With the growing demand for fuels and the obvious difficulty in expanding the country's infrastructure, supplying fuel to the Brazilian market is starting to become a concern, mainly due to the highly strategic nature of these products.
Due to fears about the possible compromise in meeting demand, the logistics chains of these products were analyzed in a study carried out by the Institute of Logistics and Supply Chain (ILOS), in partnership with the Brazilian Institute, Gas and Biofuels (IBP), through of its Fuel Supply Logistics Commission.
The study, completed in December 2011, sought to analyze the main logistics and production infrastructure projects planned for the next ten years, as well as the growth and geographic distribution of demand for the same period. Understanding the new supply of infrastructure and the new demand for fuel, the expected changes to the logistical flows of these products were raised.
This article will present the main changes that will occur in the logistical flows of gasoline, ethanol, diesel and biodiesel, with the new projects planned for the country for the next ten years.
Production centers
Brazil currently has 16 refineries spread across nine states, eight of which are located in the Southeast Region. These units currently operate very close to their capacity limits, mainly in the state of São Paulo, where this utilization is higher than 90% in some refineries.
Ethanol production, in turn, is carried out in 514 plants spread across 23 Brazilian states, although there is a very high concentration in the state of São Paulo, which has 276 plants. Minas Gerais and Paraná follow with 45 and 36 plants, respectively. However, due to the lack of land in the Southeast for the production of sugarcane, a clear trend of expansion towards the Center-West Region can be seen. It is not possible to define the total ethanol production capacity in the country, since the same plant can produce both fuel and sugar, using the same installed capacity. However, there is a consensus today that the existing productive capacity is not enough to meet the expected demand for the country.
The case of biodiesel is more particular, since its production is more dispersed, with the largest producing states being Rio Grande do Sul, Mato Grosso and Goiás, since soy oil has been consolidating in the country as the main input for the production of biodiesel. In addition to these idiosyncrasies, another important point that differentiates this fuel from the others is the fact that there is still a lot of room to increase production in existing plants, since the average capacity utilization is less than 50%.
Consumer centers
According to the ANP, in 2010 approximately 95 million cubic meters of fuel were consumed in Brazil, with 50% of this volume being diesel, 3% biodiesel, 32% gasoline and 16% ethanol. Of this total volume, there is a large concentration in the Southeast Region, responsible for approximately 50% of all consumption, more specifically in the state of São Paulo, which had 29% of the consumption of all fuels analyzed.
It was also seen that the capitals concentrate a large part of the consumption of gasoline and ethanol, representing an average of 43% of the consumption of their states. In the case of diesel and biodiesel, capitals do not have such a large share (27% of the state, on average). The consumption of these fuels is directly associated with freight transport, which is concentrated around large centers, notably in distribution centers located in regions close to highways and with cheaper areas than large cities.
Thus, it is clear that the consumption of fossil fuels is very close to the major producing regions, a fact that no longer occurs with biodiesel, which is produced and consumed in different areas of the country. The case of ethanol is intermediate and it can be seen that production is shifting away from large consumer centers.
The IBP Logistics Commission and the ILOS revised the federal government's consumption estimates, taking into account the possible supply of fuels in the coming years (Figure 1). Estimates indicate growth in the consumption of all fuels for the coming years. The Southeast Region drives growth with an estimated increase in consumption of 72% by 2020, followed by the Northeast, with an estimated increase of 62% in the same year. Brazil as a whole is expected to increase consumption by around 56%.
Figure 1 – Forecast of fuel demand in the coming years
Source: PDE 2020 - ILOS and IBP Analysis
Analyzing growth by fuel, one can see a strong increase in demand for ethanol. IBP/ILOS forecasts indicate an increase of 103% by 2020, increasing the volume consumed from 15 million liters in 2011 to 32 million in 2020. Diesel also plays a prominent role, with a projected growth of more than 50% in the next ten years, reaching 70 million liters per year in 2020. Gasoline, in turn, has slightly more modest prospects, of growth of 40% by 2020, with demand reaching 45 million liters/year.
Current logistics flows
The analyzed liquid fuels can be transported by virtually all modes, with the exception of air. That is, there is the possibility of supplying the fuel bases through pipelines, railways, waterways, cabotage or highways.
