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Shell and Cosan sign joint venture

A US$12-billion joint venture between Shell International Petroleum Company Limited (Shell) and Cosan S.A. (Cosan) moved closer to reality today when the two companies signed binding agreements.

The proposed joint venture, which still requires regulatory approval, will produce and commercialise ethanol and power from sugar cane and distribute a variety of industrial and transportation fuels through a combined distribution and retail network in Brazil.  It will also explore business opportunities to produce and sell ethanol and sugar globally. 

"The proposed joint venture is set to pool our complementary businesses, enhance our growth prospects in ethanol production globally and support our growth platform for our retail and commercial fuels businesses in Brazil," said Mark Williams, Shell Downstream Director.  "Over the next 20 years, sustainable biofuels are one of the most realistic commercial solutions to reduce CO2 emissions from transport."

"While there is still plenty of integration planning to do before we launch the proposed joint venture, this is an important milestone in our effort to create one of the world's most competitive sustainable biofuels companies," said Rubens Ometto Silveira Mello, Cosan's Chairman of the Board and non-executive Chairman-elect of the proposed joint venture.

With annual production capacity of over 2 billion litres, the proposed joint venture will be one of the world's largest ethanol producers.  The inclusion of Shell's equity interests in Iogen Energy and Codexis would enable the joint venture to deploy next generation biofuels technologies in the future.  The company will also generate electricity from sugar cane bagasse in cogeneration plants at all mills.  Ten cogeneration plants are already operational.

With total annual sales of about 18 billion litres of fuels, the proposed joint venture will have a competitive position in the Brazilian fuels distribution market built upon a network of about 4,500 retail sites.

Today's agreement follows the signing in February of a non-binding memorandum of understanding.  With the transaction terms agreed, Shell and Cosan, which remain as competitors, will now focus on securing regulatory approvals and starting integration planning before launching the new company.

Notes to editors The proposed JV would enable Shell and Cosan to establish a scalable and profitable position in sustainable biofuels - one of the most realistic commercial solutions to take carbon out of the transport fuels sector over the next twenty years - by building a highly competitive position in the most efficient ethanol producing country in the world and by exploring opportunities to produce and sell ethanol and sugar globally. 

Cosan and Shell would contribute the following to the joint venture:

Cosan and Shell would contribute the following to the joint venture Cosan Shell
  • Sugar cane crushing capacity: currently ~60 million tonnes per annum from 23 mills;
  • Ethanol production capacity:  currently >2 billion litres per annum;
  • All Co-generation plants
  • Brazilian downstream assets, including ~1,730 retail sites, and supply and distribution assets;
  • Ethanol logistics assets
  • Net debt of approximately US$2.5billion;
  • Additional debt of R$500 million from BNDES.
  • Approximately US$1.6 billion in cash;
  • Brazilian downstream assets, including ~2,740 branded retail sites, supply and distribution assets, and the aviation fuel business, including the one recently acquired from Cosan;
  • Its 50% share interest in Iogen Energy;
  • Its 14.7% share interest in Codexis.
Neither Cosan nor Shell will contribute their Lubricants business to the proposed JV.

Royal Dutch Shell plc is incorporated in England and Wales, has its headquarters in The Hague and is listed on the London, Amsterdam, and New York stock exchanges. Shell companies have operations in more than 100 countries with businesses including oil and gas exploration and production; production and marketing of Liquefied Natural Gas and Gas to Liquids; manufacturing, marketing and shipping of oil products and chemicals and renewable energy projects. For further information, visit www.shell.com.

Brazil's only totally integrated player in the renewable energy sector, Cosan has 23 sugarcane producing units, 21 of which are in São Paulo state, one in Jataí city (Goiás state) and one in Caarapó city (Mato Grosso do Sul state); four sugar refineries and two port terminals. The company is present in the retail sugar market, through the União and Da Barra brands, in the distribution fuels market, through the Esso brand, and in the production and distribution of lubricants for vehicles and industries through Mobil brand. Cosan is also one of the world major producers, traders and exporters of sugar and ethanol, and a major power producer from sugar cane bagasse.  

Iogen Energy is a technology development company dedicated to advancing cellulosic ethanol, jointly owned (50:50) by Iogen Corporation and Shell.  The company has been producing cellulosic ethanol from wheat straw at its Ottawa demonstration plant since 2004.  The demonstration plant produced more than 500,000 litres of cellulosic ethanol last year.  Shell and Iogen Energy are working together on technical and commercial feasibility of a large-scale cellulosic ethanol plant.

Codexis is a leading provider of optimized biocatalysts that make existing industrial processes faster, cleaner and more efficient than current methods and have the potential to make new industrial processes possible at commercial scale. Codexis has commercialized its biocatalysts in the pharmaceutical industry and is developing biocatalysts for use in producing advanced biofuels under a multi-year research and development collaboration. The company is also using its technology platform to pursue biocatalyst-enabled solutions in other bioindustrial markets, including carbon management, water treatment and chemicals.

Cautionary note

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this press release "Shell", "Shell group" and "Royal Dutch Shell" are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words "we", "us" and "our" are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ''Subsidiaries'', "Shell subsidiaries" and "Shell companies" as used in this press release refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as "associated companies" or "associates" and companies in which Shell has joint control are referred to as "jointly controlled entities". In this press release, associates and jointly controlled entities are also referred to as "equity-accounted investments". The term "Shell interest" is used for convenience to indicate the direct and/or indirect (for example, through our 34% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This press release contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''intend'', ''may'', ''plan'', ''objectives'', ''outlook'', ''probably'', ''project'', ''will'', ''seek'', ''target'', ''risks'', ''goals'', ''should'' and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this press release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Shell's products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this press release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell's 20-F for the year ended December 31, 2009 (available at www.shell.com/investor and www.sec.gov - opens in new window). These factors also should be considered by the reader.  Each forward-looking statement speaks only as of the date of this press release, 25 August 2010. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this press release.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions.  We may have used certain terms in this press release that SEC's guidelines strictly prohibit us from including in filings with the SEC.  U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov - opens in new window. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.

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