan Target Achievement Plan • 0.5 million KL crude oil equivalent Biofuels (equivalent to 0.85 million KL • 0.5 million KL crude oil equivalent Biofuels (equivalent to 0.85 million KL of Ethanol) by 2010 of Ethanol) by 2010 January 2006 January 2006 • Petroleum Association of Japan • Petroleum Association of Japan • ETBE use of 0.84 million KL (0.36 million KL ethanol equivalent) by 2010 • ETBE use of 0.84 million KL (0.36 million KL ethanol equivalent) by 2010 February 2007 February 2007 • Discussion in Biomass Nippon Comprehensive Strategy Promotion • Discussion in Biomass Nippon Comprehensive Strategy Promotion Committee Committee 7 7 • Discussion on 6 million KL of Bio Fuel Use • Discussion on 6 million KL of Bio Fuel Use
Activities of Japanese Private Sector in Brazil Activities of Japanese Private Sector in Brazil 1. Mitsui 1. Mitsui 1. Mitsui MOU with Brazilian Partners to secure stable supply and economical efficiency MOU with Brazilian Partners to secure stable supply and economical efficiency • March 2005: • March 2005: MOU with Petrobras, CVRD to search best logistics solution MOU with Petrobras, CVRD to search best logistics solution • April 2006 • April 2006 MOU with Petrobras to study on production & marketing of Ethanol MOU with Petrobras to study on production & marketing of Ethanol (Business & Price Model, Project Selection) (Business & Price Model, Project Selection) Mitsui has intention to invite reliable Japanese partners to the project Mitsui has intention to invite reliable Japanese partners to the project • February 2007 • February 2007 MOU with Petrobras, Camargo Correa to study on Ethanol Pipeline MOU with Petrobras, Camargo Correa to study on Ethanol Pipeline 2. Itochu 2. Itochu • Technical Cooperation Agreement with CODEVASF, CAMPO • Technical Cooperation Agreement with CODEVASF, CAMPO • Feasibility Study on Ethanol and Bio Diesel • Feasibility Study on Ethanol and Bio Diesel 3. Marubeni 3. Marubeni • Establish JV with Agrenco • Establish JV with Agrenco • Plan to invest in production of Bio Diesel • Plan to invest in production of Bio Diesel 8 8
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