Brazil Eyes $1.5 Trillion Sustainable Aviation Fuel (SAF) Market Opportunity

Investing between $1 trillion and $1.5 trillion in the Sustainable Aviation Fuel (SAF) market will create a large market that Brazil could take advantage of to become a major player. But in order for production to grow, investment will need to meet production, feed stock availability will need to meet the demand of airlines to buy low carbon fuel, and the cost of the fuel will need to be at a price point that makes it worth the trade off.

These points were the focus of discussion during the 26th DATAGRO International Sugar and Ethanol Conference that was held in São Paulo, where the Brazilian Ministry of Mines and Energy (MME) met with KPMG, a consulting firm, to look at the opportunities for investing in the growing industry and to address the hurdles that still stand in the way.

As one of the representatives of MME at the conference, Darlan Silva dos Santos said that world SAF production is still at a point where it accounts for less than 1% of the demand of what is expected for the market in the coming years.

Other barriers to growing the market still include high production costs, low supply, and the demand to build a market to meet the price.

Santos explained that SAF production facility construction is 20 times the capital expenditure of building a standard ethanol production plant. Because of the combination of high construction cost and the volatility in future demand, investors find it hard to predict project feasibility and find ways to finance. 

Brazil prepares emissions targets to boost SAF demand

The increased scale of production is going to require more reliable feedstock and fuel procurement contracts, which will help reduce the overall project risk for all involved stakeholders. 

Brazil is working to help grow the supply and demand of SAF in the region. There is a planned 1% reduction of aviation emissions for Brazil that will come into effect in 2027. There will be a gradual increase in the reduction of emissions by 1% a year until 2037 when the reduction will reach 10%.

The regulation will give an indication of demand to producers and investors, but the demand will rely on the expansion of supply of the fuel to levels where the airlines can afford to purchase it.

Petrobras renews international certification for SAF

Petrobras’ Duque de Caxias refinery (Reduc) has received its international sustainability certification for producing sustainable aviation fuel (SAF) for another year.

The certification confirms the sustainability criteria set forth in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), created by the International Civil Aviation Organization (ICAO).

Petrobras first received this certification in October 2025. It now enables the company to sell its Reduc SAF that it makes by co-processing soybean oil and corn ethanol’s byproduct.

Improvements in managing the hydrogen source has allowed Petrobras to reduce its SAF’s carbon intensity by 29%, as a result of a 23.8% reduction in the carbon intensity of the corn oil input. 

Petrobras said the achievement proves that reduction in carbon emissions is not solely the result of feedstocks that have been certified. It is a result of improved production processes that help reduce the input’s carbon footprint.

“We don’t stop at finding feedstocks that come with the appropriate certification. We look for innovative and cost-effective processes to reduce the production impact of the materials we use,” commented França.

“Certifying this feedstock adds even more value to the renewable fuel sector,” he noted, and emphasized how certification strengthens Petrobras’ position to provide solutions for airlines committed to international mandates for the transition of air transportation.

Petrobras expands refinery utilization

Petrobras is operating refineries at nearly 98% of installed capacity. The expansion in processing crude oil is in response to the growing demand for diesel and the effort to reduce Brazil’s imports. 

Petrobras expects that imports of diesel will drop almost to zero by the end of December, based on the data that has been made available. 

Brazil is looking at refining facilities to address the country’s reliance on foreign fuel imports. However, refining facilities are only one aspect, and production, demand and infrastructure must be addressed. 

Brazil’s potential to play a leading role in the SAF industry depends on its established biofuel and agriculture sectors. However, to convert that potential to actual production on a significant scale will require an investment in capital, a secure market, and clear and stable regulations.

Pemex and Petrobras (PETR3; PETR4) Renew Deepwater Oil Partnership

After the win by Brazilian President Luiz Inácio Lula da Silva in the elections, Mexico's Pemex and Brazil's Petrobras plan to work together on the exploration and production of oil, Mexico's President Claudia Sheinbaum stated on Monday. 

According to Brazil's electoral court, Lula was elected with 51.8 percent of the votes against the 48.2 percent achieved by Flávio Bolsonaro, a Senator. Lula will return for his fourth term of office on January 5, 2027. 

Sheinbaum congratulated Lula and Brazil and stated that Mexico would reactivate the country's joint ventures, especially the Pemex and Petrobras joint venture.

"All of the joint venture projects on various topics will be resumed, including the partnership between Pemex and Petrobras," said Sheinbaum at her daily news conference in Mexico City.

Both companies previously entered into a Memorandum of Understanding on June 23 in Rio de Janeiro to study potential projects in the Mexican part of the Gulf of Mexico.

Areas that the contract will touch upon include development of both new deep and ultra-deep offshore fields as well as old fields. There will also be cooperation between the two on technologies that help improve the efficiency of using energy resources as well as development of low-carbon fuel technologies.

Petrobras and Mexico are looking to combine their resources and explore deepwater opportunities, in hopes that Petrobras' expertise in deepwater exploration and development will enable Mexico to better exploit the oil potential of the Gulf of Mexico. Sheinbaum has publicly commented that the deal was to better utilize Petrobras’ expertise and to work with the Brazilian state company. Petrobras also has expertise in both deep and shallow waters.

Pemex has significant financial and operational problems. As production was halved, with oil output reaching 1.6 million barrels per day compared with the 2004 peak of 3.4 million barrels per day, there was significant strain on Pemex to fund new projects. At $77.5 billion in June, Pemex financial debt puts a significant strain on funding new projects, especially deep water fields. As of today, Pemex has no production from any deep water fields.

Petrobras has production growth to account for, thanks to production from the Pre-salt offshore fields. As production in Q2 was 3.34 million barrels of oil equivalent per day, up 14.1% over last year, the Pre-salt fields were a huge factor, as they provided 2.78 million of the 3.34 million barrels per day of production.

Petrobras CEO Magda Chambriard commented that she believes both nations will benefit greatly in the long run. Pemex CEO Juan Carlos Carpio commented that this partnership signifies the start of a new collaborative relationship between the two companies. This relationship will involve working on future projects together and sharing knowledge.

The partnership also shows the broader efforts of Latin American state-owned energy companies to collaborate in order to grow their presence and capabilities in the international energy market.

Acelen raises diesel capacity at Brazil’s Mataripe refinery by 25%

Acelen purchased Mataripe refinery in 2021 and has since grown diesel production capacity by 25%. This was largely in response to domestic and global diesel needs. 

The hydrotreater at the facility is now capable of processing 13,700 cubic metres of diesel a day, an increase of 2,700 cubic metres a day. This most recent expansion project, which was completed and authorized for operation in September 2022, raised production from 12,400 cubic metres. According to Acelen, the total increase will allow for 100 million litres more fuel over that time period at full production capacity. 

