Petrobras banking on renewable fuels, niche refining

Brazil's state-controlled Petrobras is developing green diesel and other niche refining businesses as part of its effort to reduce emissions.

Earlier this year, the company concluded refinery tests on its patented hydrotreated vegetable oil (HVO) production technology. The co-processed renewable fuel uses up to 10pc vegetable oils to produce a drop-in fuel that is chemically identical to petroleum diesel.

Petrobras' HVO diesel, also known as green diesel, reduces emissions by 70pc compared to conventional diesel and by 15pc compared to biodiesel, downstream director Anelise Lara said in a call with analysts this week.

Production of renewable diesel is technically possible at the company's existing refineries and has already been tested at the 208,000 b/d Presidente Getulio Vargas refinery (Repar) in Parana state, Lara said. Repar is among the refineries that Petrobras plans to divest.

While Petrobras is in the process of exiting conventional biofuels production, the company is evaluating investments in greenfield biokerosene projects, as well as the construction of dedicated co-processed green diesel refineries.

"We are waiting for approval from the CNPE (national energy policy council) and the ANP (hydrocarbons regulator) to begin selling our renewable diesel in Brazil," she said. "Recognition that our renewable diesel meets the requirements of the Renovabio (biofuels law) is an important step to making these projects economically viable."

The ANP conducted a public hearing process between July and September regarding the classification of HVO and renewable diesel. The agency received nearly 40 contributions from market participants and is expected to release its recommendations to the CNPE later this year or in early 2021.

In a preliminary designation, the ANP stopped short of classifying HVO as biodiesel as Petrobras had hoped. Instead, it sided with Brazil's biodiesel and agricultural industry associations, which asserted that only 5pc of Petrobras' green diesel comes from renewable sources while 95pc of its feedstock remains fossil fuel.

Lara highlighted that the company's renewable diesel reduces the "collateral impact" of biodiesel use on engines, which "suffer" from conventional biodiesel blends.

Brazil's biodiesel producers' association Ubrabio rejects claims that biodiesel causes engine damage.

The expansion of second-generation biofuels production is part of Petrobras' new niche refining strategy, which will focus on environmentally friendly products with a renewable content, Lara said. The company is also planning to concentrate its refining assets in populous southeastern Brazil, while it divests half of 2.2mn b/d of refining capacity in other parts of the country.