NEW YORK, July 14 (Reuters) - Valero Energy Corp, one of the biggest U.S. oil refiners, is preparing to sell ethanol for export for the first time, the company said, betting on the $2 billion overseas market as U.S. demand remains plagued by political uncertainty.
The San Antonio-based oil refiner, the third-largest U.S. ethanol producer, has recently been offering export-grade ethanol to shippers and leasing tank space for it at St. Rose, Louisiana, opening a gateway to major markets in Asia and Brazil, three U.S. trade sources said.
For now, the material will be sold on a freight-on-board basis for shipment overseas, they said.
Ultimately, the company plans to sell its output and third-party production directly to buyers overseas, as it does with other fuel products.
"We are looking at increasing sales and expanding markets, including export markets," said Valero spokesman Bill Day.
He declined to confirm details of the plan or comment on them.
The move underscores the increasingly competitive nature of the overseas market as U.S. biofuels policy remains in flux and companies rush to sell in countries such as Brazil and the Philippines, where government mandates have helped drive demand.
The push abroad will pit Valero against Archer Daniels Midland Co, the country's top producer, privately-held Marquis Energy LLC, and Pacific Ethanol, which are also going after a slice of the export market.
Ethanol is also battling for market share with rival gasoline additives, like methyl tertiary butyl ether (MTBE), which are used to oxygenate fuel and are popular in the Middle East and other regions.
Exports offer hope for the U.S. industry after the government proposed lower-than-expected targets for blending biofuel into the nation's motor fuel.
U.S. prices are down 20 percent over the past year and inventories are near three-year highs. Even as new capacity comes online, Brazilian producers are shipping cargoes to the United States as the import window widens.
In the first five months of the year, the United States exported 377 million gallons of ethanol, up 6 percent from the same period last year, government data show.
Since it started ethanol production six years ago, Valero has only sold a domestic grade, traders said, but the company spokesman said it was eyeing a bigger export presence when it bought and revived a 110-million-gallon plant in Mount Vernon, Indiana, last year from Aventine Renewable Energy Holdings.
That plant, its 11th ethanol facility, gave it access to the Ohio River. (Reporting by Chris Prentice; Editing by Peter Galloway)