Brazil’s Big Six in advanced biofuels & chemicals: who’s doing what now?

September 16, 2013 |

brazilAfter taking a leading role in the global first generation wave of ethanol production, here come the Brazilians — with some hot North American technologies in tow — to take on next-generation biofuels and chemicals.

Who are the Big Six, and why?

It was BP Biofuels chief Phil New who drew the clearest contrast between advanced technology progress in Brazil, the US and the EU this year.

There has been a stand-off, New observed, in the US, as the industries have engaged in what has largely been a debate over “how to” implement renewables targets. “In Brazil,” he said, “there’s less talk about grand expansion and more now on consolidation and making the industry work better. In the EU, it’s a shrill debate driven by NGOs largely around sustainability concerns, with the resulting regulatory uncertainties.

But, the pace has been notably quickening in Brazil.

Late last week, the Brazilian national development bank, widely known as BNDES, announced the finalization of a 207.7 million real financing package for the construction of the proposed Raizen Energia cellulosic ethanol project in Piricicaba, in Sao Paulo state.

It follows a decision by BNDES to boost sugarcane mill financing by 46% this year in order to increase ethanol production. The bank said in August that it expects to lend about $2.6 billion in 2013 with interest rates down to 5.5% as of July 29, from 6.3% previously.

The BNDES move comes as dry weather has boosted the sugarcane crush, leading to a surge in sugar production over ethanol production. But despite that, ethanol prices have fallen below the 70% price parity in many parts of the country that leads drivers to switch to ethanol for their flex-fuel cars. In some places, they’ve got below 60%. So far ethanol sales are up 46% on the year at 9.9 billion liters. But Brazil expects to import a billion liters of ethanol to cover demand during the interharvest period.

The Raizen deal clarifies the “starting line-up” for the next generation in Brazilian biofuels. There are a large number of Brazilian producers and global technology providers active in development right now — six have achieved an advanced degree of traction in the short term. Some have been focused on Brazil for longer, some have faster-maturing technologies. More are coming, for sure.

But here are the big Six now.

Raizen

Cellulosic ethanol
40 million liter
Piricicaba, Sao Paulo state

raizen

The BNDES deal is expected to be the primary financial catalyst in the 40 million liter commercial scale plant that Raizen is building, in association with Cosan, and the Digest understands that Iogen cellulosic ethanol technology will be a featured part of the overall process. The financing is part of an overall Brazilian plan to expand the production of sugarcane and ethanol. The project is utilizing sugarcane residues, bagasse, as a feedstock.

Raizen will invest $102 million in the add-on cellulosic ethanol plant that will be attached to its Costa Pinto facility in Piracicaba. The 40 million liter per year bagasse-based facility may begin production as soon as next year.

Construction is expected to cost $90 million. CEO Vasco Dias said that the Raizen expects to have eight plants producing advanced ethanol by 2024. His comments follow announcements in June that the company would invest $7 billion in a program to reach 100 billion tonnes in cane crushing capacity, a 50 percent increase over current capacity. In June, Raizen exec VP Pedro Mizutani said that the company, which now has 10 percent of the cane crushing capacity in Brazil, would increase production by 5 million tonnes at its current plants, and achieve the remainder of growth through new project, as well as acquisitions.

GranBio-API

Cellulosic ethanol and biobutanol
22 million litres
São Miguel dos Campos, Alagoas state

granbio

GranBio was founded in June 2011 with an initial focus on developing strategic alliances and proprietary technologies that can be industrially scaled in Brazil. GranBio was recently ranked among the top 10 most innovative companies in South America by Fast Company magazine. In January, BNDESPar invested R$600 million in the company for a 15% stake, with the remainder controlled by the Gradin family, which also controls a large interest in Brazilian conglomerate Odebrecht.

GranBio’s next-gen cellulosic ethanol plant in Alagoas, is expected to commence operation in early 2014 with a nominal capacity of 22 million gallons (82 million liters). GranBio is investing $R350 million in the project.

GranBio completed the acquisition of a 25% equity stake in cleantech process development company American Process. Under the agreement, GranBio said it will have gained access to a proprietary biomass pretreatment platform that makes it possible to cost-effectively develop cellulosic sugars as a feedstock to a range of biochemicals and biofuels. The companies said that they expect to break ground on their first commercial-scale facility by the end of 2014. The companies will collaborate on a first commercial facility with API technology in Brazil, followed by one in the United States.