With 20% to 30% of diesel demand in Brazil coming from imports, it provides opportunities for domestic producers. This is in spite of Petrobras diesel pricing that is lower than the cost of importing.

According to Acelen’s Vice President of Operations, Celso Ferreira, this expansion will cost 71.5 million reais (~$14.3 million USD). Acelen purchased Mataripe refinery from Petrobras in 2021 for an estimated 4 billion reais.

The modifications replaced catalyst beds, increased the capacity for handling heat, reduced hydrogen gas leaks, and improved the efficiency of the facility's steam systems. Acelen said it has the ability to boost output and break production bottlenecks without constructing an additional plant. To optimize catalyst lifespan, the firm said it is using an artificial intelligence system that supports real-time operating decisions.

Jet fuel, gasoline, lubricants and paraffin production has also been expanded at Acelen’s refinery. Ferreira said middle distillate output at the facility has jumped from 35 percent to approximately 42 to 43 percent. 

Mataripe processes 301,000 barrels per day of crude oil and represents 14 percent of Brazil’s total refinery capacity. The Mataripe refinery is also responsible for more than 80 percent of the fuel supply to the state of Bahia, and covers 42 percent of the fuel requirements for Brazil's entire northeastern region. 

Acelen estimates that its additional production will remain within Bahia. However, the company is leaving space to meet any occasional requirements from other parts of Brazil, should it become necessary.

Petrobras (PETR3; PETR4) Discovers Oil in Ultra-Deepwater Equatorial Margin Off Amapá

Petrobras said today (02/10) that it found oil in ultra-deepwater off the coast of Amapá state. It is in Brazil’s Equatorial Margin.

The company said the well sits about 175 to 180 km from shore, or roughly 109 to 112 miles. It is in water that is around 2.9 km deep.

Petrobras added that the results back up that oil is present. Still, it said there is not enough data yet to judge how big the potential reserve could be or what the quality is like.

Next, the firm plans to finish the drilling. After that, it will review the rock layers it identified. It will also follow its safety rules and environmental procedures.

This came after a prior oil discovery in the same area. Petrobras noted that early checks at that time pointed to oil that was of good quality.

The company says this work supports Petrobras as it looks for fresh spots to drill, since output from Brazil’s pre-salt area is expected to fall sometime between 2030 and 2035.  

At the start of the day, Petrobras stock on the New York exchange was down by almost 2% as world oil prices slid. After the update was released, the shares moved nearer to even.  

Big international oil firms are taking a closer look at offshore options in Brazil. Exxon Mobil said it will put about $3 billion into its operations there, with a focus on pre-salt. Other outside players are also watching the Equatorial Margin, an area that includes neighboring Guyana, which has reported several major oil finds.

Petrobras (PETR3; PETR4) Outperforms Aramco, Expands to Ivory Coast

Petrobras had a higher net profit margin than Saudi Aramco for the first time in the first half of 2026, based on an evaluation of company financial reports.

For that period, Petrobras showed a net margin of 29.15%. This means it kept 29.15 reais in profit for each 100 reais of sales. Saudi Aramco came in at 25.48%.

The list was put together by economist Cloviomar Cararine from Brazil’s Dieese research group and the Single Federation of Oil Workers, FUP. It looked at eight large oil companies from 2020 through the first half of 2026.

After Petrobras, the next figures were: Chevron at 18.01%. ExxonMobil at 16.33%. BP at 14.83%. Equinor at 12.84%. Shell at 9.94%. TotalEnergies at 9.44%.

In the first half, Petrobras reported net profit of 85.1 billion reais, or about $16.5 billion. That was up 37.6% compared with the same months in the prior year.

Cararine said the firm did better because it made more, benefited from higher world oil prices tied to the conflict between Iran and United States, cut some general costs, and leveraged Petrobras’ combined setup that covers both oil work and refining.

On Thursday, the company signed production sharing pacts with the Ivory Coast government and with Petroci Holding, the state oil company, covering eight offshore exploration areas.

Via Petrobras Netherlands B.V., Petrobras will own 90% and run the blocks labeled CI-513, CI-600, CI-601, CI-602, CI-603, CI-605, CI-701, and CI-702. Petroci keeps the other 10%.

The deals bring Petrobras into these offshore zones. They also fit the firm’s plan to look for fresh oil and gas reserves beyond Brazil.

Petrobras (PETR3; PETR4) Discovers Light Oil in Amazon Basin as China Boosts Brazilian Crude Purchases

Early checks suggest the oil Petrobras found in the Morpho well, located in Brazil’s Foz do Amazonas Basin near the coast of Amapá, could be on the lighter side. A person close to the testing said the API gravity may fall in the 35 to 40 range.  

If that holds up, it would sit near the lightest oils seen in Brazil so far. It might also match crude made in nearby Guyana. In general, a higher API gravity points to a lighter product. Lighter crude usually needs less refining to turn into fuels like gasoline, diesel, and jet fuel. Still, how much sulfur is present and what the chemical mix looks like will shape the final market value.  

Petrobras is now running the samples at its research site in Rio de Janeiro. The last results are expected within the next few weeks. The firm has also been cleared to drill three more wells in the same area. It is working on permits for other blocks across the basin.

A new shift in demand is helping crude prices and lifting sentiment for Brazil. On Monday, Brent was above $97 a barrel and close to the top it has hit all year. Supply tightness tied to the Strait of Hormuz has slowed shipments from the Persian Gulf. That has made refiners look farther away for oil.

Chinese buyers have been taking cargoes from multiple regions. In recent weeks, they purchased crude from Brazil, Canada, Argentina, and parts of Africa. Analysts say the firmer price conditions have helped Petrobras and also smaller Brazilian companies. Petrobras stock has risen by more than 50% this year. Prio shares are up by more than 40%.

Still, some analysts urge caution. They think China’s recent purchases may be about restocking and better refining margins, not a steady bounce in demand. They also point to electric vehicle growth. There are also expectations that China’s oil use may have peaked in 2025. If that plays out, imports could ease later on.

Brazil’s Equatorial Margin: New Oil Frontier Could Boost Reserves and Transform Amapá

Brazil’s recent oil discovery out by the coast of Amapá has already made people hope that the country’s Equatorial Margin might help refill the declining reserves of the country, sure bolster energy security and, in a longer view, do something real for one of Brazil’s poorest states, even if actual commercial output is still years away, maybe more.

This find is the first clear sign of hydrocarbons in a zone the government and Petrobras both treat as one of Brazil’s brightest new oil frontiers. The Equatorial Margin runs along Brazil’s northern shoreline and, according to the government, it could hold reserves up to 16 billion barrels. Petrobras has even called the area a kind of “new Amazon pre-salt” which sounds dramatic, but that’s what they said.

Still, the discovery doesn’t automatically mean that there are commercially workable oil reserves that have been confirmed. Petrobras needs to figure out the size and quality of the deposits, and then, assess if extraction would be economically feasible. As economist Eric Gil Dantas from the Instituto Brasileiro de Estudos Políticos e Sociais noted, that part comes next.

