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Shell and Cosan: Fuelling a Lower-Carbon Future With Biofuels

June 2, 2011

THE HAGUE, The Netherlands and SAO PAULO, June 2, 2011
/PRNewswire-FirstCall/ — Shell (NYSE: RDS.A) (NYSE: RDS.B) and Cosan today
launched a multi-billion dollar joint venture that will become a leading
producer of the low-carbon biofuel, ethanol made from sugar cane. Named
Raizen, this major retail and commercial fuels company will operate in
Brazil, one of the world’s fastest-growing markets.

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In one of the biggest biofuels deals to date, Shell is combining its
extensive retail experience, global network and research in advanced biofuels
with Cosan’s technical knowledge of producing biofuels on a large scale.
Raizen will produce and sell over 2 billion litres a year of the
lowest-carbon biofuel commercially available – ethanol made from Brazilian
sugar cane.

Shell is already one of the largest distributors of sustainable biofuels:
now it is moving for the first time into production. The deal with Cosan is a
major development in Shell’s strategy of investing for selective growth in
its fuels business.

Raizen will distribute biofuels and over 20 billion litres of other
industrial and transport fuels annually through a combined network of nearly
4,500 Shell-branded service stations. In Brazil it becomes the third largest
fuels company. Plans would extend the company’s reach in future years to
export more ethanol to other key markets.

Low-carbon biofuels will be the most practical and commercially realistic
way to take carbon dioxide (CO2) out of transport fuel in the coming years
and will be a vital part of the future energy mix.

The joint venture also combines Shell’s expertise and technology
partnerships in advanced biofuels with Cosan’s experience in the commercial
production of low-carbon biofuels. This has the potential to accelerate the
commercial production of biofuels from crop waste and inedible plants.

Raizen’s 24 mills can process up to 62 million tonnes of cane into sugar
or ethanol each year, with the flexibility to adapt to market demand.

“We are building a leading position in the most efficient
ethanol-producing country in the world,” says Peter Voser, Shell Chief
Executive Officer. “Low-carbon, sustainable biofuels will be increasingly
important in the global transport fuel mix.”

“This is a turning point in the search for alternative energy sources,”
says Rubens Ometto Silveira Mello, Cosan’s Chairman of the Board. “Raizen is
one of Brazil’s largest companies and is ready to offer international markets
a clean, renewable and economically viable solution.”

Meeting demand

New energy policies in Europe and the USA are calling for more renewable,
lower-carbon fuels for transport. Biofuels make up around 4% of transport
fuel in Europe, and 3% in the USA. Globally biofuels currently meet around 3%
of road-transport fuel demand. Shell expects this to rise to about 9% by 2030.

Brazil leads the world in the use of biofuels for transport. They are
likely to make up more than 40% of the country’s transport fuel mix by 2030,
double today’s proportion. Raizen’s current annual production capacity will
be enough to meet nearly 9% of Brazil’s current ethanol demand.

At the pump Brazilian motorists are offered the choice of pure ethanol or
a blend of petrol (gasoline) and ethanol. Around 90% of the country’s new
cars can run on either fuel type.

“The Raizen business model, which combines Shell and Cosan assets and has
direct access to consumers, is a breakthrough in the biofuels sector,” says

Marcos Marinho Lutz, Cosan Chief Executive Officer.

The sugar cane-to-ethanol process used by Raizen is the most efficient in
turning biomass into fuel. Brazilian sugar cane yields 7,000 litres of
ethanol per hectare of cane compared to, for example, 3,800 litres for a
hectare of corn in the USA and 2,500 litres for a hectare of wheat in Europe,
according to Unica, the Brazilian sugar-cane industry association.

“Sugar cane is the most efficient plant we know in converting sunlight
into energy,” says Professor Edgar de Beauclair, of the Crop Production
Department Sao Paulo State University.

Better biofuels

Turning sugar cane into ethanol offers a number of environmental benefits
over other biofuel production processes. As it grows, sugar cane generally
absorbs CO2 at a greater rate than other biofuel crops such as soy.

Ethanol made from Brazilian sugar cane produces around 70% less CO2 than
petrol, when the cultivation and production processes are taken into account.
Since 2003 the use of ethanol in Brazil has avoided over 103 million tonnes
of the CO2 that the petrol it has replaced would have produced, according to
Unica.

By-products from turning sugar cane into ethanol are recycled as organic
fertiliser. Plant waste, called bagasse, is burned to produce power for the
processing mills and surplus energy is supplied to the national grid.

To further improve productivity, Raizen will use its own advanced
geographical information system to monitor its land. This allows its
scientists to make accurate predictions about crop yields and adjust
fertiliser or pest control, for example, to help boost production.

“Brazilian sugar-cane ethanol is one of the most sustainable and
lowest-CO2 biofuels available,” says Mark Gainsborough, Shell Executive
Vice-President Alternative Energies. “We expect the development of advanced
biofuels to benefit from Cosan’s feedstock and its expertise in large-scale
biofuels production. This has the potential to accelerate the future
commercial viability of cellulosic ethanol.”

