BP Boosts Its Biofuels Business with Brazilian Joint Venture
22 Julho 2019 - 11:58AM
Dow Jones News
By Sarah McFarlane
Energy giant BP PLC is doubling down on biofuels with a joint
venture with agricultural trader Bunge Ltd. in Brazil, betting that
the global movement to reduce carbon emissions will boost demand
for low-carbon fuels.
The two companies have combined their sugar and ethanol
businesses to create the second-largest sugar cane crushing
operation in Brazil, called BP Bunge Bioenergia. The venture will
produce ethanol from sugar cane.
Ethanol's greenhouse gas emissions are around 70% lower than
hydrocarbon transport fuels, and around 70% of vehicles in Brazil
can run on ethanol. The joint venture will also produce electricity
from the waste biomass of the sugar cane.
BP will pay Bunge $75 million and the equally owned joint
venture will assume $700 million of non-recourse debt associated
with Bunge's assets. The stand-alone joint venture includes BP's
three sugar cane crushing mills and Bunge's eight mills, with
combined capacity to crush 32 million metric tons a year.
The mills yield around 60% ethanol and 40% sugar, and there is
some flexibility to adjust these ratios, said Dev Sanyal, chief
executive of BP Alternative Energy.
Some countries, including Brazil and the U.S., mandate a minimum
amount of ethanol is blended with gasoline. Brazil is already the
world's leading biofuels market as a share of the country's
transport fuel mix.
"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 Bob Dudley,
BP chief executive.
Brazil is the world's second largest ethanol market behind the
U.S., having adopted policies to use more biofuels in the 1970s
when oil prices surged after the Organization of the Petroleum
Exporting Countries halted exports to some countries.
The joint venture follows a similar move by Royal Dutch Shell
PLC and Brazilian sugar and ethanol producer Cosan Industria e
Comercio SA in 2010, when they formed Brazil's top cane crusher
Raizen.
Sugar producers have struggled with lower prices in recent years
with booming output in top-producing nations, including India and
Thailand, causing global stocks to build.
Meanwhile, Brazil's ethanol market has been supported by strong
demand. The government plans to introduce new mandates for fuel
distributors to increase their biofuel sales from 2020.
Bunge started reviewing its South American sugar business in
2013 and had looked at options including a sale or initial public
offering, the company has said. It sold its sugar trading business
to Wilmar International Ltd in August last year.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
July 22, 2019 10:43 ET (14:43 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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