The potential development comes as Brazil, sort of quietly gets ready for a decline in existing oil reserves during the 2030s. The pre-salt fields now make up roughly 80% of Brazil’s oil output, so finding new reserves becomes more and more crucial for the state-run oil company.

Brazil is already self sufficient in crude oil, meaning it produces more than it uses, however it still relies on imports of refined products. Diesel is kind of the weak spot here, because imports account for about 25% of domestic consumption, according to Dantas. New oil output from the Equatorial Margin could help keep Brazil’s crude oil self-sufficiency intact, but at the same time investment into refining would be needed in order to cut dependence on imported fuels.

The discovery could also create a noticeable economic ripple effect in Amapá. If the reserves prove commercially viable and production actually starts in the coming years, the state might receive royalties and special participation payments that are like the ones major oil-producing regions collect, such as Rio de Janeiro, São Paulo and Espírito Santo.

The National Confederation of Industry (CNI) estimates that moving forward with the Equatorial Margin could boost Amapá’s gross domestic product and bring around 54,000 direct plus indirect jobs. 

Meanwhile Amapá’s government is trying to pull in companies to set up an oil and gas supply chain in the state, using tax incentives, and also pushing investments in infrastructure logistics and workforce training. The state government says oil revenues could support education, healthcare infrastructure, environmental protection and even research.  

On the federal side and at the state level people are already preparing for that possibility. The Ministry of Regional Integration and Development together with Petrobras signed a partnership focused on workforce training, strengthening local supply chains and creating development initiatives across areas like bioeconomy and biodiversity.

Even so, the idea that new oil wealth might show up is still growing in a state that, well, has a pretty solid environmental profile. In fact, more than 70% of Amapá’s territory is protected, and the state even logged a net negative carbon balance in 2023, based on the Climate Observatory’s SEEG system.

For Petrobras, these potential reserves can matter to investors long before a single barrel is produced. Oil projects usual ly demand years of investment before any revenue shows up, and the expectations around future output can end up shaping how the market values oil companies, as Dantas put it.

Commercial production in this kind of new frontier could take six to eight years, maybe more, so the Equatorial Margin probably won’t translate into a quick lift for Brazil’s oil supply. Still, if the deposits end up being commercially workable, the area could turn into a meaningful supply of crude for Brazil over the coming decades while, at the same time, giving Amapá another stream of economic activity and public income.

Today, the state of Amapá still sits among the places with the highest unemployment rates in Brazil. In the labor market, things moved a bit between the first and second quarters of 2026, and the unemployment rate dropped around 0.2 percentage point. Even with that small progress, Amapá kept the top spot, it actually had the country’s highest unemployment rate, reaching 9.8% of its labor force.

Petrobras’ (PETR3; PETR4) Equatorial Margin Find: A New Oil Frontier or Just a Promising Clue?

Petrobras’ discovery of hydrocarbons at an exploratory well off Brazil’s northern coast has kinda reanimated hopes that the Equatorial Margin might end up being a real new oil frontier, yet the find is still a long way from commercial production and it is already stirring a lot of discussion about environmental risk, energy security, and also how any future oil revenue should be spent or re-invested.

The state-controlled company said it identified hydrocarbons at the Morpho well, in block FZA-M-59, in the Foz do Amazonas basin, roughly 175 km (109 miles) off Amapá state, at water depths of 2,886 metres. Petrobras has also been pretty clear that this result is an exploratory discovery, not proof of a commercially viable reserve.

Petrobras now has to finish more drilling, analyse the oil samples, and do appraisal work to pin down the size, the quality and the recoverability of the accumulation. More wells and authorisations from the environmental regulator Ibama will also be needed before Petrobras can hand in a development plan.

Chief Executive Magda Chambriard has said, that if the project proves viable first oil could be produced in around six to seven years or so. Industry specialists mentioned in the source material said that the schedule would be challenging, and not just a bit, because Brazilian offshore efforts often need longer to move from an initial indication into actual production.

The stakes feel pretty high for Petrobras, where the established pre-salt fields make up most of Brazil’s output and are expected to eventually mature. If the Equatorial Margin province lands commercially, it could help the company replenish reserves, keep exports steady, and also lower the risk that Brazil might end up leaning on imported crude or refined fuels later.

Some of the optimism comes from the region’s geology looking akin to offshore Guyana and Suriname. There, large discoveries have pulled in global oil companies and that change, has reshaped Guyana’s economy. Still, earlier wells in other sectors of Brazil’s Equatorial Margin have not proven commercially viable, so the Morpho finding is more like an initial step rather than a done deal.

The potential prize has also kind of nudged a broader disagreement about who would actually gain, if the discovery becomes a producing field. Ildo Sauer, a former Petrobras director and professor at the University of Sao Paulo, said the find could turn into a “passport to the future” only if Brazil captures and steers a larger slice of oil income toward development priorities, such as public services, infrastructure, technology, and a low-carbon transition.

Supporters of exploration argue that oil revenue and domestic supply security could help bankroll Brazil’s transition, especially while global demand for fossil fuels stays substantial. They also point to the country’s growing ethanol, biodiesel, wind, and solar industries as proof that oil development and decarbonisation can move along at the same time, sort of in parallel, without too much friction.

Climate advocates push back on that, they say new oil fields might collide with Brazil’s climate commitments, and end up locking in fossil-fuel output for decades. They add that the Foz do Amazonas basin is unusually environmentally sensitive, with strong currents and limited room to maneuver, if an offshore accident happens, there’s not much margin for error.

The next phase is basically going to see if Petrobras can take a fairly early geological clue and turn it into something commercial, all while still meeting those environmental conditions, and also showing how, if this oil wealth ever actually becomes real it will be shared. Until that time, the Equatorial Margin stays a rather hopeful prospect, not really a confirmed new chapter in Brazil’s oil industry yet. 

Petrobras’ Amapá Oil Discovery Could Reshape Brazil’s Energy Map

Petrobras’ identification of oil at an exploratory well off Brazil’s northern coast seems to have boosted the state-controlled company’s expectations, for pushing into a fresh oil frontier. At the same time though, it also brings up new doubts, about how Brazil will juggle reserve replacement, together with its broader energy transition aims.

Petrobras said that the Morpho well, in block FZA-M-59 in the Foz do Amazonas basin, returned hydrocarbon samples. The well sits about 175 km (109 miles) from the Amapá coast, in water depths around 2,886 metres, give or take.

Chief Executive Magda Chambriard said the discovery is meaningful but she also underlined it is not yet a commercial find. Petrobras still has to finish drilling, carry out sample analysis, and drill appraisal wells to determine the size of the accumulation, how much can likely be recovered, and whether development makes economic sense, she added in remarks referenced by the source material.