API CEO Theodora Retsina pointed towards technical capabilities, especially the technology’s capabilities of separating three distinct fractions from softwoods — cellulose, hemicellulose, and lignin. “Softwoods are very recalcitrant and difficult to work with, but 90% of the sugars in the hemicellulose are C6 and that is a distinct difference from other wood, not to mention the plentiful supply of softwood, for example across the southeastern US. Softwood is abundant and today is in surplus — and it’s been one of the myths that, with hemicellulose, you typically have C5 sugars – that’s not the case with softwoods.”

In a related development, GranBio and Rhodia have signed an agreement to create a partnership to produce bio n-butanol. Bio n-butanol is made from sugar cane straw and bagasse, the same raw material that is used to manufacture second-generation ethanol and which is abundant in Brazil. An essential chemical in the production of acrylates and methacrylates, n-butanol is widely used in the paint and solvent industries, in which Solvay is South America’s market leader.

Under the partnership, the companies plan to build the world’s first biomass-based n-butanol plant in Brazil, which will enter into operation in 2015. The plant will produce 100 kilotons per year of solvents.

Solazyme-Bunge

Tailored renewable oils
100 metric ton project, Moema

Bunge-Moema

This summer, Solazyme and Bunge broke ground on a their 100,000 metric ton renewable oil production facility adjacent to Bunge’s Moema sugarcane mill in Brazil. Construction started on schedule and the plant is targeted to be operational in the fourth quarter of 2013. It will service the renewable chemical and fuel industries within the Brazilian marketplace and will initially target 100,000 metric tons per year of renewable oil production.

A new Bunge agreement signed at the end of last year will expandthe  joint venture-owned oil production capacity at Solazyme Bunge Renewable Oils from the current 100,000 metric tons under construction in Brazil to 300,000 metric tons by 2016 at select Bunge owned and operated processing facilities worldwide.

“After building a strong commercial relationship together, we believe there is a broader scope of opportunities ahead of us,” said Ben Pearcy, Managing Director, Sugar & Bioenergy, and Chief Development Officer, Bunge Limited. Specifically, in this round of announcements, in edible food oils.

Let’s put that in context. In a recent quarterly report, Bunge posted $2.395 billion in edible oils sales, representing 1.692 million tons of product sold at $1,415 per metric ton. In that context, this deal represents $424 million in potential revenues at current prices, using the average edible oils prices that Bunge is currently generating.

Fundamentally, the market of customers is beginning to see Solazyme as a particularly efficient hybrid of agroscience company and grower. In the old model, companies like Bunge and ADM depended on companies like Monsanto, Dow AgroSciences, and DuPont’s Pioneer HiBred to come up with seed technologies that optimized oil characteristics, and farmers to grow the oilseeds via their “programmable” farmland. Powerful stuff.

Cobalt-Rhodia

Capacity undisclosed
Santo André, São Bernardo do Campo, Jacareí or Paulínia, Sao Paulo state

rhodia

Last October, Bunge’s innovation arm is investing an undisclosed amount in the Series E funding round for California-based Cobalt Technologies and anticipates introducing the biobutanol technology in its sugarcane mills. The companies are working Rhodia to produce n-butanol from bagasse at a pilot facility in Campinas.

Last summer, Cobalt Technologies and Rhodia announced they would begin joint development and operation of a biobutanol demonstration facility in Brazil. The Cobalt/Rhodia plant is planned to utilize sugarcane bagasse to make n-butanol; bagasse is used at sugar mills to provide process energy to drive the mill and to supply power to the local grid; the Cobalt project will utilize that fraction of the bagasse that generates power for the grid, or any residual biomass that is burned as waste.

Work was scheduled to begin in August 2012 and move to a mill site in early 2013 for integration testing. Operational testing at the demonstration plant was expected to be completed by mid-2013.  The exact production capacity of the plant was not disclosed.

