BP aims for large biofuels expansion, forms joint venture with Bunge in Brazil

LONDON (ICIS)–BP is to expand its biofuels business by more than 50% after forming a joint venture in Brazil with US agribusiness company Bunge, the UK energy and petrochemicals major said on Monday.

BP Bunge Bioenergia will create 11 biofuel sites in Brazil with a capacity to crush 32m tonnes/year, producing a mix of ethanol and sugar.

Both businesses will contribute their existing Brazilian biofuel, biopower and sugar businesses into the new equally-owned venture.

The deal is expected to be finalised in the fourth quarter of 2019, subject to conditions including regulatory clearances and approval.

On completion of the project, BP will pay Bunge $75m, subject to customary closing adjustments, and the joint venture will assume $700m of non-recourse debt associated with Bunge’s assets.

This venture will mean that the combined business has the second largest crushing capacity of sugarcane ethanol biofuel in Brazil.

Following this, the firms, which jointly employ more than 10,000 people in Brazil, will aim for operational and financial synergy, and both will retain equal representation on the board of directors.

The merge will bring together BP and Bunge’s complementary assets, with sites across five Brazilian states, including three within the Sao Paolo region.

The new headquarters is also set to be established in Sao Paolo, with BP’s Mario Lindenhayn and Marcus Schlosser taking roles as executive chairman and CFO respectively, while Bunge’s Geovane Consul has been appointed CEO.

The project will also generate renewable electricity, fuelled by waste biomass from the sugar cane to power the sites through its cogeneration facilities and will sell the surplus electricity to the Brazilian power grid.

In 2018, the two businesses produced a total of 2.2bn litres of ethanol equivalent and exported 1,200 gigawatt hours of low-carbon biopower to the national grid in Brazil after powering the sites, said BP.

In the same year, there was 26bn litres of ethanol made in Brazil, almost entirely from domestic sugarcane.

Ethanol from sugarcane is one of the most carbon-efficient biofuels available, as greenhouse gas emissions are around 70% lower than conventional hydrocarbon transport fuels.

Brazil is the world’s second largest and most integrated market for ethanol as a transportation fuel, with around 70% of the country’s vehicles already able to run on ethanol.

This is anticipated to increase by around 70% by 2030.

The Brazilian government is encouraging growth in this market by introducing the first regulated carbon credits market in the country, known as RennovaBio.

This announcement follows the settlement of a free trade agreement between the EU and Latin America’s Mercosur, which will allow a 450,000-tonne/year quota of ethanol to enter the EU duty free.

“Biofuels will be an essential part of delivering the energy transition and Brazil is leading the way in showing how they can be used at scale, reducing emissions from transport,” said BP’s CEO Bob Dudley.

Pictured: Sugar cane during mechanical cut
Source: Sipa/Shutterstock