The company says, per the source material, that first production could start in about seven years if the discovery is confirmed and then developed. That sort of schedule, really points to how long the lead time is with ultra-deepwater projects, you know, those needing heavy appraisal, environmental licensing, engineering work, plus infrastructure spending, before any oil can actually make it to the market.

For Petrobras, the Equatorial Margin might give a way to top up reserves as its existing producing areas slowly mature. The broader region along Brazil’s northern and northeastern coast has been getting a lot of attention, mainly because of geological likenesses with offshore Guyana and Suriname, places where big discoveries have changed the pace of regional oil investment.

As for the Morpho result, it doesn’t automatically mean a fresh producing province is coming. Other exploration wells in the Equatorial Margin elsewhere, haven’t been able to show commercial viability, so Petrobras (PETR3; PETR4) will still need more drilling to figure out whether the Amapá find is just a small pocket, or part of a wider accumulation.

The project also seems to sit right at the centre of Brazil’s ongoing debate about fossil fuels and climate policy, sort of. Environmental licensing is still a make-or-break condition for anything like continued exploration, especially in that sensitive offshore zone, where an operational incident can, without much warning stop drilling activity. Petrobras has said its work is kept under environmental controls and that any next phases will need the right authorisations.  

People in favour of exploration argue that tapping new reserves would strengthen Brazil’s energy security, and help keep Petrobras’ place as a major oil supplier even while global demand slowly shifts elsewhere. 

Amapá Governor Clécio Luís called the oil discovery “the news of the century,” saying that potential oil development could transform the state’s economy by increasing tax revenue, creating jobs and attracting investment in infrastructure, logistics and services.

On the other hand, critics worry that pushing more oil could pull away capital and political attention from low-carbon fuels and renewables.  

But these two approaches might not have to clash at all. Brazil’s sugarcane and corn based ethanol sectors are growing, while biodiesel is also expected to take on a larger part in the country’s fuel mix. Whether that shift really runs alongside a new offshore oil province will likely come down to the commercial results of the Morpho appraisal programme, and also to how Brazil chooses its future energy policy.

Petrobras (PETR3; PETR4) Finds Hydrocarbons Off Brazil, Raising Hopes for New Oil Province

Brazil’s Petrobras said it might start producing oil from the country’s Equatorial Margin in roughly seven years after they identified hydrocarbons at an exploratory well out off the coast of Amapá. This outcome, the company said, could help restore national reserves as older fields get weaker over time.

The state-run firm added it found hydrocarbons via wireline logs, plus rock samples at the Morpho well in block FZA-M-59, within the Foz do Amazonas basin. Petrobras is still drilling and doing more investigations to figure out the scale of the accumulation, and also whether it could be developed commercially, or in other words turned into real production.

Morpho lies about 175 km (109 miles) off Amapá’s coast in water depths of 2,886 metres, placing it among the most technically demanding offshore exploration projects in Brazil. Petrobras holds a 100% stake in the block. 

The result is an early signal, rather than confirmation of a commercially viable discovery. Still, it strengthens Petrobras’ case for exploring the Equatorial Margin, a frontier stretching from the border with French Guiana to Brazil’s northeastern coast that the company sees as strategically important for replacing reserves and safeguarding future energy supplies during the country’s energy transition.

The company got environmental approval last year, to drill in the Foz do Amazonas basin, after a long licensing grind with the environmental regulator Ibama. Overall, the Equatorial Margin spans the Foz do Amazonas, Pará-Maranhão, Barreirinhas, Ceará, and Potiguar sedimentary basins.

Interest in the whole area has been climbing because of its geological nearness to offshore Guyana and Suriname. In those places, big discoveries really changed the perception, making it one of the world’s most closely watched oil frontiers. Brazil’s oil regulator ANP has estimated that the Equatorial Margin may hold as much as 30 billion barrels of oil equivalent. Still, that number is prospective resources not proven reserves, so it’s more like potential then certainty.

Former ANP director-general David Zylbersztajn said the Morpho result could have wider economic implications, if further drilling confirms a big oil province. He noted that if the appraisal goes well, investment and industrial activity might drift toward northern Brazil, and at the same time help Petrobras absorb or offset expected declines from older producing fields.  

That said, commercial production is still a few years away. Petrobras has to finish its appraisal programme, figure out the reservoir’s actual size and quality, lock in a full development plan, and deal with the logistical hurdles plus environmental constraints of operating in ultra-deep waters.

For Brazil, the discovery adds a new variable to the debate over how the country balances climate ambitions with energy security. A commercially viable oil province in the Equatorial Margin could provide fresh crude supplies and investment for the country’s north, but it would also intensify scrutiny of fossil-fuel expansion in a sensitive offshore region near the Amazon.

Petrobras (PETR3; PETR4) Pricing Distortion Raises Fears of Post-Election Inflation Shock

Petrobras, Brazil’s state run oil giant, is dealing with a bigger and bigger mismatch between what people pay at home for fuel and what crude costs on the global market, with Middle East geopolitical tensions helping shove Brent crude toward the $120 per barrel area.

In the meantime, market analysts and economists say the Brazilian government is relying on subsidies and political leverage, basically holding the line on prices right now ahead of October’s decisive election, but there’s a coming “inflationary shock” after the votes, something that could hit hard once the post election period starts.

The Subsidy Shield

As of late July, the federal government has kept up pretty substantial subsidies to help keep pump prices steady. Based on the latest market data, the government is still providing something like 0.44 reais per liter for gasoline, and 1.12 reais per liter for diesel.

Even though these steps ease the immediate consumer pain, they also start to generate a larger fiscal strain, plus an inflationary mismatch that is hard to ignore. One thign is certains, no one in Brazil expects a fuel price hike before the elections. 

Widening Parity Gap

The space between Petrobras’ refinery prices and the Import Parity Price (PPI) has gotten pretty close to critical, like, it’s at a bad threshold now. BTG Pactual estimates Petrobras is moving diesel at a 47% discount compared with international levels, but the gap only tightens to 28% once the government subsidies are taken into account. For gasoline, the pre-subsidy discount is sitting around 37%.

So this mismatch has kind of shut the door for private importers, and now Petrobras is basically the only major supplier for a big slice of the domestic market. Meanwhile, private refiners such as Acelen have already started correcting their prices upward, and just recently they bumped diesel by 8% and gasoline by 5% to mirror international fluctuations, even with all that volatility in play.

Market Opportunity Amid Volatility

Even with the pricing constraints , financial institutions seem to be getting more bullish on Petrobras (PETR4) shares. Banco do Brasil recently upgraded its recommendation to “Buy” and put a price target at 45.00 reais, kinda straightforward in a way.

Analysts say Petrobras is somehow uniquely built to profit from a “new era” where oil prices stay structurally higher. They argue that geopolitical risk lingering around longer, has basically formed a higher price floor for the commodity and, honestly, few players are as well-positioned as Petrobras to absorb that value. Banco do Brasil analysts said that part directly.

