Cosan Buys Esso in Brazil

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Brazilian ethanol giant Cosan S.A. agreed with ExxonMobil International Holdings last week to buy its Esso Brasileira de Petroleo Ltda. subsidiary and its affiliates that market and distribute fuels, lubes and specialties. The purchase is valued at $826 million.

According to Sao Paulo-based Cosan, the acquired assets include a lubricants plant in Rio de Janeiro, and a controlling stake in a lubes terminal in Duque de Caxias. Cosan and ExxonMobil have also entered into long term agreements that will allow Cosan to resell Mobil 1 and use other Esso and Mobil lube brands in Brazil, the company said.

Cosan is one of the worlds largest producers of sugar and ethanol.

Little Falls, N.J.-based consultant Kline and Co. estimates the Brazilian lubricants market at about 1.07 million metric tons per year, according to Geeta Agashe, vice president of Klines Petroleum and Energy Practice.

ExxonMobil had a 10 percent market share in Brazil, in our opinion, in 2007, Agashe told Lube Report. This is a big market and a growing one, but it is intensely competitive.

Other companies had expressed interest in ExxonMobils assets in Brazil. We understand that ExxonMobils assets were also considered by Petrobras, Ashmore, Royal Dutch Shell, Ultra/Ipiranga and others in addition to this consortium of Cosan and Cristal Sugar, Agashe said. Cosan needed the fueling assets in order to distribute their ethanol. ExxonMobil on the other hand is constantly analyzing the performance and returns on their assets and investments globally.

She said that in Brazil, with Petrobras and Ultra Groups acquisition of Ipiranga, there are a lot of changes happening. Petrobras clearly dominates, spreading the gap between them and Chevron, Agashe said.

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