Due to the lack of competitive modes for transporting these products, a large part of fuel supply today is still carried out by trucks, using highways. This pattern is also repeated in other sectors of the economy. The participation of road transport in Brazil is quite distorted in relation to other countries in the world. While here 65,5% of loads per useful kilometer (TKU) were transported by road in 20101, in the United States this number corresponded to less than 30%2. Russia, in turn, has a share of this modal of only 4%, while pipelines account for 50% of TKUs and railways for 42%3. The situation is, in part, attenuated because, as we saw earlier, in several situations the fuel consumer centers are very close to the production centers. The geographical arrangement of supply and demand directly affects the logistical flows that supply the distribution bases.
Precisely as a result of the concentration of demand, the greatest supply of “alternative” modes is in the South and Southeast regions, such as the two main derivatives pipelines, the São Paulo-Brasília Oil Pipeline (Osbra), the largest in the country, and the Paraná Oil Pipeline. -Santa Catarina (Opasc). The main railways are also located in these regions: the Ferrovia Centro-Atlântica (FCA), which connects Regap, in Betim (MG), to secondary bases in the interior of Minas Gerais; ALL Malha Paulista, connecting Replan, in Paulínia, to the interior of São Paulo and the Midwest Region; and ALL Malha Sul, which connects Repar, in Araucária (PR), and Refap, in Canoas (RS), to the interior of their respective states. The transport made by waterways occurs only in the North Region of Brazil and, cabotage, mainly between the Ports of Santos (SP) and Itaqui (MA).
In 2010, 100% of biodiesel was transported by road, as well as 90% of ethanol. This is mainly due to the low scale of the volume of these fuels and the lack of supply of modes other than road in the national territory. Thus, modes other than road were used only by derivatives.
Figure 2 illustrates the main current flows. Not only does the small offer of modes draw attention, but also the low integration between them, especially between each of the regions of the country.
Figure 2 – Current logistical flows of fuels
Source: Sindicom; analysis: ILOS
Planned projects
In the development of the work, the main planned and ongoing projects that could affect, in some way, the fuel supply logistics in the country were raised. The surveys considered forecasts from the Growth Acceleration Program (PAC), as shown in Table 1, the National Logistics and Transport Plan (PNLT), the National Waterway Transport Policy (PNTH), public information available from Petrobras and other publicly traded companies. and private projects raised by the IBP Logistics Commission.
Table 1 - PAC investments that affect the fuel market
Source: PAC. Analysis: ILOS and IBP
From the analysis and discussion of dozens of projects, the most important from the point of view of reducing bottlenecks in the logistical and production systems were highlighted and prioritized by the study's development team. Many of these projects will be responsible for changing existing flows today, generating what have been called new logistics chains. These new chains will be explained later.
More than 30 projects were prioritized, with an estimated investment value of BRL 130 billion, to be carried out by the year 2020. The projects were divided into nine groups, shown in Table 2.
Table 2 - Investment groups analyzed by the study
Source: PAC, PNLT. Analysis: ILOS and IBP
The projects were classified into five levels of priority, according to the benefits they can bring to the system or even the need for them to guarantee fuel supply. In Table 3, the list of initiatives considered the most important by the project development team is presented.
Table 3 – Main investments prioritized by the IBP Logistics Commission
Source: PAC, PNLT, PNV, PNTH. ILOS and IBP analysis
Standing out in this list are the expansion of pipeline capacity and investment in railways and waterways, essential modes for transporting large volumes of cargo. Another highlight is ethanol production, which is going through a crisis and whose maturity period for investments is 4 to 7 years.
Fuel regulation
In addition to the infrastructural bottlenecks that affect the supply of fuel, another point that can constitute a considerable bottleneck to the realization of investments is the regulation of the sector. The interaction between the various regulatory and licensing bodies, such as, for example, the National Petroleum, Natural Gas and Biofuels Agency (ANP), state environmental bodies and the Fire Department, among others, with their different requirements, can cause some conflicts .
