El Futuro de la Energia y los Biocombustiveis

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1 El Futuro de la Energia y los Biocombustiveis Roberto Giannetti da Fonseca August, 2007

World Energy Demand 1970 2025 (10^6 tonnes of oil equivalent) World energy demand will reach 15.

2 World Energy Demand (10^6 tonnes of oil equivalent) World energy demand will reach 15.7 million of tonnes of oil equivalent in 2025 with a growth rate of 1.8% y.y Source: International Energy Outlook adapted from UBRABIO

3 World Oil: Consumption and Production HISTORICAL PROJECTED We are all currently addicted to oil. Oil consumption is forecasted to grow to 120 million barrels per day by 2030 from the current 83 million barrels per day Source: BP Statistical review july 2007, projection by team analysis

4 World Oil: Consumption and Production???? How this consumption could be fulfilled? Existing reserves have we passed the Oil Peak? What remains there to be discovered? New technologies? New sources of fossil fuel? What will be the environmental impact of Source: National Petroleum Council july 2007

5 End of Cheap Oil US$ / barrel Regardless of all questions: We face the end of cheap oil! This new economic reality, combined with environmental awarness, will shape the future energy trends Source: MBF Consulting Energy insecurity & Environmental Anexiety

6 Share of Energy Source 1970 & 2025 Source: International Energy Outlook adapted from UBRABIO

7 Future Energy Trends Source: Adapter from Future Energy, Bill Paul 2007 New Oil Industry Efficiency Substitute Liquid Fuels Conventional Oil Kilowatt Gasoline Negaoil Biofuels Unconventional Fossil Fuels Deepwater Enhanced Oll Recoverery Ethanol Tar Sands Cellulosic Ethanol Coal Biobutanol Natural Gas Biodiesel Oil Shale

8 World Fuels Production (million tonnes in 2005) Fossil Fuels Biofuels Feedstock Fuel Fuel Feedstock Gasoline 1237 MT (53,8 BGJ) Sugarcane Petroleum (184,9 BGJ) LPG 391 MT (11,9 BGJ) Diesel* 1077 MT (46,1 BGJ) Kerosene 92 MT (3,9 BGJ) Ethanol 36 MT (0,96 BGJ) Biodiesel 3,2 MT (0,12 BGJ) Total (Equiv. Energy)** = 115,7 BGJ 1,1 BGJ Renawable/Total: 0,9% Corn 702 Soya 214 Palm 8 Mamona 1,4 Colza 47 Wheat 628 Girassol 31 Source: Adapted from ICONE / UBRIBE, refering to FAO, Oil World, F.O. Licht, LCM, EIA. Notes: 2003 para palma, gasolina e diesel. *Diesel destilado. **BCJ=Bilhões de Giga Joule

9 Future Energy Trends Alternatives energy sources: will complement one another; and will compete with one another. Time will be needed for substitution (adapt vehicle fleet and distribution infrastructure and network) Technology driven: IT has changed the way we work and entertain during the 90 s now technology is going to change the way we deal with energy. We need to learn to make better usage of the energy available (efficiency)

10 Biofuels Production Agriculture land Sun Water Technology: agriculural and industrial Which feedstock? Government Policy to support Marketing Logistics infrastructure Consumers Oil Majors and industry Gas stations Automobile industry (FFV) Government Policy to enforce Biofuels is a complement that will substitute oil to fulfill a significant part of the increase on energy demand over the next decades. We could be using around 30 million barrels of biofuels per day by 2030 if it is to fulfill 80% of the increase in the demand forecasted for 2030.

11 Biofuels Substitute Liquid Fuels Ethanol Corn in the US vis-à-vis Sugarcane in Brazil US biggest producer and consumer: Food vs. Fuel issues: limited agricultural land and questionable feedstock because of energy balance and economics Brazil has long term experience on production and usage of ethanol as a blend in gasoline. All Brazilian gasoline has 25% ethanol blended anyone aware of problems with Argentinan cars visiting Southern Brazil and stopping at gas stations? Cellulosic Ethanol Make ethanol from any biomass (wood, switchgrass, organic material...) Technology development: significant investments made but still 5 10 years to be produced in commercial scale When technology is solved will play a major role on the way we deal with energy. Biobutanol Biodiesel Four carbon alcohol while ethanol is two carbon alcohol. Better than ethanol: transportation on existing liquid fuels infractstruture, permit higher blending Technology still to be developed; Produced from vegetable oils and animal fats Many differente feedstocks (most commolnly repeseed oil and soybean oil) Europe is the leader in production and consumtion of Biodiesel Can be used in its pure form or blended with diesel

Ethanol Global Ethanol Production (thousand kilolitres) Production Breakthrough Cellulosic Ethanol in 2015 (? - 2020) Source: F.O.

