Ouro sobre azul: Brazil allocates $1bn for SAF projects

opinion

by Fayaz Hussain

September 9, 2024

The Portuguese phrase “ouro sobre azul” (literally translated to gold over blue) is used by native speakers in Brazil to express a promising position, a favourable circumstance or a good opportunity.

The proverb encapsulates Brazil’s position in the sustainable biofuels. With its expansive agricultural lands and a deep-rooted agricultural tradition, Brazil possesses the ideal conditions for cultivating energy crops and producing renewable fuels.

Recognising this potential, the Brazilian government has long championed biofuels as a key component of its green energy strategy. In 2019, the country introduced the National Biofuels Policy (RenovaBio), a comprehensive framework designed to reduce the carbon intensity of its transportation fuel matrix by increasing the production and utilisation of biofuels.

Last week, Brazilian development bank BNDES, and government funding agency Finep, announced a combined investment of 6bn Brazilian reais ($1.1bn) to support local production of sustainable aviation fuel (SAF) and sustainable marine fuels.

“Credit instruments, equity participation, non-reimbursable resources for cooperative projects between companies and technological institutions and economic subsidies are available,” said BNDES in its announcement.

The funding plan envisages extension of low interest rate credit lines for project developers to help them cover initial set-up costs such as research, engineering projects, industrial plant construction and equipment purchases.

This funding is available to Brazilian firms engaged in the production of fuels or research, technological development, and innovation activities related to SAF technologies. Companies can either participate individually or as part of a consortium.

Beyond investment, BNDES and Finep have also shown their willingness to invest in projects as partners consistent with Brazil’s green goals. The country’s Fuels of the Future Bill, approved in the Chamber of Deputies and under analysis in the Senate, aims to achieve a 10% reduction in carbon emissions from the aviation sector by 2037.

Brazil is world’s second largest producer of ethanol – a key feedstock for producing SAF in the future as the alcohol-to-jet (AtJ) production pathway matures with more and more projects being set up across the world. Brazil, with its established ethanol industry and its readily available sugarcane bagasse, has the potential to become the leading SAF producer in the world.

It was a Brazilian energy firm Raizen SA that made the first ethanol shipment to US for SAF production at the world’s first ethanol-to-SAF plant launched by LanzaJet in Soperton, Georgia. LanzaJet has said it will continue to use Brazilian ethanol at its production facility in addition to locally sourced corn-derived ethanol.

Estimates show that with upgradation of existing technology, Brazil has the potential to scale up SAF production to 6,000 barrels per day by 2030 and 700,000 bpd by 2050. That’s nearly 35% of the expected global production capacity by then.

The funding support comes at a time when several major players operating in Brazil are investing in setting up domestic SAF production. Shell and Cosan SA are planning to construct a plant in Brazil to produce low-cost SAF. BP has also recently acquired a controlling stake in a Brazilian ethanol company renowned for producing SAF-certified products.

Additionally, Abu Dhabi state-owned investment company Mubadala backed Acelen Energia Renovavel SA is set to establish a SAF plant in the state of Bahia, Brazil while Petrobras is exploring the possibility of producing SAF at least two of its refineries.

BNDES and Finep will begin public selection for the business plan from August 22nd, 2024. Once selected, companies must submit their business plans by the end of October while results of the business plan selection will be announced by November.

With the “ouro sobre azul” of its thriving ethanol industry and government support, Brazil is poised to become a global leader in SAF production.