O Globo reports that Petrobras is considering investing in Raizen as a way to enter the ethanol market.

The Brazilian state-owned oil company Petrobras, according to local newspaper O Globo, is looking at investing in sugar and bioethanol producer Raizen, as a means of reentering the ethanol industry.

Petrobras has previously stated that it is looking to return to the ethanol industry after having announced its strategic plan for 2017-2021, which states it will no longer be producing biofuels. Raizen on the other hand, faces financial challenges and would welcome a new partner.

Petrobras and Raizen didn't immediately respond to comments.

O Globo reported that Petrobras may make a decision before the end of the year. Reports said that the oil company was examining several options including becoming a Raizen partner or purchasing assets from the company.

Shell and Brazilian conglomerate Cosan control Raizen, which is the largest sugar producer in the world and a major ethanol producer. The company has also ventured into the fuel distribution industry.

Raizen acknowledged earlier this week that a possible new shareholder was a possibility after its stock plunged to a record-low following the release of weak results. Cosan stated that bringing in a partner was "an option" they liked.

Raizen is facing high debt and operational challenges. Diversifications and the closure of a major mill were among recent measures taken to reduce leverage. Reporting by Gabriel Araujo in Sao Paulo and Fernando Cardoso, Editing by Matthew Lewis

(source: Reuters)