BP Biofuels: Biofuels Digest’s 2015 5-Minute Guide

BP Biofuels is a leading global biofuels player, with a breadth of investment that is unique in terms of both its scale and its reach. Since 2006, BP has announced investments of more than $2 billion in biofuels research, development and operations, and has production facilities operating or in the planning/construction phases in Brazil and Europe.

BP Biofuels has investments throughout the entire biofuels value chain: from sustainable feedstocks, including cellulosic energy grasses, through to advantaged molecules like biobutanol. BP’s close links into other sectors that will be crucial to the development of the biofuel industry, particularly the automotive industry, and its in-depth knowledge of the fuels market and infrastructure, will underpin the biofuels industry’s intentions to grow to be a more material and sustainable part of the global transport fuel market.

In Brazil, the company has have assets (BP-operated and joint venture assets) producing ethanol from sugar cane today. We were the first international oil company to invest in this industry.

A BP joint venture, Butamax Advanced Biofuels, is developing the advanced biofuel biobutanol and commissioning a technology demonstration facility in the UK. Also in the UK, in partnership with AB Sugar and DuPont, BP is constructing a 110 million gallon per year wheat-to-ethanol facility.

Rankings

50 Hottest Companies in Bioenergy: 2014-15, #18

The Situation

In December, BP dropped a big bombshell in the biofuels sector, that the company has determined to divest the cellulosic biofuels business amidst an overall corporate retrenchment, in the face of falling energy prices, that will result in more than “hundreds of jobs” lost in the UK, US and across the whole of BP’s global operation.

Most of the cuts are expected to hit administrative and financial back office groups, but assets are being put on the block as well — in addition to more than $40 billion in assets sold as part of the payment for the 2010 Deepwater Horizon oil spill.

“BP informed staff of a shift in focus in its global biofuels business,” the company told The Digest. “We are seeking to divest the cellulosic biofuels business.”

“The current challenging external business environment is resulting in tough strategic choices having to be made by businesses across BP.  In Biofuels, the decision has been taken to cease further development of BP’s proprietary lignocellulosic technology. While we believe there is value in the LC technology, we have chosen to focus our biofuels investment on building the profitability and scale of our sugarcane biofuels business in Brazil.

This decision will affect lignocellulosic activities including a demonstration plant in Jennings, Louisiana, the technology center in San Diego, the Highlands feedstock farm in Florida as well as some activities in Brazil and centrally. We will now explore options to sell these assets and facilities. We are committed to supporting our staff through this process and informing them of their individual positions as soon as we are able.”

BP added: “This decision does not affect our Vivergo bioethanol joint venture in the UK or our bio-butanol joint ventures Butamax and Kingston Research Limited. The Butamax joint venture is progressing with its existing strategy to commercialize biobutanol.”

Major Investors

BP is a public company, of which BP Biofuels is a wholly-owned subsidiary.
LSE (BP)
NYSE (BP)

Type of Technology(ies)
The BP Biofuels strategy focuses on the fermentation of sugars to produce ethanol, biobutanol and biodiesel.

Feedstocks
– Sugarcane
– Cellulosic feedstocks, on-purpose energy grasses
– Wheat

Products

– BP is producing ethanol from sugar cane in Brazil at operated assets in Minas Gerais and Goias states and a joint venture in Goias.

– In partnership with DuPont (and via a joint venture Butamax Advanced Biofuels), we are developing the advanced fuel molecule biobutanol, which has a higher energy content that ethanol, can be blended at higher rates into fuel that can be used by vehicles on the road today and may be able to facilitate the adoption of biofuels into the fuel supply chain at a faster rate. The partners are constructing a technology demonstration facility in the UK.

– With AB Sugar and DuPont (through a joint venture called Vivergo Fuels), BP is constructing a 110 million gallon-per-year wheat to ethanol plant in the UK. When operating next year, it will produce one-third of the UK’s requirement for ethanol under the UK’s renewable transport fuel obligation (RTFO). Once the technology has been proven at scale, the partners will look to convert the plant to produce biobutanol.

Past Milestones

In January 2015, BP Biocombustiveis said it was looking to finance investments in its local businesses such as expanding sugarcane production through a capital increase of $126 million, following a similar capital hike of $94 million last month. Shareholders will vote on the plan on Feb. 4.

In September 2014, BP announced an equity investment of an undisclosed amount in Pure Biofuels del Peru. Based in Lima, Pure Biofuels is a leader in the Peruvian refined fuels and distribution services markets. Pure Biofuels currently has over 1,000,000 barrels of liquid fuels storage at the Port of Callao, the largest port on the Pacific Coast of South America. The Company markets and distributes liquid fuels and biofuels in both the local and regional markets and also owns and operates a state-of-the-art biodiesel refinery co-located with the storage and dispatch terminal in Callao.

In November 2013, BP announced a new technology, Hummingbird, that directly converts ethanol to ethylene through dehydration. Hummingbird is a newly developed proprietary process by which ethanol is dehydrated to produce ethylene. BP states that the new technology is lower cost and simpler compared to existing ethanol to ethylene technologies.

“Hummingbird is a next generation technology, clearly differentiated from the competition,” said Charles Cameron, BP’s Head of Technology, Downstream. “The Hummingbird process with its proprietary catalyst and its milder operating conditions is ultra-selective, resulting in a market leading conversion of ethanol to ethylene.

In January 2013, BP Biofuels said it would invest $345m at Usina Tropical in Edeia to refurbish a distillery into a flexible, state-of-the-art ethanol and sugar production facility. 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.

Future milestones

• Divestiture of its cellulosic biofuels assets

• Demonstrate biobutanol technology and develop next steps for commercial deployment (with their partners DuPont, through the joint venture, Butamax Advanced Biofuels).

• Commercial production at world-scale wheat-ethanol facility in the UK (with partners AB Sugar and DuPont, through the joint venture Vivergo Fuels).

Business Model

BP operates throughout the biofuel value chain. They own and operate facilities in Brazil and the US and have joint ventures and joint development partnerships in the Brazil, US and Europe where BP brings scale, infrastructure and fuels market knowledge to these partnerships to drive long-term development of the businesses.

Competitive Edge

• Global scale and reach, and an intent to develop projects that can succeed on a global platform and make a material difference to supplies of sustainably-produced biofuels.

• Breadth of strategy – covering the entire biofuels value chain, from a range of sustainable feedstocks appropriate to different markets, through to the production of advantaged molecules to meet varied consumer needs: ethanol, biobutanol and biodiesel.

• As one of the world’s largest energy companies and a major blender, distributor and retailer of transport fuels, BP has core expertise and capabilities in fuel infrastructure, fuel markets and the requirements of the vehicle parc. This experience will be crucial in scaling-up the biofuels supply chain to meet the needs of consumers.

• Sustainability has been central to the strategic decisions that BP has made about its biofuels business: the feedstocks to invest in, the geographies to focus on and the molecules to pursue. They say: “We are developing ways to ensure and report on sustainability throughout our supply chain – including the development of an effective sustainability management system for our biofuels operations. BP is a member of the Roundtable for Sustainable Biofuels, Bonsucro (formerly the Better Sugarcane Initiative), Roundtable for Sustainable Palm Oil and Roundtable for Responsible Soy.”

Research, or Manufacturing Partnerships or Alliances.

• DuPont
• AB Sugar
• Brazil Ecodiesel