The deal includes part of Shell’s interest in the firm Iogen, which uses
enzymes to break down plant waste into ethanol, as well as Shell’s interest
in Codexis, developers of “super-enzymes” for the faster conversion of plant
waste into transport fuels.

Sustainable production

Raizen will work to improve the sustainability of its operations. Sugar
cane for ethanol requires little water to be added because Brazil’s tropical
rainfall provides natural irrigation. In the industrial process Raizen has
been introducing a system that recycles up to 90% of water used.

Raizen supports the development of varieties of sugar cane to suit
regional climate and resist disease. To protect cane from pests, it breeds
and releases natural predators, further reducing the use of chemical
pesticides.

As a member of Bonsucro, formerly the Better Sugarcane Initiative, Raizen
has joined with other producers, non-governmental organisations and other
experts to establish an EU-approved certificate for sustainable sugar-cane
production. This covers areas such as human rights and the impact of
activities on biodiversity.

Raizen is working towards achieving certification for all ethanol
produced by its own operations over the coming years. It also plans to have
certified all ethanol produced from suppliers’ cane.

Current sugar-cane production in Brazil takes up 8.1 million hectares,
around 0.9% of the country’s land. Government legislation forbids industries
from entering sensitive areas such as rainforests or land needed for other
food crops, and from displacing food crops into other sensitive areas.
National laws also recognise the rights of indigenous communities and their
claims to land ownership. The main sugar-growing areas are hundreds of
kilometres from the Amazon rainforest.

Raizen is well advanced in phasing in mechanised harvesting, ahead of
requirements due to come into force in the main Brazilian sugar-cane growing
state of Sao Paulo in 2014. It already uses machines on around 64% of its
suitable land (with a slope of less than 12%). CO2 emissions can be reduced
because it avoids the need to burn the hard straw, a necessary step in manual
cutting.

Cautionary Note

The companies in which Royal Dutch Shell plc directly and indirectly owns
investments are separate entities. In this press release “Shell”, “Shell
group” and “Royal Dutch Shell” are sometimes used for convenience where
references are made to Royal Dutch Shell plc and its subsidiaries in general.
Likewise, the words “we”, “us” and “our” are also used to refer to
subsidiaries in general or to those who work for them. These expressions are
also used where no useful purpose is served by identifying the particular
company or companies. “Subsidiaries”, “Shell subsidiaries” and “Shell
companies” as used in this press release refer to companies in which Royal
Dutch Shell
either directly or indirectly has control, by having either a
majority of the voting rights or the right to exercise a controlling
influence. The companies in which Shell has significant influence but not
control are referred to as “associated companies” or “associates” and
companies in which Shell has joint control are referred to as “jointly
controlled entities”. In this press release, associates and jointly
controlled entities are also referred to as “equity-accounted investments”.
The term “Shell interest” is used for convenience to indicate the direct
and/or indirect (for example, through our 24% shareholding in Woodside
Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or
company, after exclusion of all third-party interest.

This press release contains forward-looking statements concerning the
financial condition, results of operations and businesses of Royal Dutch
Shell
. All statements other than statements of historical fact are, or may be
deemed to be, forward-looking statements. Forward-looking statements are
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are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. Readers should not place undue
reliance on forward-looking statements. Additional factors that may affect
future results are contained in Royal Dutch Shell’s 20-F for the year ended
31 December, 2010 (available at http://www.shell.com/investor and
http://www.sec.gov – opens in new window). These factors also should be
considered by the reader. Each forward-looking statement speaks only as of
the date of this press release, 2 June 2011. Neither Royal Dutch Shell nor
any of its subsidiaries undertake any obligation to publicly update or revise
any forward-looking statement as a result of new information, future events
or other information. In light of these risks, results could differ
materially from those stated, implied or inferred from the forward-looking
statements contained in this press release. There can be no assurance that
dividend payments will match or exceed those set out in this press release in
the future, or that they will be made at all.

The United States Securities and Exchange Commission (SEC) permits oil
and gas companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or conclusive
formation tests to be economically and legally producible under existing
economic and operating conditions. We use certain terms in this press
release, such as resources and oil in place, that SEC’s guidelines strictly
prohibit us from including in filings with the SEC. U.S. Investors are urged
to consider closely the disclosure in our Form 20-F, File No 1-32575,
available on the SEC website http://www.sec.gov – opens in new window. You
can also obtain these forms from the SEC by calling 1-800-SEC-0330.

    For more information, interview requests or photography, please contact:

    Shell Media Relations
    David Williams +31-70-377-3600

    Shell Investor Relations
    Europe - Gustavo Bursztyn: +31-70-377-3996
    United States - Ken Lawrence: +1-713-241-2069

http://www.shell.com

    Cosan Media Relations
    Daniela Christovao +55-11-3897-9797

http://www.cosan.com.br

SOURCE Royal Dutch Shell plc & Cosan S.A.(Bovespa:CSAN3)


Source: newswire



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