On the technical side, there’s also talk of additional upside, with some targets landing near 47.53 reais as the stock follows the upward momentum of Brent crude. Brent recently slipped past the $94 mark and is still getting upward pressure, with attention shifting toward $100, for now.

The "Querosene" Exception

While gasoline and diesel stay frozen, airfares are already starting to feel it. Different from road fuels, aviation kerosene is tweaked every month according to international prices. Analysts expect a pretty sharp rise in passenger costs from August, and that could become the first real, visible signal of energy‑driven inflation inside the official indexes.

Meanwhile, Brent crude keeps climbing, pushed by thin global inventories and the worry of supply interruptions around the Red Sea. So the strain on Brazil’s energy policy is moving toward a kind of boiling point. For now, the “election ceiling” holds steady, but the market is already pricing a rough, jagged finish for 2026.

Petrobras (PETR3; PETR4) Expands Energy Transition Strategy with Critical Minerals, SAF and Biofuels Investment

Petrobras (PETR3; PETR4) has been taking pretty significant steps over the past week, to kind of lock in its role in the global energy transition. The focus is on critical minerals, sustainable fuels and fiscal compensation, all of that at once.

PARTNERSHIP FOR CRITICAL MINERALS

Petrobras and the Brazilian Development Bank, BNDES, signed a protocol of intentions to collaborate on research and innovation, for critical and strategic minerals. The whole thing is meant to tackle technological bottlenecks within the supply chains for electrification, for batteries, and for clean energy. In Brazil there are major reserves of graphite, nickel, manganese, lithium, and aluminum too, and this partnership wants to take advantage of Petrobras’ research know-how so the country can plug into higher-value global production chains.

$1.2 BILLION BIOREFINERY INVESTMENT

The state-run oil giant also approved the final investment decision (FID) for a new $1.2 billion biofuels plant at the Presidente Bernardes Refinery (RPBC) in Cubatão, São Paulo. The unit will have a production capacity of 15,000 barrels per day, focusing on Sustainable Aviation Fuel (SAF) and renewable diesel. Scheduled to begin operations in 2030, the project aligns with Brazil’s "Fuel of the Future" law and international aviation decarbonization standards (CORSIA), marking a major milestone in the company’s 2026-2030 business plan.

DIESEL SUBSIDY REIMBURSEMENT

Petrobras received 752 million reais ($130 million) as the first installment of a government economic subsidy program for diesel. This payment covers the period between March 12 and March 31, following a measure that provided a 0.32 reais per liter aid. The subsidy program, intended to stabilize domestic prices, is expected to remain in effect until the end of 2026, though the government has signaled potential periodic reviews of the policy.

MARKET CONTEXT

The moves come as global competition for critical minerals intensifies, with G7 leaders recently agreeing to reduce dependence on China. Brazilian officials view this as a "window of opportunity" to demand local industrialization and processing investments. Meanwhile, the domestic transport sector remains cautious; while overall automotive sales are rising, truck registrations fell 3.24% in April compared to last year, with industry leaders looking to credit programs and trade fairs to unlock pent-up investment.

Brazil to Launch First Biorefinery as Petrobras (PETR3; PETR4) Bets on "Diesel R" Technology

Brazil is set to inaugurate its first dedicated biorefinery this year, marking a paradigm shift in the country’s energy transition as state-run oil giant Petrobras (PETR4.SA) scales up its proprietary "Diesel R" technology.

The project involves transforming the historic Rio Grande Refinery (Refinaria Riograndense), built in 1937, into a 100% renewable fuel facility. The move, revealed by former Petrobras CEO Jean Paul Prates in a recent interview, aims to repurpose older, less competitive infrastructure into a cornerstone of Brazil’s green economy.

THE "DIESEL R" ADVANTAGE

Unlike traditional biodiesel (fatty acid methyl esters), which is blended into fossil diesel at the pump, Petrobras’ "Diesel R" is produced by co-processing vegetable oils — such as soybean, rice, or corn — directly within the refinery’s hydrotreatment units.

"This is not biodiesel. It is pure, clean diesel produced from vegetable oil," Prates said. "The resulting product is chemically identical to fossil diesel, requiring carbon dating tests to distinguish between the two."

The technology offers several logistical and mechanical advantages:

• No Engine Modifications: "Diesel R" meets the highest standards for modern engines and exhaust systems without requiring changes to vehicle hardware or storage infrastructure.
• High Stability: The fuel is characterized by low contaminants and high stability, reducing engine failure risks and maintenance costs.
• Flexible Feedstock: Refineries can process varying percentages of vegetable oil (R5, R10, R15) alongside crude oil, or move to 100% renewable feedstock as seen in the Rio Grande project.

STRATEGIC TRANSITION

The initiative aligns with the "Fuel of the Future" law and the ANP (National Petroleum Agency) Resolution 968 of 2024, which created the "Diesel C" category for fuels with renewable content.

Prates emphasized that while total electrification is the ultimate goal for the 21st century, biofuels provide a critical 40-to-50-year bridge for countries like Brazil, which possess abundant land and agricultural frontiers that do not compete with food production.

DECARBONIZING THE PRE-SALT

Beyond biofuels, Petrobras is leveraging proprietary technologies like Ricep (Remote Interception for Controlled Evacuation Process) to lead global subsea carbon capture efforts. The company is currently reinjecting CO2 directly into offshore reservoirs 3 kilometers below the seabed, bypassing the need to bring the gas to the surface for processing.

"Petrobras has the largest subsea CO2 reinjection program in the world, by far," Prates noted, highlighting the company’s focus on maintaining its technological edge to avoid becoming a mere exporter of energy commodities.

POLITICAL CONTEXT

The technological push comes amid a polarized political climate in Brazil. Prates warned that the 2026 presidential cycle is already being "polluted" by misinformation and personal scandals, which often overshadow critical debates on public services, energy policy, and economic development.

Petrobras (PETR3; PETR4) Aims for Brazil's Diesel Self-Sufficiency by 2030 with $6.4 Billion Investment

State-run oil giant Petrobras committed on Monday to making Brazil self-sufficient in diesel production by 2030, announcing 37 billion reais ($6.4 billion) in investments for São Paulo state through the end of the decade.

The announcement, made by Petrobras CEO Magda Chambriard, marks a significant shift in the company’s strategic ambition, moving from an original target of 85% domestic diesel coverage to a goal of 100%.

"We have committed to President Lula to be self-sufficient in diesel in this country by 2030," Chambriard told reporters during an event at the Replan refinery, Brazil’s largest processing unit.

ENERGY SECURITY PUSH

The push for self-sufficiency comes amid heightened global geopolitical tensions, particularly the conflict involving the United States and Iran, which has spiked concerns over global energy supply chains and price volatility.

