The 'Canal of the Savannah': colossal biofuel project in Brazil's semi-arid northeast

Earlier we mentioned a public-private partnership between the Japanese trading company Itochu and Brazil's state-owned oil firm Petrobras, aimed at producing biofuels in Brazil's poorest and most arid region, the so-called Nordeste. More details have now emerged and the dimensions of the project are being described as 'truly colossal'. It is part of the old dream of developing the 'Canal do Sertão' ('Canal of the Savannah') that brings water for irrigation to the dry interior. The global transition to biofuels makes the visionary project a reality.

'Canal of the Savannah'
Because of its arid climate, Brazil's Nordeste has traditionally been the poorest zone of the vast country. Millions of mainly black rural families have steadily migrated away from the region over the past decades to settle in the rapidly growing mega-cities to the North and the South, where they often end up in slums. For a long time, promises to build the so-called Canal of the Savannah - a vast irrigation project aimed at tackling deep-rooted rural poverty - kept the 'Nordestinos' dreaming of a better future. Even though several projects have been underway, progress has been slow (see the overview of the Projeto Canal do Sertão Alagoano at the Ministry of National Integration).

The agreement signed between Itochu and Petrobras is now seen as leap towards making the vision finally a reality. The 500 kilometer irrigation network will connect 16 municipalities in the State of Pernambuco, cross the state of Alagoas and link up with Lake Sobradinho, in Bahia (map, click to enlarge). Not less than 150,000 hectares of energy plantations will be established alongside the canal, with sugarcane for ethanol and oleaginous plants such as castor beans and jatropha for biodiesel as the main crops. It will be the largest irrigation work ever undertaken in northeastern Brazil. The vast project will offer direct employment opportunities to 50,000 of the region's rural poor. Over the long-term it will boost agriculture in the region that was long seen as 'lost'.

According to Pernambuco's Minister of Regional Development, Geddel Vieira Lima, the total cost for the construction of the Canal of the Savannah is estimated to be around US$ 1.2 billion:
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The memorandum of understanding for the Canal, signed in Tokyo (June 8), shows an initial series of investments of 56 million Brazilian reais (US$ 29.3 million), that break down as follows: Itochu and Petrobras, of 20 million reais (US$ 10.4 million). The public-private partnership also counts on the participation of the São Francisco and Parnaíba Valley Development Company (Codevasf), which contributes 16 million reais (US$ 8.3 million), and from the state and federal governments, who will contribute another 20 million reais from the Growth Acceleration Program (PAC) of the Brazilian government.

According to the president of the Union of the Sugar and Alcohol Industry of the Pernambuco State (Sindaçúcar-PE), Renato Cunha, after the implementation of the irrigation project, the state will have an additional production of 10 million tonnes of cane. Presently, all of the 16 million tonnes produced come only from coastal areas.

To Cunha, bioenergy is a highly promising sector and with the Canal, the state is now entering a new phase. "Being able to use cane bagasse to produce ethanol and biodiesel is a great opportunity, because this way we are managing to attract foreign capital,” he said. According to him, Itochu is interested in the project because Japan intends to increase the share of clean fuels in its energy matrix and it wants to import the biofuels from countries where they can be grown sustainably.

Economic and social devlopment
To the engineering director at the Codevasf, Clementino Coelho, the aim of the project is to make families of small farmers benefit. 50,000 direct jobs will be created, and later on, the canal will boost agriculture further. "We will map the appropriate areas for each type of specific culture. There is lots of fertile land in conditions of serving the agricultural sector, but it is not explored due to lack of water,” he explains.

Under Brazil's President Inácio Lula da Silva, the country launched a new Pro-Biodiesel plan, analogous to the Pro-Alcool programme that was introduced in the 1970s. The difference is that this time accompanying legislation has been adopted that makes social inclusion of small farmers and poor rural families a reality. The so-called 'Social Fuel' legislation is explicitly aimed at providing poverty alleviation in the Nordeste. It contains a range of incentives that make it feasible for biofuel producers to source their biomass from small producers.

Applying the legislation in practise, and to set an example, Petrobras has been experimenting with the production of biodiesel feedstock by such cooperatives of small farmers - with success. The farmers not only enjoy a boost in income security, their food security is enhanced as well, because food and fuel production are integrated.

The Social Fuel policy will form the basis for the projects alongside the Canal. According to Cunha, finally the interior of the state of Pernambuco - long seen as lost for development - will become viable for agriculture and capable of attracting investment from the public and private sector, while boosting social development.

Exports to Japan
The project provides that the 150,000 hectares will be turned to the planting of sugarcane for production of alcohol fuel, and of other cultures for production of biodiesel. Of this hectarage, 115,000 will be found in the state of Pernambuco, and the remainder in the north of the state of Bahia. The production of ethanol and biodiesel will cater to the expanding Japanese market.

Annually, Japan consumes 400 million litres of alcohol, with a 3% rate of addition of the fuel to gasoline. The Japanese law forecasts that the rate should increase up to 15%, due to international commitments for reducing emission of pollutant gases into the atmosphere. Thus, alcohol consumption will rise to 1.5 billion litres. Itochu, also in the field of fuel supply, currently operates 2,200 stations in Japan.

More information:
ANBA: Agreement ensures alcohol and biodiesel production in northeastern Brazil - June 19, 2007

IPCDigital: Japoneses e Petrobras serão sócios no “Canal do Sertão” - June 13, 2007.

Programa Parcerias Publico-Privadas de Pernambuco: Petrobras investe no Canal do Sertão - Estatal aplicará R$ 20 mi em estudos atenta à exportação de biocombustíveis - January 16, 2007.

Biopact: An in-depth look at Brazil's "Social Fuel Seal" - March 23, 2007