Amyris-Total

Biofene
50 million liter
Brotas, Sao Paulo state

Amyris_Farnesene_Plant_in_Brazil

In February, Amyris announced its the first commercial shipment from its new Brazilian facility. Amyris’s first purpose-built industrial fermentation facility produces Biofene, Amyris’s brand of renewable farnesene, to be used in a range of specialty chemical and fuel applications. The production facility os located in Brotas; the sugarcane facility in Paraiso, which was acquired to secure cane sugars for the Amyris process, was acquired by  Tonon Bioenergia in May.

“During the second quarter, we continued to ramp up our farnesene production volume at our production facility in Brotas, Brazil. We achieved record renewable product sales during the quarter and continued to execute on our collaboration strategy with our partners, all the while maintaining lower operating expenses,” said John Melo, Amyris President & CEO.

Raymond James’ Pavel Molchanov wrote this summer: “The 50 million liter Paraíso plant in Brazil made its first farnesene shipment in 1Q13 and is running with no major mishaps, though production ramp-up has been slower than expected – hardly a surprise in the world of industrial biotech.” Stone and Medvedeff added, “The contamination issue may be resolved; all six fermenters are now running, albeit in early-ramp mode. However, strong execution is needed to meet H2 revenue and cost targets on the product side,” but “fermenter contamination restrained the pace of the ramp at Brotas, and cost of product sales was $8.9MM.”

Piper Jaffray’s Mike Ritzenthaler warned “a substantial product ramp in FY14 with healthy gross margins is still needed to hit the cash flow milestone. Management highlighted a 30% y/y reduction in operating expenses, which is a more normalized level. Management highlighted lighter capex, lower production costs (from cheaper feedstocks), and a growing revenue pipeline as key factors in achieving cash flow break even in 2014. As for the timing, we continue to expect that many of the positive indicators for achieving cash-flow breakeven in 2014 (such as Novvi volumes, sustained and stable production from Paraiso) will occur in the back half of 2013.

As a result of milestone achievements, Amyris and Total, the two parties intend to form a joint venture company by mid-2013 to market renewable diesel, jet fuel, and other specialty products derived from Biofene, Amyris’s renewable brand of farnesene.

In a related development, Amyris and Cosan entered into definitive agreements to expand their joint venture, Novvi, to include renewable additives and finished lubricants for industrial, commercial and automotive uses in addition to the joint venture’s original scope of renewable, base oils for such markets. Amyris plans to supply Biofene to Novvi for finishing into final products until the joint venture builds its own farnesene production capacity.

BP Biofuels

Advanced biofuels locations and capacities forthcoming

Worker at Tropical BioEnergia, Edéia, Brazil

BP Biofuels has an arsenal of 2G technologies to call on – Butamax’ biobutanol technology, the cellulosic technology developed originally in collaboration with Verenium, and a renewable diesel technology it is developing with DSM (following DSM’s acquisition of Martek). The company has not announced its deployment plans imn Brazil, but has been building up a major presence in 1G ethanol in the region, primarily through its Tropical Bioenergia project.

BP Biofuels ambitions – especially given the attractive prices for acquiring technologies from distressed companies?. For now, BP Biofuels CEO Phil New told the Digest, “We are focused on the knitting. We have the assets now in place, the key technologies are now becoming commercial. It will be better for us to have fewer distractions. For now, we plan to do the simple things well.

Last December, BP committed to spending $350m to double the capacity at Tropical, of which the company took full ownership last year. The expansion is expected to be complete by the end of 2014 or early 2015, and will develop 35,000 hectares of plantations to bring the facility’s capacity up to 5 million tons.

“Margins are tight,” New observed, “high feedstock prices, overcapacity as the blend wall bites, depressed sugar and power prices; all part of an economic context which remains very challenging.”

Depending on prices, the production split will be 40-60% for either ethanol or sugar, compared to the typical 45-55%. The project will create 7,600 direct and indirect jobs by 2014 with an annual production of 500m liters. The plant will also cogenerate electricity from waste and sugarcane bagasse with an estimated 340 GWh to be sold to the national power grid.

At World Biofuels Markets this past March, BP Biofuels CEO Phil New delivered a keynote speech which attempted to turn the industry’s attention towards “the hard yards” of operational excellence, saying that “it is arguable that the time to talk of game-changing inventions in biofuels is largely behind us – at least for this phase of our history.”

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