Brazil’s largest state-owned energy company made another play today to become a world leader in biofuels. Petrobras announced a $1.23 billion deal with Tereos International’s Brazilian Branch, Acucar Guarani, to supply up to 2.2 billion litres of sugarcane ethanol to Petrobras’ fuel distribution subsidiary, BR, over the next four years.

Petrobras said in a statement today, “The contract ensures commitment in the supply to BR, access for Guarani to BR’s distribution system for part of its hydrated and anhydrous ethanol production, besides greater synergy between production, marketability and logistics.”

Petrobras has made several strategic moves in just the past few months including partnerships with Novozymes and KL Energy to develop second generation ethanol from sugarcane bagasse. In addition, the Company is converting several of its gas turbines to run on ethanol, and in other news an ethanol pipeline has received environmental permits.

Brazil is the second largest global producer of ethanol and is preparing to double its ethanol output over the next decade to meet the growing global demand for renewable fuels.