BP Plans Foray into 2G Ethanol, Sustainable Jet Fuel with Brazil Base

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June 24, 2024

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by Roberto Samora and Marcelo Teixeira (Reuters) BP Plc (BP.L) will evaluate expanding and diversifying its biofuel operation in Brazil, looking at new products such as second-generation ethanol and sustainable aviation fuel after buying out Bunge (BG.N) from their joint venture BP Bunge Bioenergia.

The company said in written comments to Reuters that it wants to use the venture's massive biofuel base in Brazil - an industrial complex with 11 plants in five states processing sugarcane - to develop key projects to support the broader BP view for bioenergy.

The Brazil complex "is a scalable bioenergy platform with cost advantages," it said. "We will seek to explore new growth opportunities in the region and develop new bioenergy platforms, such as next-generation ethanol, SAF, e-fuels and biogas," BP added, using an acronym for sustainable aviation fuel.

The strategy of the British oil major follows Shell (SHEL.L), which partnered with Brazilian sugar and ethanol giant Cosan (CSAN3.SA) years ago to form Raizen SA (RAIZ4.SA), which is developing the world's largest cellulosic ethanol program, a second-generation ethanol.

"Good biofuels - those that actually help achieving emissions savings - are still seen as having an important role to play," said biofuels expert Soren Jansen, a former executive at Brazil's Copersucar.

"The whole alcohol-to-jetfuel supply chain is very expensive to build up, and the deep pockets from the oil companies is accelerating the process with an initial geographic spread over Brazil, the U.S., Europe and Japan," he said.

Raizen opened its second 2G ethanol plant in May. The fuel, made from biomass residues from processed sugarcane, has 80% less carbon than gasoline.

BP's plans for its complex in Brazil go in the opposite way from most companies processing sugarcane in the country. Those have increased their capacity to make sugar, instead of ethanol, due to higher international prices for the sweetener. READ MORE

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BP Acquires Full Control of Bioenergy Venture in Brazil for $1.4 Billion (The Rio Times)
BP Eyes Biofuel Dominance In Brazil With Expansion Plans: Report (Benzinga)
bp to acquire full ownership of Brazilian biofuels JV bp Bunge Bioenergia -- High-returning transaction will allow bp to realise synergies and continue to grow the business (Indian Chemical News)
BP to Acquire Full Control of Biofuels Joint Venture for $1.4B (Benzinga)
BP agrees buyout of Brazilian biofuels JV at USD-1.4bn EV (Renewables Now)
bp to acquire full ownership of bp Bunge Bioenergia while refocusing plans for new biofuels projects (bp)
BP Pauses SAF Projects As It Simplifies Biofuel Growth Plans (Aviation Week)

Excerpt from The Rio Times: BP has finalized a deal to purchase Bunge’s 50% stake in the BP Bunge Bioenergia joint venture for $1.4 billion.

This acquisition grants BP full control, significantly bolstering its role in the global renewable energy landscape, particularly in biofuels.

Set to complete by late 2024, this strategic pivot underlines BP’s enhanced focus on green energy sources.

With this deal, BP’s ethanol production will catapult to around 50,000 barrels daily.

The joint venture’s 11 biofuel plants in Brazil drive the surge by producing over 1.5 billion liters of ethanol and 1.1 million tons of sugar annually.

These operations are pivotal in advancing Brazil’s renewable energy targets, transforming sugarcane waste into electricity.

This not only powers their operations but also feeds into Brazil’s national grid.

...

Amid integrating the joint venture’s assets, BP has paused some new projects and is reviewing others, ensuring strategic alignment with its long-term goals.

This focus on operational efficiency is poised to maximize the existing assets’ potential.

Conversely, Bunge will concentrate on its core agribusiness, moving away from bioenergy.

This shift enables Bunge to strengthen its financial base and explore new ventures, including potential IPOs and partnerships. READ MORE

Excerpt from bp:

bp agrees to take full ownership of its Brazilian biofuels joint venture, acquiring Bunge’s 50% interest.
High-returning transaction will allow bp to realise synergies and continue to grow the business.
In parallel, scaling back plans for development of new biofuels projects, pausing two while continuing to assess three.
Changes contribute to delivery of bioenergy transition growth engine target of ~$2bn EBITDA by 2025.

bp has agreed to acquire Bunge’s 50% holding interest in its bp Bunge Bioenergia S.A. joint venture, one of Brazil’s leading biofuels-producing companies.

