The Sugar Rush: Dow, Mitsui revive major renewables project in Brazil

July 20, 2011 |

Oil majors be darned. Dow Chemical and Mitsui revive the Usina Santa Vitoria project.Who’s next to move forward in the Long Samba – or is it a slow, rhythmic Bolero? – towards a diversified supply chain, anchored by renewables, and anchored in Brazil?

In Brazil, Dow Chemical has teamed with Mitsui in a JV that will produce ethanol and bioplastics from sugarcane, which the companies are saying will be the world’s largest biopolymers investment. The project will produce DOWLEXT polyethylene resins, the main building block in polyethylene, from ethanol.

Ethylene is traditionally produced from naphtha and natural gas, and manufacturers have been seeking for some time to reduce the CO2 output associated with the traditional process, as well as diversify supply chains and hedge against rising oil prices.

The deal includes Mitsui investing $200 million, to become a 50% equity interest partner in Dow’s Usina Santa Vitoria sugarcane project in Minas Gerais.

Capacity and timeline

Reports on the project’s timeline and capacity are mixed. Nikkei business daily is reporting that the project will commence production in 2015 with an ethanol capacity of 117 million gallons (350,000 tonnes), while Reuters is reporting, based on conversations with Dow, that construction on the mill project under the JV would commence in Q3 2011, and come online by mid-2013, and have a 63 million gallon capacity. Nikkei put the total project tab at $2 billion, which Misui officials said was high.

The long march from Crystalsev to Mitsui

The Dow-Crystalsev project in happier times, in 2009

The announcement brings to a close a long search by Dow for a JV partner for the Usina Santa Vitoria project. Dow has originally formed a 50/50 partnership with Crystalsev, the ethanol distribution arm which was wound up in 2009 after majority owner Santelisa Vale sold itself to Louis Dreyfus.

The project originally commenced back in 2007, and was slated to commence operations this year, and at the time had a projected capacity of 117 million gallons (350,000 tonnes). At the time, there was talk of obtaining Clean Development Mechanism credits through the UN to help support the project, which advanced past the feasibility stage and into some construction efforts before Crystalsev commenced liquidation in 2009.

The ethanol distribution group sold off, starting in 2009, two port terminals in Sao Paulo, a stake in a Syrian sugar project, and a dehydrating plant in the Caribbean a sugar refinery in Syria, and a dehydrating ethanol plant in the Bahamas , plus storage tank facilities.

The Crystalsev – Amyris disconnection

Back in August 2008, Dow Chemical said that it would commence land acquisition efforts that summer, and ultimately acquired a total 42,000 acres of sugar cane.

Crystalsev had also been the original partner of Amyris in Brazil, and was originally scheduled to supply up to 2 million tonnes of cane per year in a deal announced originally in spring 2008. After Santelisa Vale racked up more than $300 million in currency derivative losses in 2008-09, Amyris ultimately bought out Crystalsev’s 30 percent stake in the Amyris-Crystalsev Biofuels venture.

Subsequently, Amyris set out to acquire its own ethanol mill, a search which ultimately resulted in the Amyris Brasil operation and indirectly contributed to the timing of the group’s IPO, in part motivated by the working capital needs of its ethanol production projects. In the Amyris project, sugarcane juice provides feedstock for the companies renewable diesel, lubricants and chemicals production.

Dow itself took back full control of the Usina Santa Victoria project in July 2010, but there were concerns that the company would not be able to find the right JV partner, and that the project would ultimately be abandoned. In the end, Mitsui came forward, a company which has successfully partnered with Dow for chlorine production in Texas.

Dow and OPX Bio

In April, Dow Chemical and OPX Biotechnologies announced that they are collaborating to develop an industrial scale process for the production of bio-based acrylic acid from renewable feedstocks.

Dow and OPXBIO recently signed a joint development agreement to prove the technical and economic viability of an industrial-scale process to produce acrylic acid using a fermentable sugar (such as corn and/or cane sugar) feedstock with equal performance qualities as petroleum-based acrylic acid, creating a direct replacement option for the market. If collaborative research is successful, the companies will discuss commercialization opportunities that could bring bio-based acrylic acid to market in three to five years.

Other Sugar Rushers

Check out the latest on LS9, Amyris, Solazyme, Cobalt Technologies, KL Energy, Codexis, and Shell-Cosan’s Raizen JV – among other companies exploring opportunities in Brazil. Not to mention local giants such as Petrobras, or Braskem.

The Digest’s Take

Like Dupont, Down wants to diversify its supply chain with bio-based materials, and has been active in developing partnerships in ethanol – notably, a partnership with Algenol, Georgia Tech, and NREL to produce ethanol via hybrid microalgae (in which Dow is slated to supply technology related to the soft plastic photobioreactor units) – and the recent partnership with OPX Bio.

The announcement, which parallels developments by Braskem in producing bio-based materials from sugarcane in Brazil, may well put added pressure on BASF to develop a more aggressive renewable chemicals strategy. Other rivals of BASF include INEOS, which is sponsoring the INEOS Bio integrated biorefinery project in Florida, and Dupont, which recently announced a $6B acquisition of Danisco, which includes Genencor, as it focuses its strategy on biotechnology.

Meanwhile, Shell and Cosan formed the Raizen joint venture in Brazil, which will be the largest ethanol producer in the country, but the venture is not yet involved in the production of chemicals or other bio-based products.

Category: Fuels

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