12 Ethanol Global Ethanol Production (thousand kilolitres) Production Breakthrough Cellulosic Ethanol in 2015 (? ) Source: F.O. Lichts, UNICA Market Breakthrough Flex Fuel Vehicles in % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 91% 9% Brazil s Projected FFV Sales 78% 22% 48% 52% 23% 77% Gasoline + Diesel 16% 84% 13% 87% 11% 89% 10% 90% 10% 90% FFV + Ethanol

13 Biofuels - Energy Balance Source: Adapted from ICONE / UBRIBE, refering to World Watch Institute Fuel Unit Energy Content / Fossil Fuel Unit Used for Production Etanol Ethanol Biodiesel Beetroot Sugarcane Cassava Corn Sorghum Wheat Palm Oil Vegetable Oil Soybean Oil Colza

14 Soybean Yield: example to other feedstocks UBRABIO Source: Adapted from ICONE / UBRIBE, refering to USDA Main Producers: Moving Average - 3 years (t/ha) 2,900 2,700 USA BRA ARG 2,771 Prices drop 2,639 2,800 2,500 2,450 2,577 2,300 2,189 Result of intensive technology research 2,439 Dry season and fungus 2,100 1,

15 Source: Adapted from UBRIBE, refering to Bunge World Consumption of Vegetable Oils for Biodiesel (million tonnes)

Renewable Energy Source: Clean Tech Revolution, 2007 Wind Power Global wind power industry

2016. Wind farms established all around the world (Denmark, Germany, Spain, USA, Canada)

54 GW (40% in Europe 40 GW) High volume is growth Price is dropping R&D high investments at

cheaper and more efficient solar cells Global production gas grown from: 5 MW in 1979 2,000

16 Renewable Energy Source: Clean Tech Revolution, 2007 Wind Power Global wind power industry has grown from: US$ 12 B in 2005 to US$ 18 B in 2006 and is forecasted to reach US$ 61 B by Wind farms established all around the world (Denmark, Germany, Spain, USA, Canada) Global installed capacity of approx. 54 GW (40% in Europe 40 GW) High volume is growth Price is dropping R&D high investments at developed world Solar Energy Decades-long process developing technology for manufacturing cheaper and more efficient solar cells Global production gas grown from: 5 MW in ,000 MW in 2006, while prices dropped from US$ 32/watt to in 1979 around US$ 3/w in 2006 Still relying on Governmental policy and subsidies Operational costs are marginal

17 Argentina and Brazil: two different approaches OIL PRODUCTION (in M bbl/day) OIL CONSUMPTION (in M bbl/day) Source: BP Statistical review july 2007

18 Argentina: Natural Gas Energy Consumption by fuel (M tonnes of OE in 2006) OIL (M bbl/day) Production Natural Gas (bcm) Production Consumption Consumption Source: BP Statistical review july 2007

19 Future Energy Trends How the new energy industry will change people, politics, and behavior? Which are the good opportunities for emerging countries and for equity investors on this new renewable energy cicle? Energy uncertainty and Environment ansiety, two new current syndromes. What is the clean tech revolution and when is going to take place?

20 Conclusions Entering a New Energy Era There won t be one unique source to replace Oil; we need substitutes that will be complement. We need volume (increasing energy demand) with small environmental impact (clean energy) Biofuels is one a substitute liquid fuel required a technological breakthroughs: cellulosic in commercial and economic scale

21 Gracias! Roberto Giannetti da Fonseca FIESP Federação das Indústrias do Estado de São Paulo Ethanol Trading S.A.

Biofuels. Camille Cagley. Newzaroundus.com

Biofuels. Camille Cagley. Newzaroundus.com Biofuels Camille Cagley Newzaroundus.com Advantages and Disadvantages A * Less Pollution Production *Biofuels made from waste * Biomass biomass made from degraded/ abandoned agricultural lands (sciencemag.org)