By Jonathan Wheatley in São Paulo and Ed Crooks in,London
Published: April 25 2008 03:00 | Last updated: April 25 2008

BP announced plans to invest $560m (£284m) in biofuels yesterday but said its proposals to develop ethanol production from sugar cane in Brazil would not affect food supplies.

The oil group plans to spend $60m on a 50 per cent stake in a Brazilian joint venture and to invest $500m in two ethanol refineries.

Environmental groups, some of which supported the push to biofuels a few years ago, are increasingly critical of the effects of ethanol and biodiesel production on food supplies and the environment.

However, BP said Brazilian ethanol fitted its strategy of investing in "sustainable feedstocks that do not impact on food supplies".

BP is providing half the $1bn investment in two ethanol plants being prepared by Tropical BioEnergia, a venture it is entering with Grupo Maeda, a Brazilian agribusiness group, and Santelisa Vale, a Brazilian sugar and ethanol producer.

Phil New, president of the biofuels division, said BP entered the joint venture at a time when the oil industry faced big challenges over energy security and greenhouse gas emissions.

"Brazil is the most pragmatic and sensible place to respond to these concerns," said Mr New in São Paulo. "Sugar cane has the best greenhouse gas profile of any biofuel feedstock and the way it is produced in Brazil is a remarkable story of a closed and sustainable process."

Brazil is the biggest producer of fuel ethanol after the US and its sugar cane-based industry is the world's most efficient.

The country came under attack recently as concerns spread that crops planted for ethanol were displacing food crops.

Mr New said there was no shortage of arable land in Brazil and most of the land being planted with sugar cane had previously been used for pasture.

"I struggle to see how this kind of project can be connected to the food and fuel debate," he said. "If it could be connected to it, we wouldn't be investing in it."CosanExxonMobil