"In this troubled moment of war... concerns regarding our country's energy security are exacerbated," Chambriard said. "Every country is discussing its energy security, and Brazil is no exception."

Petrobras currently supplies approximately 75% of Brazil’s diesel. The company plans to increase its refining capacity to bridge the remaining gap, reducing the country’s vulnerability to international price swings and import dependencies.

REFINING HUB

São Paulo state, which handles half of Petrobras’ total refining and 40% of Brazil’s fuel consumption, will be the heart of this expansion.

• Refining Investment: 17 billion reais will be allocated to refining projects.
• Replan Focus: 6 billion reais will go to the Replan refinery in Paulínia to expand its processing capacity by 63,000 barrels per day, specifically targeting high-value S10 diesel.
• Broader Network: An additional 11 billion reais will be invested across the Revap, RPBC, and Recap refineries.

The CEO noted that increased diesel production will naturally boost gasoline output, further improving domestic fuel availability.

OFFSHORE AND RENEWABLES

Beyond refining, Petrobras will invest 9 billion reais in offshore exploration and production in São Paulo’s pre-salt fields, including the new "Arã" area and upgrades to the Sapinhoá and Mexilhão fields. The investment package also includes:

• Port of Santos: 3.3 billion reais to expand the water terminal and storage capacity.
• Energy Transition: Projects for sustainable aviation fuel (SAF) using recycled cooking oil and a new photovoltaic plant for Replan’s internal consumption.

Petrobras estimates the investment cycle will generate approximately 38,000 direct and indirect jobs in São Paulo by 2030. "São Paulo is the largest consumer market in Brazil, and Petrobras cannot and does not intend to be absent from it," Chambriard concluded.

Natural Gas as a Pillar of Brazil’s Energy Security: Insights from Gas Week 2026

A comprehensive panel discussion on the impact of Brazil's Capacity Reserve Auction (LRCAP) on the natural gas market, recorded on the second day of the Gas Week 2026, organized by Eixos, highlighted the pivotal role of natural gas in the nation's energy matrix. With 90 projects and 15 GW of gas thermal plants contracted, the panel brought together key players including Eneva, Petrobras, Origem Energia, Cocal, and ED, alongside regulators EPE and ANP, to debate critical issues such as tariffs, LNG, storage, biomethane, and the future steps for the post-auction gas market.

Brazil’s recent capacity reserve auction has solidified the role of natural gas as a critical pillar for the country’s energy security, with major industry players securing key contracts to provide dispatchable power to a grid increasingly reliant on intermittent renewable sources.

The auction, held in March and conducted by ANEEL, MME, and CCEE, successfully contracted 18.97 GW of capacity — primarily from gas-fired thermal plants. The projects represent R$ 64.5 billion in total investments with delivery dates ranging from 2026 to 2031. The auction achieved a 5.52% discount, resulting in estimated savings of R$ 33.64 billion.

The results were the focus of intense discussion at the Gas Week 2026 conference in Brasília, where executives and regulators analyzed the long-term impacts on the nation’s energy and gas markets.

Eneva and Petrobras Secure Dominance

Eneva, the largest private natural gas producer in Brazil, emerged as a protagonist in the auction. Despite legal challenges and scrutiny from the Federal Audit Court (TCU), Executive Director of Marketing, Sales and New Business at Eneva, Marcelo Lopes, expressed confidence in the process.

"The auction was not designed to favor specific agents, but to contract the energy security the system needs," Marcelo stated during a panel. He noted that national energy planners (EPE) and the grid operator (ONS) have signaled the need for dispatchable power since 2021.

State-run oil giant Petrobras also secured significant re-contracting for its existing thermal fleet. Leonardo Santos Ferreira, a Petrobras Gas and Energy Marketing Manager, highlighted that the new contracts provide the fixed revenue necessary for infrastructure investments, with a renewed focus on "operational flexibility." This allows plants to be dispatched up to twice a day to balance the grid.

Market Volatility and New Frontiers

The auction is expected to transform the Brazilian gas market by treating gas as a "flexibility fuel." Flávia Barros, director of Origem Energia, noted that the intermittent demand from thermal plants would likely increase short-term price volatility, creating both risks and opportunities for traders.

"The winners in the post-auction market will be those capable of coordinating infrastructure and operating in a regionally fragmented environment," Flávia said, highlighting Origem’s strategy of integrating upstream production with strategic gas storage.

In a first for Brazil’s capacity auctions, Cocal successfully negotiated thermal projects powered by biomethane, signaling a shift toward replacing fossil fuels with renewable gas in the industrial and power sectors.

Regulatory and Infrastructure Outlook

The National Petroleum Agency (ANP) estimates that the auction results could lead to the contracting of 49 million cubic meters of gas per day. Pietro Mendes, an ANP director, emphasized that this volume is crucial for maintaining the financial health of the gas transport system and could help lower transport tariffs in the long run.

Heloisa Borges, Director at the Energy Research Office (EPE), concluded that the Brazilian gas industry has reached a level of maturity capable of delivering diversified solutions, including LNG, domestic gas, and pipeline imports.

"We saw a robust industry capable of responding to the different needs of various actors," Borges said, pointing to the upcoming Integrated National Infrastructure Plan as the next step in supporting Brazil's growing gas production.

Brazil’s Energy Time Bomb: The Hidden Costs of Dismantling State Control

The energy security system of Brazil faces a critical vulnerability which results from multiple policy transformations that have prevented the country from producing enough diesel, gasoline, LPG, and aviation fuel to satisfy its internal consumption needs. The current situation exists because both the global market trends and the systematic destruction of the country's refining capabilities together with its state regulatory systems which started after the 2015-2016 political changes, during Michel Temer's presidency, which was achieved after the impeachment of President Dilma Rousseff, in a political action coordinated by then-Speaker of the House Eduardo Cunha, who would eventually be arrested in October 2016 as part of Operation Lava Jato, accused of receiving bribes (approximately US$1.5 million) to facilitate the purchase of an oil field in Benin (Africa) by Petrobras.

Now, the core of the issue lies in the abandonment of a comprehensive strategy aimed at energy independence during the years of Michel Temer and Jair Bolsonaro's governments. Before that, Brazil had set an ambitious goal to achieve complete self-sufficiency for both oil production and refinery operations which would enable the country to become an exporter. 

However, this vision was derailed. The Lava Jato (Car Wash) operation reached its peak when state-owned oil company Petrobras had to cut back its business activities. The company reduced its refinery operations in order to prepare for privatization while it sold BR Distribuidora to leave the retail sector and divested its stake in Liquigás — which, for many Brazilians politicians, such as Ciro Gomes, for example, was a "crime against the nation".

The strategic withdrawal from the market left Petrobras unable to handle domestic consumer needs. The country increased its dependence on private companies to bring in necessary fuel supplies. During the years of the Temer and Bolsonaro governments, Brazil adopted a policy of growing dependence on the international market, naively assuming that the world would remain at the low price levels seen from 2014 to 2020. Such decisions demonstrate today, at the very least the short-sightedness of the approach.

