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Posted on  

March 13, 2003

Peru plan aims to supply Calif. with ethanol fuel

By Missy Ryan

LIMA, Peru, March 12 (Reuters) - Peru hopes to produce up to 25,000 barrels per day of sugar-based ethanol, seen as a cleaner fuel alternative, to export to the United States in a $185 million project slated to be online by late 2004, the head of the state oil company said on Wednesday.

"This is an extremely important project for PetroPeru, benefiting farmers in the jungle and creating jobs for around 50,000 people," Hector Taco, the head of PetroPeru's board of directors, told Reuters.

"The private investor, Coler & Colantonio, puts up the entire $185 million cost ... The Peruvian government does not invest a thing," he said, adding that Peru, on its end, would commit to buying 70 barrels of the project's ethanol a day.

Coler & Colantonio, a Massachusetts-based engineering and scientific firm, is due to sign on the deal on April 1, Taco said. It will then launch construction of a 617-mile (1,029 km) pipeline from the central jungle to the Bayovar port some 540 miles (900 km) north of Lima.

Coler & Colantonio will also build several sugar cane distilling facilities along the $101 million pipeline, which will run in large part alongside an existing oil pipeline in order to minimize construction costs and environmental impact.

Peru is aiming to begin exporting the ethanol to California, where it would be mixed with gasoline, by December 2004. Ethanol is seen as a cleaner-burning gasoline additive, and is used in some 100 percent ethanol-fueled vehicles.

"Ethanol doesn't pollute like gasoline and it makes for longer-running and more powerful motors," Taco said.

According to PetroPeru, the United States produces some 85,000 barrels per day of ethanol, but demand for the fuel in California alone is around 44,000 barrels per day.

In the Peruvian project's first stage, production will be 6,000 barrels per day of ethanol, PetroPeru said, but the project's ultimate goal is 25,000 barrels per day.


The projects offers several other perks for Peru, Taco said, including a promise from Coler & Colantonio to piggyback a purchase of 1 barrel of Peruvian light naptha for every barrel of ethanol it ferries to California.

Peru exported 1.5 million barrels of light naptha in 2002.

The company will also pay a "toll" for pipeline use as well as a fee for administrating the cultivation of sugar cane.

The agriculture ministry and anti-drugs agency, Devida, are also working on the deal, which aims to introduce up to 617,760 acres (250,000 hectares) of sugar cane in jungle areas now home to much of Peru's coca leaf, which is used to make cocaine.

Peru is the world's second biggest cocaine producer, but the government of President Alejandro Toledo is trying to wean farmers from illegal coca to alternate crops like coffee.

Many of those plans have stumbled because new crops simply cannot compete with lucrative coca. But Taco said that sugar cane, going for 30 percent to 40 percent more than coca's $4 per kilogram (2.2 lbs), would be a more promising switch.

Already some 2,670 acres (1,080 hectares) of sugar cane have already been planted in the jungle and will be ready for harvest in late March, Taco added.



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