Brazil ethanol project could hit $ 8 billion

SAO PAULO, Brazil (AP) A project between Brazil and Japan to help supply Brazilian ethanol made from sugar cane to the Japanese market could cost $ 8 billion, Brazil's largest newspaper reported.

The money would be used to take minority stakes in 40 ethanol distilleries across Latin America's largest nation, ensuring Japan with a stable supply as it promotes a mix of ethanol in gasoline, the Folha de S. Paulo said Saturday.

Brazil's state-run Petroleo Brasileiro SA already confirmed it was negotiating a partnership with Mitsui & Co. Ltd. on the stakes, but the report quoting Petrobras executive Paulo Roberto Costa was the first time that an investment amount was disclosed.

Japan could require 1.8 billion to 6 billion liters of ethanol per year, depending on the ethanol mix required, according to Petrobras estimates.

Brazil exported 3.4 billion liters in 2006, of which less than 7 percent went to Japan. The Development Bank of Japan will help with financing the distilleries aimed exclusively for the Japanese market, which would be built or purchased, Folha reported.

Costa told the newspaper that the investment in each distillery could total $ 200 million. Aiming to ensure long-term supply for 15 years, Petrobras and Mitsui may set up a Brazil-based subsidiary.

Costa was quoted as saying Japan is insisting on a guaranteed long-term supply of ethanol, an increasingly popular fuel because of persistent high oil prices.