Michel Temer and Jair Bolsonaro brought major changes to Petrobras's business operations. The company operated as a crude oil producer for pre-salt reserves, which limited its business activities to the Southeast and South regions while it stopped serving customers across the entire country.

The present day displays clear effects which stem from this security weakness. Brazil relies on diesel imports for about 30% and gasoline along with LPG imports for 15% to 20% of its total needs. The domestic market experienced tremors when global energy prices increased because of geopolitical conflicts although actual price increases remained contained. The federal government implemented short-term solutions which included tax reductions for PIS and Cofins along with cost subsidies for importers and a 12% export duty on crude oil which would help reduce expenses for end users.

The absence of government control over the retail industry has permitted private distribution companies and gas stations to boost their profits while charging higher prices to consumers, even though fuel prices in Brazil did not suffer the same impact as in other regions due to the Iran-Iran War. Private distributors buy fuel at a discount from Petrobras and sell it at a higher price to ordinary consumers, even though the price of these fuels has not been affected by the increase caused by the war. For that reason, the government needs BR Distribuidora because it serves as the only way to establish effective pump price controls.

A recent Petrobras gas auction controversy demonstrates the existing fundamental problems. The auction resulted in exorbitant prices which caused the company to terminate gas director Cláudio Schlosser. The incident revealed the complete price increases throughout the supply chain: Petrobras sells cooking gas cylinders at the refinery for R$ 34 to R$ 35 yet consumers purchase them at R$ 110 to R$ 150. The auction conducted outside established supply agreements during a time of extreme industrial demand and market speculation permitted price gouging which enraged President Luiz Inácio Lula da Silva because he wanted to defend low-income households.

The government needs to explore comprehensive strategies which include consumption limits and severe penalties against all market speculation activities. Petrobras has ended its adherence to Import Parity Price (PPI) regulations which resulted in Bolsonaro administration fuel price changes that reached 100 times per year yet the company must continue to rely on international markets until it provides funding for domestic importers. The current strategy which uses "Brazilianization" for price control purposes seeks to minimize market fluctuations while protecting Brazilian markets from severe global market impacts.

The main question which needs to be answered now requires Brazil to find solutions for its energy security problems under conditions of growing global instability. The government needs to establish permanent solutions which will make it necessary to change its current methods of managing the country's natural resources, which should provide citizens with stable and affordable energy.

Brazil’s Diesel Subsidy Could Supercharge Petrobras (PETR3; PETR4) Returns to 12.7%

A new diesel subsidy package announced by the Brazilian federal government is poised to significantly enhance shareholder returns for state-controlled oil company Petrobras (PETR4.SA), according to an analysis by BTG Pactual (BPAC11.SA).

The measures could elevate Petrobras's free cash flow yield to shareholders to approximately 12.7% by 2026, analysts Bruno Montanari de Almeida and Pedro Soares da Cunha stated in a report. Under the new scheme, Petrobras is expected to receive around 4.77 reais per liter of diesel sold, equivalent to $147 per barrel.

While the Import Parity Index (IPP) currently stands at 6.18 reais per liter, subsidies for imported diesel, estimated at 1.52 reais per liter, effectively reduce the IPP to about 4.66 reais per liter. "This implies that Petrobras is receiving the maximum possible in this scenario," the BTG team noted.

The package includes an additional subsidy of 0.80 reais per liter for diesel produced domestically, initially valid for two months. BTG Pactual estimates this could inject an additional $1.5 billion per quarter into Petrobras's revenues. "The additional subsidy of R$0.80 per liter, even if valid for only two months, implies approximately $1.5 billion per quarter in incremental revenue," the analysts highlighted. They added that extending this benefit until year-end could impact the FCFE yield by about 3.5 percentage points.

This 12.7% yield projection is based on Brent crude oil prices at $80 per barrel and stable fuel prices throughout 2026.

BTG Pactual also anticipates positive impacts for the distribution sector. An increased subsidy of 1.20 reais per liter for imported diesel is expected to boost distributors' participation in the government program. "The increase in the subsidy to R$1.20 per liter should encourage greater adherence to the program by distributors. This tends to reduce distortions and increase predictability in the fuel market," the bank assessed.

Despite an environment of heightened government intervention, BTG's report concludes that Petrobras is likely to maintain its profitability and continue high levels of cash distribution. "The package creates an environment in which the company maintains value capture while the domestic market adjusts through subsidies," the team concluded.

In related developments, Petrobras recently approved the financing for the Sergipe Deepwater project, which aims to produce 200,000 barrels of oil and 18 million cubic meters of gas daily. This initiative underscores the company's commitment to natural gas as a transitional fuel and its broader energy transition strategy.

Petrobras is also advancing projects in renewable fuels, including co-processed diesel and aviation Sustainable Aviation Fuel (SAF), which incorporate vegetable oil or recycled cooking oil. The company is also investing in solar energy, with a project already operational at its Minas Gerais refinery, aiming for self-sufficiency and potential electricity export.

President Lula is seeking to annul a recent Petrobras auction for LPG (cooking gas) supply, citing concerns over significant market distortions. Petrobras currently sells 13kg of gas to distributors at a fixed price of R$34.70, unchanged since July 2024. 

However, as Petrobras cannot meet 100% of Brazil's LPG demand, it sells by quotas and occasionally holds extra-quota auctions. A recent auction saw prices reach R$72, more than double the fixed price in some regions, with premiums ranging from 48% to 82% above the fixed value. 

This auction accounted for about 15% of Brazil's monthly gas demand, and the price increase is expected to reach consumers. Petrobras justifies these auctions by citing industrial supply and demand management, leveraging external market prices to increase profit margins without unpopular fixed-price adjustments, and for logistical control. 

The situation highlights a conflict between Petrobras's right to operate as a mixed-capital company (51% government, 49% private) and the government's desire to control consumer prices, especially in an election year. 

Critics, including President Lula, view high profits from such auctions as exploitative, and can generate inflation and directly affect the lives of Brazilians. 

To combat the high prices of fuel and cooking gas, the Brazilian government has implemented measures to curb rising fuel prices, including subsidies for national and imported diesel, tax exemptions for biodiesel, and credit lines for airlines. 

These measures are initially valid for two months, with a potential impact of R$31 billion if extended until year-end. The government claims a "zero effect" on public coffers due to increased revenue from other sources, such as a 12% increase in oil export tax, estimated to generate R$32 billion. 

For imported diesel, a R$1.20 per liter subsidy is in place, with states contributing R$0.60. Domestically produced diesel receives an R$0.80 per liter subsidy fully funded by the federal government. These are in addition to a R$0.32 per liter subsidy announced earlier. Importers are expected to pass these benefits to consumers. Biodiesel will see federal tax exemptions (PIS/Cofins), saving R$0.02 per liter. 

