Bloomberg News

Brazil Revamps Biodiesel Auctions After Regulatory Probe

May 11, 2012

Brazil revised the way biodiesel is sold in the country after regulators found indications that producers colluded to keep prices high.

Fuel distributors will now negotiate contracts directly with producers in government-organized auctions, Marco Antonio Martins Almeida, secretary of petroleum, natural gas and biofuels at the Ministry of Mines and Energy said today at an event in Brasilia.

Under the previous auction system, contracts to supply biodiesel were signed with state-controlled oil producer Petroleo Brasileiro SA (PETR4), known as Petrobras, which then sold it to distributors, who are required to use 5 percent biodiesel in the diesel fuel they sell.

“The new auction model is less susceptible to an agreement on prices,” Almeida said. The system will “avoid new complaints from happening.”

Comanche Clean Energy Corp., a biodiesel producer, complained to fuel regulator Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis on Nov. 28 that participants colluded on prices in an auction earlier that month.

The regulator conducted an investigation following the complaint and found evidence of price-setting, the agency said in a May 7 e-mail. It has notified the federal police, ANP said.

Under the new system, biodiesel producers will be able to furnish distributors with three offers during auctions, Almeida said. While Petrobras will still buy and resell the biodiesel, the Rio de Janeiro-based company will only act as an “intermediary,” he said.

Comanche, based in Sao Paulo, didn’t immediately reply to a telephone call from Bloomberg News seeking comment.

Changes Sought

The previous system didn’t differentiate producers on the basis of the quality of their product, Erasmo Carlos Battistella, president of the biofuel trade group Associacao dos Produtores de Biodiesel do Brasil, said today in a telephone interview. Distributors may “select who they buy fuel from taking into account who’s efficient and who’s reliable.”

Abrobio, as the association is called, has been pushing for these changes for more than a year, he said.

The next auction is scheduled for June, the Ministry of Mines and Energy said today on its website.

The new model may lead to a decline in biodiesel prices over time, Almeida said. It will result in a “lower level of government interference and a greater level of participation of market players.”

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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