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Royal Dutch Shell says it has signed a $12 billion joint venture agreement with Cosan of Brazil to produce and distribute ethanol from sugar cane.

The companies say in a joint statement the binding agreement will create one of the largest ethanol producers for industry and transportation in Brazil, and will explore a global market.

Cosan will contribute its existing production capacity of 2 billion liters (528 million gallons). Shell's contribution will be $1.6 billion in cash and its equity in Iogen Energy and Codexis, which research biofuel technology.

Both would put their Brazilian retail sites into the distribution network — a total of nearly 4,500 outlets.

The deal announced Wednesday follows a nonbinding agreement in February and requires regulatory approval.

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