Petrobras Seeks Biodiesel Sector Alliance as State Oil Company Pivots on Co-Processed Diesel Strategy

Petrobras announced through its Energy Transition executive manager William Nozaki that it is seeking membership for subsidiary PBio in the Brazilian Biodiesel and Biokerosene Union (Ubrabio), describing the approach as “agriculture embracing petroleum” during the organization’s third forum in São Paulo on May 14. The state oil company explicitly denied any agenda to modify the Fuel of the Future law, marking a notable reversal from its previous position. In October 2025, Petrobras president Magda Chambriard had stated the company would pursue discussions with government and Congress in early 2026 regarding public policy for co-processed diesel, calling the product’s exclusion from mandates unreasonable.

The backdrop involves a multi-year dispute over market territory between Petrobras and biodiesel producers. Each percentage point of mandatory biodiesel blend removes approximately 800 million liters from petroleum-derived diesel demand, directly affecting Petrobras market share. The company developed Diesel R, a co-processed product containing 10% vegetable oil, and attempted unsuccessfully to include it in biodiesel mandates and later in renewable diesel categories under the Fuel of the Future legislation.

Behind the association membership bid lies negotiation of a sectoral agreement to find market space for Diesel R alongside biodiesel. Nozaki indicated potential commercial partnerships across the value chain, from vegetable oil acquisition as feedstock to soybean meal destination from processing. The timing proves strategic for both sides, as biodiesel producers are attempting to advance the mandate from 15% to 16% but face resistance from government, distribution, and transport sectors demanding validation tests for higher blend levels. Historical patterns suggest progression beyond B15 may prove difficult, making Petrobras as an ally potentially valuable.

PBio currently operates two biodiesel plants at Montes Claros and Candeias with annual production between 250,000 and 300,000 tonnes, while studying reactivation of the hibernated Quixadá facility. PBio president Alex Gasparetto outlined expansion strategy including greater integration with Petrobras biorefining initiatives and targeting new markets including biobunker marine fuel and European biodiesel exports. The company is pursuing partnerships particularly in soybean crushing to enable increased biodiesel production, with modernization investments planned for operational plants.