The increase should be through the expansion of its current units and  the construction of new plants.

 "In our vision, ethanol will be a global commodity, therefore we aim to  have low cost operations... big scale units," said the head of BP Biofuels  in Brazil, Mario Lindenhayn.

 The company had announced earlier on Wednesday that it has agreed to  raise its share in Brazilian ethanol maker Tropical Energia S.A. to 100  percent by acquiring the remaining 50 percent from partners for about $71  million in cash.

 It also agreed to buy an additional 3 percent share in Brazilian sugar  and ethanol producer Companhia Nacional de Acucar e Alcool (CNAA) from LDC  Bioenergia S.A., for around $25 million in cash.

 The plan now is to double the existing three units, all of them with a  current annual capacity to crush 2.5 million tonnes of cane, and build  three new plants -- actually the construction of one of them has already  begun.

 After the investments, each unit will be able to crush up to 5 million  tonnes of cane per year, raising BP's annual ethanol capacity in Brazil to  2.7 billion liters. All the units will be located in Goias and Minas Gerais  states.

 Although deep-pocketed milling groups have recently announced  investments to expand crushing capacity in Brazil, the building of new  mills is virtually halted due to factors such as rising production costs,  market distortions and a lack of incentives to invest, producers say.

 After a boom that saw 117 ethanol mills built since 2005 to cope with  soaring demand, few projects are expected to come online in the next few  years.

 Instead, the sector has seen a wave of mergers and acquisitions since  the worsening of the 2008 global credit crisis, which hit mills that had  been highly leveraged to fund expansion plans.

 But companies in general are still optimistic about demand for the  cane-based fuel in the long run. BP's deal highlight big oil companies'  diversification into the sector as countries reconsider their dependence on  fossil fuels.

 "We have a major growth agenda for our biofuels business in Brazil.  This transaction (of Tropical), with other recent acquisitions, gives us a  strong platform from which to expand our capacity to supply both domestic  and international fuels markets," Lindenhayn said.

 BP entered the Brazilian ethanol sector in 2008, when it bought 50  percent of Tropical. Its joint venture partners at the company were  agribusiness group Maeda S.A. Agroindustrial, with 25 percent, and LDC-SEV,  with the remaining 25 percent. BP will also refinance Tropical's existing  debt.

 The share increase in CNAA follows the acquisition earlier this year of  a stake in the company and subsequent conversion of CNAA's long-term debt  to equity.

 The shares were bought from French group Louis Dreyfus. The oil company  will own 99.97 per cent of CNAA, with the remaining shares in hands of  private minority shareholders.    (Editing by John Picinich)