BP To Take 50% Stake in Brazilian Ethanol Company Tropical BioEnergia SA
24 April 2008
BP announced today that it intends to take a 50% stake in Tropical BioEnergia SA, a joint venture established by Brazilian companies Santelisa Vale and Maeda Group, which is constructing a 435 million liter (115 million gallons) a year ethanol refinery in Edéia, Goias State, Brazil. The joint venture, in which Santelisa Vale and Maeda Group would each hold 25%, also intends to build a second ethanol refinery, investing a total of approximately R$1.66 billion (US$1 billion) in the two refineries.
Assuming all the required approvals are received, BP will pay around R$100 million (US$59.8 million) for the 50%, subject to working capital adjustments, and provide funding for agreed future investment in line with its shareholding. The parties said that they hoped to be able to complete the transaction before the end of June 2008.
BP’s investment is the largest made yet by an international oil company in the Brazilian ethanol industry, according to the company.
The joint venture will focus on potential sugarcane production and the manufacturing and marketing of conventional ethanol, including the associated agricultural assets and cogeneration plants. Sugarcane is the most efficient source of first-generation ethanol currently available. Sugarcane lends itself to further improvement through the use of advanced biofuels technology and can be a source of renewable fuel for the foreseeable future.
Operations at the first refinery are expected to commence during the second half of 2008, with full capacity anticipated by mid-2010. The refineries will be positioned to supply the Brazilian ethanol markets with the potential to export to the demand markets of US, Europe and Asia.
Besides developing sustainable biofuels, the refineries are expected to be able to sell surplus electricity, with each of them exporting at least 30 MW of surplus power from integrated bagasse cogeneration facilities. The facilities are also intended to offer a potential platform for deploying future technologies such as lignocellulosics and biobutanol.
The Maeda Group is one of the largest cotton producers in the world. Santelisa Vale Group is the second-largest sugar cane crusher in Brazil and the first in energy cogeneration from bagasse. As it already operates a number of ethanol refineries, Santelisa Vale has expertise along the entire value chain of ethanol/sugar production.
Santelisa Vale expects to crush 18 million tons of sugar cane in 2008. The company will produce 25 million bags of sugar and 770 million liters of ethanol.
Oil companies have tons of money and it is costing them tons to go after the tougher oil these days. Since more than 80% of the world's oil reserves are in the hands of national oil companies, the companies like BP, Shell and Exxon need a new plan. It is unlikely that the Saudis will let them back in anytime soon.
Posted by: SJC | 24 April 2008 at 03:19 PM
Just $100 mil? Pretty reasonable given BP's BILLIONS that they made this past year alone...they'll probably pay in cash. What's sad is that the oil companies are making windfall profits with gas at 3.50+ per gallon, and our politicians don't have the guts to stick them with a windfall profits tax!! I am a registered republican - but the direction of the democrats is the right one at this time on most issues.....
Posted by: ejj | 24 April 2008 at 06:48 PM
BP, while trying to do the right thing at times, is pursuing coalbed methane in sensitive wilderness areas (e.g. Canada's Flathead region in BC.) They would do well to review these drilling policies and start building E85 infrastructure in North America. A few key compromises can earn them a new lease on life.
Posted by: gr | 25 April 2008 at 07:26 AM
I agree about the E85. It is going to take at least one major oil company to make E85 available nation wide. If cellulose ethanol comes on big time, it would be good to fuel those 5 million FFVs with it.
Posted by: SJC | 25 April 2008 at 07:49 AM
Why should oil companies be punished for "Windfall profits"? That's the point of being in business, to make profit.
If the government taxes these "windfall profits" you'll pay for it at the pump. So you'd be screwing yourself by passing that kind of legislation. Don't get suckered into all this political rhetoric. These politicians suggesting this crap are after your emotions and votes, not logic.
Oil prices don't go up because the oil companies feel like screwing people. It's a traded commodity driven by supply, demand, and fear.
Posted by: TRO | 25 April 2008 at 09:48 AM
So this is actually the first time a major oil player invests directly in the production of biofuels, instead of keeping things to blending or research?
Quite significant development, I think. The oil majors probably understand that Peak Oil is here, and that it's in their interest to keep the ICE on the road as long as possible.
Posted by: Jonas | 25 April 2008 at 12:50 PM
I read where some companies are investing in renewable energy now, but that huge and wealthy Exxon is not. They figure when the time is right, they will just buy their way in with all the money that they have. Maybe this is true, but I would like to think that companies with vision get rewarded.
Posted by: SJC | 25 April 2008 at 11:52 PM
Oh gosh... The exxon website looks like it was designed by an infant! Don't those money grubbing low down, Earth hating oil sheiks know that an incompetent web site makes 'em look... Incompetent??
Posted by: sulleny | 26 April 2008 at 06:54 AM
Sadly, the BP-Brazil deal underscores that the U.S. consumer continues to be held hostage--if not by oil members of OPEC, then by U.S. ethanol producers, backed by corn & sugar lobbies, who gorge us with their bullsh*t that corn is preferred feedstock over sugar cane or grasses [for their own egoistic reasons]!
David J Phillips
Energy Columnist, BNET
Posted by: david phillips | 01 May 2008 at 09:04 PM
We all know sugarcane is better than corn for ethanol, but the average person does not care. They know that we grow lots of corn and not much sugarcane. Farm Aid concerts have conditioned people to believe that the farmer is struggling. Big agribusiness is rolling in subsidies and profits. Farming has been large scale in the U.S. for a long time.
Posted by: sjc | 04 May 2008 at 04:11 PM