The difficulties generated are, in part, documented in the World Bank's Doing Business survey, which objectively compares the ease of doing business in 183 economies around the world. In the 2012 edition, Brazil ranked 127th in the Obtaining of Construction Permits item, being the sixth slowest economy in the world in this procedure.
The biggest bureaucratic obstacle identified in the ILOS-IBP study concerns the difficulties arising from environmental licensing, since, due to the environmental risk that the fuel distribution activity imposes, the requirements in these procedures are even more severe than in other activities.
Better communication between agencies, as well as between investors and regulatory and licensing bodies, would be very beneficial to speed up the bureaucratic processes associated with investments.
New flows
Most of the infrastructure that will change current flows is modals that support the transport of fuel in large volumes. Another significant driver of flows is the change that will occur in the origin of fuels, whether in production or imports. Figure 3 shows how the fuel flows that would take place with the suggested investments would look like.
Figure 3 – Fuel future logistical flows
Source: Sindicom; analysis: ILOS
Analyzing ethanol, we see that its productive capacity is stagnant. There are few investments foreseen in new plants and, due to the fact that the maturation of these investments is very long, there will probably be a deficit to meet the demand in 2020. To supply it, projects and construction of new plants would have to start between 2013 and 2016, since there is little possibility of expanding the existing capacity, taking into account the distance limit from the sugarcane fields to the mills. Otherwise, the demand for this fuel will have to be met either by imports or by replacing its use with gasoline.
From the derivatives point of view, four new refineries are planned by Petrobras for the coming years, three in the Northeast (one in Maranhão, one in Ceará and another in Pernambuco) and one in Rio de Janeiro. However, these refineries do not contemplate the production of gasoline. Taking into account the limitation of ethanol production, the demand for gasoline has grown above expectations, which will intensify imports of this product, something that is alarming both from a financial point of view, due to the relatively higher value of the imported fuel, as well as from a strategic point of view.
With the start-up of the new Abreu e Lima and Premium I refineries in the Northeast, cabotage in the south-north direction will probably be reversed, with the region becoming a supplier of petroleum derivatives to the south of the country, whose production capacity is already close to the limit.
The demand for the Northeast Region is supplied by itself, through the NovaTransnordestina and Oeste-Leste (Fiol) railroads. However, its current projects, which connect the Northeast coast to its interior, do not bring many benefits to fuel transport because there are no distribution bases on these new routes and because the lines do not connect to the great railway corridor that will be the Ferrovia North South. The interconnection of these two railways to the North-South Railway is under study in PAC 2.
This railroad, which will cut the length of the country, will be the opportunity for the movement of various loads in both directions. The movement of biofuels would take place from the producing regions, in the center-south of the country, to the Northeast, made possible by the construction of collecting centers along the route, while this region will be able to supply the Southeast and Center-West Regions of derivatives originating from the new refineries , mainly Premium I, which will be located in São Luís. The construction, by BR, of a base in Palmas (TO) is already a market investment aimed at using this modal.
The greater integration of the North Region to the center-south of the country is evident. The road connections between Porto Velho and Manaus (BR-319) and the investments being made in the Cuiabá-Santarém Highway (BR-163), which is currently in precarious conditions, expand the possibilities of connecting routes with the Midwest , through which ethanol and biodiesel would be transported to the North in periods of dry rivers.
These works are much more advanced than possible investments in navigability in the Teles Pires-Tapajós and Madeira River waterways. The latter, which today is used to transfer ethanol from Porto Velho to Santarém (PA), is extremely compromised in times of drought, when the barges are forced to use only part of their capacity or are even unable to navigate. Investments in dredging, demolition and terminals along this waterway would ensure its navigability throughout the year. The construction of locks along the Teles Pires River would be another possibility for transporting biofuels from the Midwest to Amazonas, Pará and Maranhão. Investments in navigability on the Tocantins-Araguaia Waterway would also make it possible to transport fuel by this modal. However, this waterway has a layout very similar to that of the North-South Railway.
The growth in demand for fuel in the North Region, as well as the fact that no increase in production capacity is expected for the region, will increase the movement of fuel in the Port of Vila do Conde (PA). However, its total occupancy must not exceed 60%. On the other hand, the current occupancy of the liquid bulk berths in Itaqui is 86%, with investments planned for its expansion and increase in productivity.
