BP Buying Into Brazilian Biofuel

BP is looking to go “beyond petroleum” via Brazilian ethanol, with an investment it calls the “largest made by an international oil company in the Brazilian ethanol industry.” This morning the British oil giant said it intends to pay about $60 million to take a 50 percent stake in Tropical BioEnergia, a Brazilian company that plans to build two ethanol refineries in Brazil.

Tropical BioEnergia is a joint venture between Brazil’s second largest ethanol and sugar producer, Santelisa Vale, and cotton producer Maeda Group. The company says it will spend $1 billion building two refineries: a 115-million-gallon-a-year ethanol refinery in Edéia, Goias State, that is expected to go online later this year, and a second refinery in a yet-to-be-announced location. BP expects the deal to close by June and says it will likely commit further investment in the JV.

Like the rest of the Brazilian ethanol market, Tropical BioEnergia will use sugarcane as a feedstock and will focus on producing sugarcane as well as making and marketing conventional sugarcane ethanol. The company says it could work with cellulosic ethanol and biobutanol in the future.

Interestingly, BP says the refineries will strive to produce ethanol for export to the United States, Europe and Asia. So all those U.S. ethanol makers that are already being squeezed by tight margins are going to love that. They’re already worried about Brazil getting into the nascent U.S. biofuel market, and backing from BP will leave them feeling even more nervous.

BP has said it will invest $8 billion dollars over the next 10 years in clean energy technologies. And it has been making investments in the U.S. biofuel industry, including the $500 million academic and industry collaboration the Energy Biosciences Institute and biofuel startups such as Craig Venter’s Synthetic Genomics.

Santelisa Vale has been making international friends all over the place on its own. Last year, Goldman Sachs said it would invest $210 million in Santelisa Vale. And just this week, biofuel startup Amyris said it would work with Santelisa Vale to make biodiesel from sugar cane.

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