London (Platts)--13Jun2011/800 am EDT/1200 GMT

Brazil's national petroleum agency ANP unveiled late Friday detailed plans to tighten government regulation over the ethanol market, giving the sector a first glimpse of how the rules might affect supply and demand for the biofuel.

The resolution published on ANP's website is the first move by the regulator to avoid a repeat of the recent ethanol supply crisis in the country, which led Brazil to import more than 200,000 cubic meters of the biofuel so far this year. Usually it does not import ethanol.

The news rules only affect the sales and distribution of anhydrous ethanol, used a blending component to gasoline A.

If the measures are taken forward, ANP will require distributors of road transport fuel to regularly notify the agency of contracted volumes for the purchase of anhydrous ethanol as well as details of spot deals.

Article continues below...

Request a free trial of: Oilgram News
	Oilgram News brings fast-breaking global petroleum and gas news to your desktop every day. Our extensive global network of correspondents report on supply and demand trends, corporate news, government actions, exploration, technology, and much more.

A failure to meet this requirement would result in an almost immediate suspension of gasoline A deliveries to infringing distributors.

ANP also proposed that producers of anhydrous ethanol should by March 1 have stocks equivalent to 8% of the their April output from the previous year.

Distributors are also expected by the same date to hold inventories equivalent to 15 days of their average sales of finished gasoline in the period of November-January.

ANP's measures aim to tackle a shortage of the biofuel during the December-April sugarcane inter-harvest period, when production of ethanol almost comes to a halt and prices surge.

By keeping watch on supply flows and inventory levels, ANP intends to level out the amount of ethanol producers and distributors offer the market throughout the year, forcing companies to keep minimum stocks of the product to meet demand during the sugarcane inter-season.

The rules will be up for public and industry consultation until July 1.

Last week, ANP's director Alan Kardec Duailibe told reporters in Brazil he expects the new regulatory package to be ready for publication by the end of July.

A government decree published on April 29 transferred the whole ethanol production and distribution chain -- including imports and exports of the product -- to the ANP, giving the sugarcane-based biofuel the status of a strategic fuel.

Before that, ethanol was treated in Brazil as an agricultural commodity.

ANP, which is already in charge of the gasoline and diesel supply chains in Brazil, has since then created a work group to study regulatory measures that would prevent a shortage of the fuel in the country.

--Guilherme Kfouri, guilherme_kfouri@platts.com