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Shell Joins Cosan in $12B Ethanol JV

Royal Dutch Shell (RDSA.L) is taking a big stake in ethanol in an interesting way.

Rather than buying Brazil's biggest ethanol producer, Cosan S.A. (CSAN3.BR), it's forming a $12 billion joint venture to produce ethanol, sugar and energy, and to supply, distribute and retail transportation fuels.

Shell will contribute $1.6 billion in cash over two years. The idea is to establish a scalable position in biofuels by building a market-leading position in Brazil - the most efficient ethanol producing country in the world. 

The joint venture will itself be one of the world’s largest ethanol fuel producers, with a network of about 4,500 retail sites and a total annual throughput of about 17 billion liters. 

And Shell has equity stakes in Iogen (50%) and Codexis (14.7%), which could be added to the mix in the future to deploy next generation biofuels technologies.

Cosan benefits from Shell's deep pockets and access to international markets.

Disclosure: no positions