Japanese trader Mitsui & Company is conducting a feasibility study to jointly produce ethanol in Brazil with state-owned oil company Petroleo Brasileiro SA, an official said Thursday.

"We are still carrying out a feasibility study on plans to produce bioethanol in Brazil," said a Mitsui official who spoke on condition of anonymity.

CONCLUDE FEASIBILITY STUDY

Tokyo-based Mitsui wants to conclude the feasibility study as early as possible, the official said, adding that he could not provide other details because of "confidentiality terms" with Petroleo Brasileiro SA, or Petrobras.

Petrobras has already confirmed it was negotiating a partnership with Mitsui to produce ethanol, a automotive fuel derived from grain or corn that is usually mixed with gasolene.

Japan plans to fight global warming and rising oil prices by requiring that all vehicles on the road be able to run on an environmentally friendly mix of ethanol and regular gasolene by 2030.

Japan currently allows ethanol mixtures of up to three per cent at the nation's pumps, but in practice 'almost no cars' run on the fuel.

The Mitsui official refused to confirm a Nikkei newspaper report Thursday that the joint project is expected to produce 3.5 million kilolitres (910 million gallons) of ethanol annually by 2011, and a portion bound for Japan.

EXPORT TO JAPAN

The Nikkei in its Thursday morning editions quoted Paulo Roberto Costa, an executive in charge of supply at Petrobras, as saying in Sao Paulo that Petrobras will sign a 15 to 20-year long-term supply contract for export to Japan.

Costa told the Nikkei the production plant to be built at a "highly profitable" site will be chosen from about 40 candidate sites, including the states of Sao Paulo and Minas Gerais.

Brazilian local firms will also invest in the project, with a combined stake by Mitsui and Petrobras expected to be around 15-20 per cent, the daily said. It said partners last month signed a memorandum of understanding for a feasiblity study on the construction of an ethanol pipeline linking inland production sites with port facilities in the state of Sao Paulo.

Brazil exported 3.4 billion litres of ethanol in 2006, of which less than 7.0 per cent, or 225.4 million litres, went to Japan, according Brazil's Agriculture Ministry.

- AP