Brazil biomethane sales could cut diesel imports

Market: Electricity, Emissions
09/12/24

Expanding biomethane consumption in Brazil could squeeze inflows of foreign diesel, a slow-moving shift that could take up to a decade to be significant.

Brazil's state-owned energy research firm EPE predicts domestic biomethane production can reach up to 3.3bn m³ in 2034, around 39pc of expected agricultural-linked demand for unblended diesel in that year.

Brazil imports about 1mn m³/month (209,660 b/d) of diesel to bridge a domestic supply gap.

Market participants predict biomethane substitution of some diesel is inevitable because diesel production is twice as costly as that of biomethane, and savings are passed to consumers, according to industry group Brazilian center for infrastructure.

Imported diesel prices also depend on reference prices in the international market and exchange rate fluctuations, risks that could make it less attractive — depending on the pricing of cargoes in US dollars. And in the biomethane market, diesel is seen as a strong candidate for substitution because of the effect of the cost of imports on the final price of fossil fuel.

Biomethane could displace diesel demand linked to agricultural machinery and trucks, according to EPE, particularly with farming operations making biomethane using waste from their own activities as feedstock. Production centers near farming operations could allow for the establishment of retail stations far from existing pipelines.

Prices and receipts

Pricing of biomethane in southeastern Sao Paulo state is pegged between natural gas and diesel, taking the energy efficiency of each fuel into account, according to an August study by industry federation Sao Paulo Fiesp. Average natural gas and diesel prices are R3/m³ and R6/m³, respectively, with R3/m³ seen by the sector as the minimum value economically viable biomethane production.

In addition to potentially lowering consumer costs, using biomethane as a diesel substitute could increase revenue for producers certified to generate Cbio decarbonization credits under Brazil's national biofuel policy Renovabio. Cbio sales can represent 15pc of the value of the biomethane molecule, according to EPE.

By Rebecca Gompertz and Gabrielle Moreira

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