An alternative would be to transfer part of the movement to the Port of Suape (PE), which will have a good structure and idle capacity to support the increase in movement, with transport through the new railroads in the Northeast, if they are connected to the North-South Railway. Today, at the Port of Santos, the occupation of liquid bulk berths is around 40%, the main bottlenecks being the difficulty of land and sea access, which should be reduced with the planned investments. Its vocation, however, will no longer be sending products by cabotage to the Northeast, but will now receive S10 diesel from this region, as well as other imported derivatives.
The Ferrovia Centro-Oeste (FICO), which will connect Uruaçu (GO) to Lucas do Rio Verde (MT), would not create any specific flow, but could transport biodiesel from Mato Grosso to Norte-Sul, if necessary. Its possible extension to Vilhena (RO) would facilitate the transfer of biodiesel and ethanol to the North Region. In the same way, ALL's Rondonópolis Project, in Malha Norte, foresees the expansion of the railway line to Mato Grosso, which may have flows of derivatives inland and biofuels in the coastal direction.
These routes compete with Lógum's logistics system, which includes waterway terminals, barges, collection centers and ethanol pipelines, and was designed to transport ethanol from Goiás and Mato Grosso to ports in the Southeast. However, with the change in the profile of demand for fuels, today the country is more ethanol demander than exporter, and this structure is essential for the fuel to reach the largest consumer center, which is the city of São Paulo.
This system could be used to create an extension from Uberaba (MG), with the construction of a collection center in this municipality, to supply the region of Betim, which will have an increase in demand for ethanol of around 111% until 2020, with the alternative being the use of rail or road transport.
The production of derivatives at the Regap refinery, in Betim, is at almost 100% of its capacity, with no possibility of increasing it, despite the considerable increase in demand forecast for the region. A possible solution to this problem would be to send derivatives from Comperj, in Rio de Janeiro, by reversing the direction of the Orbel, which is currently used to transport Naphtha from Regap to Reduc. Another possibility is the use of cabotage for fuels originating in the Northeast.
Osbra is operating at more than 85% of its capacity. Without duplication, the Midwest would have to be supplied with derivatives by road or rail from the ports or Comperj, or even by the North-South Railroad, which would be capable of reducing the volume transported by the pipeline by up to 40%.
Opasc and Orsub are also working beyond their capacity in some stretches, a problem that would have to be solved by duplicating the pipelines, without which the supply would have to be done by road, which can be up to 50% more expensive than the pipeline. With the reactivation of the FCA stretches between Candeias and Juazeiro (BA) and Candeias (BA) and Montes Claros (MG), the transport of fuels may be resumed, mainly for loading diesel and ethanol.
Conclusion
Projections of increased demand for fuel, both from the federal government and from companies in the market, confirm the growing pressure that the Brazilian logistics system will suffer to guarantee the supply of these products throughout the country. This growth, added to a scenario of plants and refineries operating close to their capacity limits, as well as derivatives pipelines and ports, limitations in the rail network and the low use of the potential of the country's rivers, make the need for projects even more urgent. to guarantee the future of fuel supply.
The analyzed projects can be divided into two main objectives. The first is to increase productivity, reliability and cost reduction in transport, as they increase the supply of more competitive modes than road, which is widely used today. The second objective is to guarantee supply, with an increase in the storage, production and reception capacity of fuels in ports.
With the confirmation of all projects, estimated at a value close to R$ 300 billion, the new configuration of fuel transport options will be quite different from what exists in the country today. A greater balance will be observed in the offer of alternative modes to road, which will bring greater logistic productivity for the entire system.
The projects also increase the integration between the regions of the country, mainly with Ferrovia Norte-Sul and Malha Norte of ALL, which make the Midwest, Northeast and North of Brazil “closer” to the Southeast, connecting new production centers of biofuels and derivatives to demand points.
The increase in the logistical efficiency of fuel supply brings great contributions related to costs and reliability for the sector, in addition to collaborating to reduce the so-called Brazil cost, generating positive economic reflections for the entire country.
