Bunge supplying Brazil's Petrobras with soyoil for diesel production

SAO PAULO (Reuters) - The Brazilian unit of grain merchant Bunge Ltd has agreed to supply Brazil's oil major Petroleo Brasileiro SA, known as Petrobras, with soyoil for production of diesel R5, an alternative fuel made partly from edible oils.

The companies said in a joint statement that Bunge started supplying soyoil to Petrobras in July, adding that initial tests will demand some 1.5 million liters of it.

The R5 diesel contains 95% fossil fuel and 5% renewable diesel based on co-processed products such as soyoil, popularly known as "green diesel".

Brazil's government has been assessing whether the alternative fuel can be used by distributors to fulfill the biodiesel content they are required to blend into diesel in the country, which currently stands at 10%.

Petrobras is set to produce "green diesel" at its Repar refinery in the southern state of Parana, but said it plans to expand production to two other refineries in southeastern Brazil.

In late 2021, the state-run oil giant had announced a partnership with fuel distributor Vibra Energia SA to test the R5 diesel on bus lines running in Parana's capital city of Curitiba.

(Reporting by Ana Mano and Gabriel Araujo; Editing by David Gregorio)