Brazil to boost biodiesel blend to 15% by 2023, helping soy demand

SAO PAULO (Reuters) - Brazil is poised to increase for the second time in less than a year the minimum amount of biodiesel to be blended into diesel fuel and to follow up with increases of 1 percentage point a year up to 2023, which in turn should boost demand for soybeans.

Analysts, producers and government officials see the country pushing the minimum biodiesel blend to 12% of diesel composition next March after an increase from 10% to 11% last September. They see Brazil reaching a 15% blend by 2023 and are discussing the path to higher blends after that.

Higher biodiesel blending will reduce imports of oil-based diesel fuel. It would also boost local demand for soybeans, since 80 percent of Brazil’s biodiesel is made from soybean oil.

“B15 is something that we see as certain, we are testing higher blends now,” said Fabio Vinhado, who leads the laboratory of Brazil’s oil and fuels regulator ANP. Tests are being done with blends of 20% and 30% of biodiesel in diesel fuel, he said.

Biodiesel offer in Brazil increased from 4.62 billion liters in 2016 to projected 6.69 billion liters this year, according to consultancy BiodieselBR, who estimates a demand of around 9.7 billion liters in 2023.

“There is a strong demand increase coming, and that will be met with production expansion,” said Miguel Angelo Vedana, BiodieselBR’s chief analyst.

Biodiesel producers association Ubrabio said there are 11 plants currently working on expansions and 10 new plants under construction. It expects production capacity to grow to 12.6 billion liters once those projects are operational.

“When we reach B15, the local soy industry will have to process 8 million tonnes more of soybeans, going from 44 million tonnes per year currently to around 54 million tonnes,” said Andre Nassar, head of soy industry group Abiove.

A peculiarity of Brazil’s biodiesel policy is that it determines the minimum blend, but allows fuel distributors to sell higher blends up to B15 if they want to.

“Some distributors are already selling higher blends, particularly in places where biodiesel is cheaper than diesel, such as in Mato Grosso,” said Vedana.

Another incentive for fuel distributors to do that is the new federal policy to boost biofuels, called RenovaBio, which starts in 2020.

That policy gives emission reductions targets for fuel distributors, that are set based on volumes of oil-based fuels sold in the previous year. If they sell more biofuels, their targets in the following year will be smaller, and they will need to buy fewer carbon credits to comply.

Reporting by Marcelo Teixeira; Editing by David Gregorio