Brazilian ethanol industry to grow by 7% a year, says Petrobras

Brazil's federal energy major Petrobras (NYSE: PBR) predicts the country's ethanol sector will grow by almost 7% a year in the long term amid rising domestic and international demand for liquid fuel alternatives. Brazilian ethanol output has been in decline since 2010 due to rising sugar prices, poor climatic conditions and gasoline subsidies that have left the biofuel unable to compete on the domestic market. "This [ethanol's problem] is easy to resolve. It's all about price," Petrobras CEO Maria das Graças Foster said during an event in Rio de Janeiro. "The expectation is that the annual rate of consumption growth for ethanol will increase by 6.9% until 2030." According to Brazil's liquid fuel regulator ANP, ethanol consumption fell 5.6% to 17.8Bl in 2012 from the previous year. Under federal government laws announced last month, the ethanol blend in gasoline will rise from 20% to 25% on May 1. President Dilma Rousseff has also slashed subsidies on gasoline and diesel, prompting price hikes of 14.9% and 21.9% respectively since January. Analysts say the measures will help reduce Petrobras' foreign oil import bill, seen as the chief culprit for the company's 36% decline in 2012 profit to 21.2bn reais (US$10.7bn).