LPG (cooking gas) imports will receive a federal subsidy of R$850 per ton. The airline sector, heavily impacted by rising aviation kerosene prices, will benefit from up to R$9 billion in credit lines per company, federal tax exemptions (PIS/Cofins) on aviation kerosene (saving R$0.07 per liter), and deferred payments of fees to the Brazilian Air Force until December. 

The government's economic team believes these measures, combined with increased revenue, will offset the costs, though the actual impact on revenue and expenditure remains to be seen.

Brazil’s Ethanol Power Play: How Sugarcane and Corn are Shielding the Economy from a Global Oil Shock

Brazil's long-standing ethanol program is proving to be a crucial buffer against rising global oil prices, particularly as the conflict involving Iran, the United States, and Israel enters its fifth week. Nations like India and Mexico are now examining Brazil's energy security model as a potential blueprint.

The South American giant is partially shielded from international oil market volatility by its decades-old, cost-effective, and environmentally friendly ethanol initiative. Millions of Brazilian motorists have the option to fuel their vehicles with 100% sugarcane-derived ethanol or a gasoline blend containing 30% biofuel.

Brazil's extensive fleet of flex-fuel vehicles, capable of running on any combination of ethanol and gasoline, is unparalleled globally. The program Proálcool (Programa Nacional do Álcool), initiated in 1975, has successfully evolved to reduce the country's reliance on foreign oil.

While consumers worldwide grapple with significant price hikes, gasoline prices in Brazil saw a modest 5% increase in March, starkly contrasting the 30% surge observed in the United States. Analysts attribute this stability to Brazil's mature domestic biofuel industry, which enables the nation to absorb geopolitical shocks with minimal risk of fuel shortages.

Evandro Gussi, president of the Brazilian Sugarcane Industry Association (UNICA), emphasized that Brazil is "much better prepared than most countries" due to this viable alternative. The upcoming sugarcane harvest, set to commence in early April, is projected to yield a record 30 billion liters of ethanol, a 4 billion liter increase from the previous year. Gussi noted that this additional volume alone is equivalent to Brazil's total gasoline imports for the entirety of last year.

Despite being a significant crude oil producer and exporter, Brazil remains dependent on imports for refined fuels, sourcing from countries including the United States, Saudi Arabia, Russia, and neighboring Guyana. Nevertheless, ethanol has become integral to daily transportation, with 37.1 billion liters sold in 2025, according to the state-owned Energy Research Company (EPE). Its widespread availability provides Brazilians with both psychological and economic reassurance.

Research and Development

The success of Brazil's biofuel economy is deeply rooted in São Paulo, the country's industrial and agricultural heartland. Production methods encompass both high-tech, export-oriented 'megafarms' and smaller, family-run operations. State-funded research, exemplified by the Unicamp Ethanol Scientific Development Center in Campinas, also plays a pivotal role in advancing Brazilian biofuel technology. Luis Cortez, the center's coordinator, underscored the unique advantages of Brazil's program, asserting that investment in research ultimately translates into tangible benefits at the fuel pumps.

Diesel Sector Challenges

While the potential closure of the Strait of Hormuz has not significantly impacted Brazil's gasoline market, the nation faces considerable challenges with escalating diesel prices. Diesel is predominantly produced from imported crude oil and incorporates a smaller proportion of biofuels. Brazilian biodiesel, primarily derived from soybeans, constitutes only 14% of the diesel blend. This percentage is not expected to reach 30% until 2030, implying an immediate impact from the ongoing conflict.

Brazilian diesel prices climbed over 20% in March, prompting President Luiz Inácio Lula da Silva to propose import subsidies until May. Government estimates suggest Brazil needs to import between 20% and 30% of its monthly diesel requirements, with the majority originating from Russia. Brazilian authorities reported nearly 17 billion liters of diesel imported last year. For President Lula, who is seeking re-election in October, stabilizing diesel prices is paramount to avert trucker strikes and mitigate food inflation.

Rabobank calculations indicate that increasing the anhydrous ethanol blend in gasoline from the current 30% to 32%, a measure advocated by some segments of the sugar-energy sector, could displace 1.2 billion liters of gasoline over a 12-month period. This would effectively substitute 34% of fossil fuel imports, considering Brazil imported 3.5 billion liters of gasoline A last year. However, such a modification is contingent upon technical tests, which the Ministry of Mines and Energy (MME) is currently facilitating. Industry leaders anticipate that an increased blend would only be feasible next year.

Should an increased ethanol blend be implemented sooner, it would also permit a rise in hydrous ethanol prices (which compete with gasoline at the pumps) relative to fossil fuels. Hydrous ethanol prices are typically discounted against gasoline due to its lower energy yield, generally hovering around 70% — a level that fluctuates with biofuel supply. Rabobank estimates that an increase in the anhydrous ethanol blend to 32% would reduce the hydrous ethanol price discount by 2%.

Presently, gasoline maintains a 30% anhydrous ethanol content, and its average pump price in Brazil rose 6% in March amidst speculation surrounding the Middle East conflict's repercussions. This occurred despite Petrobras not increasing the price of gasoline A sold at its refineries. The state-owned company accounts for 80% of the country's gasoline A supply capacity.

Recent Investments in Biofuels

On March 25, Grupo Potencial, a conglomerate with interests in energy, fuels, and agribusiness, announced a significant investment of BRL 6 billion ($1.2 billion USD) by 2030. Carlos Eduardo Hammerschmidt, the company's Vice-President for Commercial, Institutional Relations, and New Investments, stated that the objective is to further develop their integrated supply chain model and expand operations within a rapidly growing market. The group is already a prominent player, holding the title of Latin America's largest single-plant biodiesel producer, with an annual capacity nearing 1 billion liters. Approximately 15% of all soybeans cultivated in Paraná are processed, directly or indirectly, by the company. In 2025, Grupo Potencial's revenue increased by 15% to BRL 12 billion ($2.4 billion USD), with new investments projected to boost revenue to BRL 20 billion ($4 billion USD) within four years.

In another development, RRP Energia, a subsidiary of Grupo Piccini, secured BRL 1 billion ($200 million USD) in financing from BNDES (National Bank for Economic and Social Development) for the construction of a corn ethanol plant in Tapurah, Mato Grosso. The new facility will have the capacity to produce up to 459 million liters of hydrous ethanol or 452 million liters of anhydrous ethanol annually. Additionally, it will process over 1 million tons of corn each year, yielding valuable by-products such as animal feed ingredients and corn oil. The BNDES credit covers more than 60% of the project's total investment, structured as a long-term loan with the bank serving as the primary financier. The funding originates from the Climate Fund and the BNDES Finem line, qualifying the project due to its association with renewable fuel production and its potential to substitute fossil fuel sources.