Shell and Cosan: Fuelling a Lower-Carbon Future With Biofuels

The Hague, The Netherlands and Sao Paulo (ots/PRNewswire)
--

Shell and Cosan today launched a multi-billion dollar joint
venture that will become a leading producer of the low-carbon
biofuel, ethanol made from sugar cane. Named Raizen, this major
retail and commercial fuels company will operate in Brazil, one of
the world's fastest-growing markets.

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In one of the biggest biofuels deals to date, Shell is combining
its extensive retail experience, global network and research in
advanced biofuels with Cosan's technical knowledge of producing
biofuels on a large scale. Raizen will produce and sell over 2
billion litres a year of the lowest-carbon biofuel commercially
available - ethanol made from Brazilian sugar cane.

Shell is already one of the largest distributors of sustainable
biofuels: now it is moving for the first time into production. The
deal with Cosan is a major development in Shell's strategy of
investing for selective growth in its fuels business.

Raizen will distribute biofuels and over 20 billion litres of
other industrial and transport fuels annually through a combined
network of nearly 4,500 Shell-branded service stations. In Brazil it
becomes the third largest fuels company. Plans would extend the
company's reach in future years to export more ethanol to other key
markets.

Low-carbon biofuels will be the most practical and commercially
realistic way to take carbon dioxide (CO2) out of transport fuel in
the coming years and will be a vital part of the future energy mix.

The joint venture also combines Shell's expertise and technology
partnerships in advanced biofuels with Cosan's experience in the
commercial production of low-carbon biofuels. This has the potential
to accelerate the commercial production of biofuels from crop waste
and inedible plants.

Raizen's 24 mills can process up to 62 million tonnes of cane
into sugar or ethanol each year, with the flexibility to adapt to
market demand.

"We are building a leading position in the most efficient
ethanol-producing country in the world," says Peter Voser, Shell
Chief Executive Officer. "Low-carbon, sustainable biofuels will be
increasingly important in the global transport fuel mix."

"This is a turning point in the search for alternative energy
sources," says Rubens Ometto Silveira Mello, Cosan's Chairman of the
Board. "Raizen is one of Brazil's largest companies and is ready to
offer international markets a clean, renewable and economically
viable solution."

Meeting demand

New energy policies in Europe and the USA are calling for more
renewable, lower-carbon fuels for transport. Biofuels make up around
4% of transport fuel in Europe, and 3% in the USA. Globally biofuels
currently meet around 3% of road-transport fuel demand. Shell expects
this to rise to about 9% by 2030.

Brazil leads the world in the use of biofuels for transport. They
are likely to make up more than 40% of the country's transport fuel
mix by 2030, double today's proportion. Raizen's current annual
production capacity will be enough to meet nearly 9% of Brazil's
current ethanol demand.

At the pump Brazilian motorists are offered the choice of pure
ethanol or a blend of petrol (gasoline) and ethanol. Around 90% of
the country's new cars can run on either fuel type.

"The Raizen business model, which combines Shell and Cosan assets
and has direct access to consumers, is a breakthrough in the biofuels
sector," says Marcos Marinho Lutz, Cosan Chief Executive Officer.

The sugar cane-to-ethanol process used by Raizen is the most
efficient in turning biomass into fuel. Brazilian sugar cane yields
7,000 litres of ethanol per hectare of cane compared to, for example,
3,800 litres for a hectare of corn in the USA and 2,500 litres for a
hectare of wheat in Europe, according to Unica, the Brazilian
sugar-cane industry association.

"Sugar cane is the most efficient plant we know in converting
sunlight into energy," says Professor Edgar de Beauclair, of the Crop
Production Department Sao Paulo State University.

Better biofuels

Turning sugar cane into ethanol offers a number of environmental
benefits over other biofuel production processes. As it grows, sugar
cane generally absorbs CO2 at a greater rate than other biofuel crops
such as soy.

Ethanol made from Brazilian sugar cane produces around 70% less
CO2 than petrol, when the cultivation and production processes are
taken into account. Since 2003 the use of ethanol in Brazil has
avoided over 103 million tonnes of the CO2 that the petrol it has
replaced would have produced, according to Unica.

By-products from turning sugar cane into ethanol are recycled as
organic fertiliser. Plant waste, called bagasse, is burned to produce
power for the processing mills and surplus energy is supplied to the
national grid.

To further improve productivity, Raizen will use its own advanced
geographical information system to monitor its land. This allows its
scientists to make accurate predictions about crop yields and adjust
fertiliser or pest control, for example, to help boost production.

"Brazilian sugar-cane ethanol is one of the most sustainable and
lowest-CO2 biofuels available," says Mark Gainsborough, Shell
Executive Vice-President Alternative Energies. "We expect the
development of advanced biofuels to benefit from Cosan's feedstock
and its expertise in large-scale biofuels production. This has the
potential to accelerate the future commercial viability of cellulosic
ethanol."

The deal includes part of Shell's interest in the firm Iogen,
which uses enzymes to break down plant waste into ethanol, as well as
Shell's interest in Codexis, developers of "super-enzymes" for the
faster conversion of plant waste into transport fuels.

Sustainable production

Raizen will work to improve the sustainability of its operations.
Sugar cane for ethanol requires little water to be added because
Brazil's tropical rainfall provides natural irrigation. In the
industrial process Raizen has been introducing a system that recycles
up to 90% of water used.

Raizen supports the development of varieties of sugar cane to
suit regional climate and resist disease. To protect cane from pests,
it breeds and releases natural predators, further reducing the use of
chemical pesticides.

As a member of Bonsucro, formerly the Better Sugarcane
Initiative, Raizen has joined with other producers, non-governmental
organisations and other experts to establish an EU-approved
certificate for sustainable sugar-cane production. This covers areas
such as human rights and the impact of activities on biodiversity.

Raizen is working towards achieving certification for all ethanol
produced by its own operations over the coming years. It also plans
to have certified all ethanol produced from suppliers' cane.

Current sugar-cane production in Brazil takes up 8.1 million
hectares, around 0.9% of the country's land. Government legislation
forbids industries from entering sensitive areas such as rainforests
or land needed for other food crops, and from displacing food crops
into other sensitive areas. National laws also recognise the rights
of indigenous communities and their claims to land ownership. The
main sugar-growing areas are hundreds of kilometres from the Amazon
rainforest.

Raizen is well advanced in phasing in mechanised harvesting,
ahead of requirements due to come into force in the main Brazilian
sugar-cane growing state of Sao Paulo in 2014. It already uses
machines on around 64% of its suitable land (with a slope of less
than 12%). CO2 emissions can be reduced because it avoids the need to
burn the hard straw, a necessary step in manual cutting.

Cautionary Note

The companies in which Royal Dutch Shell plc directly and
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For more information, interview requests or photography, please contact:
Shell Media Relations
David Williams +31-70-377-3600
Shell Investor Relations
Europe - Gustavo Bursztyn: +31-70-377-3996
United States - Ken Lawrence: +1-713-241-2069
http://www.shell.com
Cosan Media Relations
Daniela Christovao +55-11-3897-9797
http://www.cosan.com.br

ots Originaltext: Royal Dutch Shell plc & Cosan S.A.(Bovespa:CSAN3)
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