Shell on Feb. 1 said it had signed a non-binding memorandum of understanding with the intention of forming a $12 billion joint venture with biofuel industry leader Cosan.

The joint venture would be for the production of ethanol, sugar and power, and the supply, distribution and retail of transportation fuels in Brazil.

"Both companies would contribute certain existing Brazilian assets to the joint venture. In addition, Shell would contribute a total of $1.625 billion in cash, payable over two years."

Royal Dutch Shell's Downstream Director, Mark Williams, said the announcement "demonstrates the continued importance of Brazil to Shell. "We're looking forward to joining with a leading company in Brazil to meet the needs of retail and commercial fuels customers in that growing market."

Cosan's board chairman Rubens Ometto Silveira Mello said it was his company's vision "to become a global leader in clean and renewable energy."

Brazil is the second-largest producer of ethanol after the United States. The product is used as a cheaper alternative to petrol used to power cars.

Copyright Agence France-Presse, 2010