Production and use of fuel ethanol in Brazil - BAFF

A2.7.
What rules were set up for the transportation,
marketing and storage of the ethanol used
as a fuel?
In July 1987 4 , the Brazilian government set up rules for the transportation, marketing
and storage of fuel ethanol, ordering the National Oil Council (CNP) to measure
and inform the National Executive Commission on Alcohol (CENAL, in Portuguese)
by the 28 th of February of each year of the total demand for the ethanol to be used
both as a fuel and a raw material in the ethanol chemistry industry for each crop.
It was incumbent upon the IAA to allocate the overall production volumes of ethanol
for other purposes, subject to the fulfillment of the condition that the demand for
fuel ethanol had to be met. For the ethanol produced for use as a fuel, distributors
of oil derivatives and Petróleo Brasileiro S.A. (Petrobras) were billed directly by the
producers.
The CNP would set up the system to apportion and bill ethanol among distributors of
oil by-products and Petrobras in view of the supply dynamics of the marketplace.
The safety stocks of the fuel ethanol supply system were to correspond to the
minimum consumption levels for two months for both anhydrous and hydrous
ethanol based on the consumption forecasts for the ending month of each crop
period. Petrobras was then made responsible for purchasing the ethanol that would
compose the safety stocks. If at the end of the crop period in each producing region
the stocks in Petrobras’ possession were larger or smaller than the safety stocks,
then the CNP had to make the necessary adjustments to the billing of production
units.
The funds required for covering operating costs, losses, storage costs, transportation
costs, and the costs of long-term loans and investments in fuel ethanol stocks,
including management costs in an amount equivalent to 2.0 percent (two percent)
of the purchase price for ethanol, were provided by Petrobras through a specific
portion (“PPE”) of the ethanol prices and, when necessary, oil derivative prices,
according to a Resolution of the CNP. In 1991, the National Fuel System (SINEC 5 )
was created by law.
3 Decree no. 94,541 of July 1st, 1987.
4 Article 4th of Law no. 8,176, enacted on February 08, 1991.
A. Fuel ethanol: Activities in Brazil and the world context
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