Upon completion, bp will become sole owner of the industrial scale sugarcane and ethanol business, enabling bp to accelerate value creation through integration with bp’s trading and technology capabilities.

The enterprise value of the stake to be acquired is approximately $1.4 billion. The acquisition will result in consolidation of 100% of the venture’s financial results, including net debt of approximately $0.5 billion and lease obligations of approximately $0.7 billion.

The acquisition meets bp’s expected returns threshold for bioenergy of more than 15% and is fully accommodated within bp’s disciplined financial framework, including capex targets of around $16 billion in each of 2024 and 2025.

Following completion, bp will have the capacity to produce around 50,000 barrels a day of ethanol equivalent from sugarcane through bp Bunge Bioenergia’s 11 agro-industrial units across five Brazilian states. The company operates with an integrated business model that covers the entire production chain through to sales of ethanol and sugar.

bp believes ownership will also offer the potential to unlock further growth opportunities in the region, and to develop new platforms for bioenergy such as next generation ethanol, sustainable aviation fuel (SAF) and biogas.

Focusing biofuels development plans

In parallel to this acquisition, bp is scaling back plans for development of new SAF and renewable diesel biofuels projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression. This is aligned with bp’s drive to simplify its portfolio, focusing on value and returns.

Emma Delaney, bp’s executive vice president, customers and products said: "bp Bunge Bioenergia is widely recognised as a leader in the industry. I am excited by the opportunity for bp to now add further value from our trading and technology capabilities. bp was an early entrant into the bioenergy business in Brazil and we look forward to continuing to grow and develop here.

“Focusing our plans to develop new biofuels projects is also driven by value. Taken together, these changes can enable us to deliver the growth and returns we expect from biofuels, but in a simpler, more focused way. This is fully in line with bp’s priorities of driving focus into the business and growing shareholder returns.“

This acquisition and focusing on key biofuels production projects are expected to support the continuing growth of bp’s strategic bioenergy business which includes both biofuels and biogas. They contribute to bp’s unchanged 2025 targets of delivering around $2bn EBITDA from bioenergy and $3-4bn across all its transition growth engines.

Subject to regulatory approvals, the transaction is currently anticipated to close by end 2024.

Bioenergy is one of bp’s five transition growth engines and includes liquid biofuels for road, sustainable aviation and maritime fuels, and biogas.
bp Bunge Bioenergia will continue to be performance-reported through the Customers sub-segment and convenience & mobility (C&M) strategic theme.
Going forward, bp’s biofuels business will include full ownership of bp Bunge Bioenergia (subject to completion of the acquisition) and the ongoing assessment of three potential biofuels projects at bp’s existing sites. In addition, bp continues to expect to more than double biofuels co-processing volumes to ~20 thousand barrels per day (mbd) by 2025, with co-processing investment plans unchanged.
bp is in action to grow its bioenergy businesses. By 2025 bp is targeting to grow its biofuels production and biogas supply to ~50mbd and ~40 thousand barrels of oil equivalent per day (mboed) respectively. By 2030, bp aims to grow its biofuels production and biogas supply to ~100mbd and ~70mboed respectively.
For the year-end 2023, bp Bunge Bioenergia unaudited adjusted EBITDA (as defined in the bp Annual Report and Form 20-F 2023) was ~$0.8 billion (USD/BRL exchange rate = 5.0). READ MORE

Excerpt from Indian Chemical News: Focusing biofuels development plans In parallel to this acquisition, bp is scaling back plans for development of new SAF and renewable diesel biofuels projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression. READ MORE

Excerpt from Aviation Week: “These two moves are connected—the net outcome is that our 2025 targets for biofuels and bioenergy (including biogas) are unchanged,” BP says. “The reason for this decision was alignment with BP’s drive to simplify our portfolio, focusing on value and returns.”

...

Following completion, BP will have the capacity to produce some 50,000 barrels per day of ethanol from sugarcane at 11 agro-industrial units in Brazil.

At the same time, BP has paused two new biofuel projects in Lingen, Germany, and Cherry Point, North Carolina. “At both of these we will instead focus on co-processing of biofeedstocks in the current refineries,” the company says. BP will continue to assess three projects at its sites in Kwinana, Australia; Rotterdam, Netherlands; and Castellon, Spain.

The Brazilian JV has been in place since 2019, producing ethanol from sugarcane. BP says its acquisition can deliver growth in biofuels in a simpler and more focused way while unlocking the potential to produce SAF. READ MORE