April 18, 2017 / 9:46 PM / a year ago

Petrobras opposes Brazil plan to boost biofuels after selloff

SAO PAULO, April 18 (Reuters) - Brazil’s state-controlled oil company Petróleo Brasileiro SA has expressed strong opposition to a government-led program to increase the use of biofuels following its recent decision to completely withdraw from the sector.

In a document the energy ministry posted on its website, the company known as Petrobras said it was worried about the impact of more biofuels on forest conservation and food production.

The document, made public last week, was prepared in response to government calls for public comment on its RenovaBio program to boost biofuels. Petrobras was the only company to submit a comment. Most submissions were from trade associations. (bit.ly/2okSyQW)

Long an ally of Brazil’s ethanol industry, Petrobras said in the document that sugar mills were financially unprepared to raise ethanol output. It also suggested it was not necessary to increase biofuel use to meet Brazil’s commitments under a global climate pact.

Petrobras’ new position marks an about-face from the recent past, when it aimed to diversify energy sources and become one of the world’s five largest biofuels producers.

The company did not respond to a request for additional comment.

In December, Petrobras agreed to sell stakes in ethanol producers Guarani and Nova Fronteira and close some biodiesel plants, as Chief Executive Officer Pedro Parente prioritized investments in offshore oil fields to ramp up cash generation and reduce its nearly $100 billion in debt.

Petrobras’ new position on biofuels has surprised former partners including Donizete Tokarski, who heads the biodiesel association Ubrabio which supports the government program.

“This is a throwback to outdated views on biofuels and a big step backwards for the company,” he said.

One of Brazil’s commitments under the 2016 Paris climate agreement was to sharply increase the share of biofuels in its energy mix to help it meet an ambitious target to cut greenhouse gas emissions 43 percent from 2005 levels by 2030.

For ethanol, that target would mean almost doubling current production to 54 billion liters by 2030.

In criticizing possible increases in biofuels usage, Elizabeth Farina, head of cane industry group Unica, said Petrobras seemed to be looking out for its own shifting portfolio.

“Pedro Parente has clearly said the focus is on fossil fuels ... but you can’t go against what is happening in the world,” she said. Unica strongly supports RenovaBio and has proposed mandates for biofuel use similar to those in the United States.

Reporting by Marcelo Teixeira; Editing by Lisa Shumaker and Tom Brown

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