‘Biofuels are the New Oil’

BP focuses its cellulosic activities on energy grass feedstocks
By Kris Bevill | January 17, 2011

BP doesn’t invent things. It just takes previously developed pieces of technology and makes them better. BP Biofuels North America President Sue Ellerbusch says this strategy holds true for the company’s biofuels sector as it positions itself to be a leader in the cellulosic biofuels industry. “BP didn’t invent cellulosic biofuels,” she says. “And BP didn’t build the first pilot plant or demonstration unit. BP will, however, construct the nation’s first commercial-scale cellulosic biofuels facility and begin to commercialize this industry at scale.”

Ellerbusch spoke at a recent ethanol industry conference and provided attendees with an update on BP Biofuels’ U.S. projects as well as some insight into the oil major’s motivation to become a biofuels producer. “We believe that what we are seeing today is the coming of age of a new energy sector that over the next 100 years will supplement traditional fossil fuels to create a more diversified energy mix,” she said. “In the U.S., one of the critical new energy technologies is biofuels. … We project that biofuels could account for up to 20 percent of the global road transport fuels market by 2030—and that’s at the conservative end. For some oil companies, biofuels remain a limited strategic option where investments are sometimes viewed as more of a technology hedge than as a business imperative or, more practically, to ensure a company can comply with blending mandates. That is not BP’s position.”

According to Ellerbusch, BP has identified biofuels as the most likely alternative fuel for internal combustion engines and found that producing those fuels is not dissimilar to its traditional business—producing petroleum. “Biofuels are in many ways the new oil,” she says. “The difference is that they are created from unlimited supplies of fresh biomass rather than finite supplies of fossilized biomass. They are not simply a complement to gasoline but a complement to our traditional core producer of crude oil. Today, when I look at a typical ethanol plant, I see a 4,000 to 6,000 barrel-a-day well.”

BP made its initial venture into biofuels in 2006 and has since committed more than $1.5 billion, more than any other oil company, to its biofuels operations, according to Ellerbusch. Its most well-known project in the U.S. to date has been a partnership with Verenium Corp. to produce cellulosic ethanol from sugarcane and energy cane bagasse. The duo opened a 1.4 MMgy demonstration-scale facility in Jennings, La., in 2008 to commercialize Verenium’s process technology. Last year, BP paid Verenium $98.3 million for all of its cellulosic interests, including the Jennings plant, its cellulosic ethanol technology and the joint venture’s Global Biofuels Technology Center in San Diego, where research and development is conducted for technologies to convert perennial grasses to biofuels. BP is currently operating the Jennings facility, where it is streamlining its production process before constructing a commercial-scale plant in Highlands County, Fla. Ellerbush says she believes the $400 million project, operated under the name Vercipia Biofuels, will be the first operating commercial-scale cellulosic ethanol plant in the U.S. when it comes online in 2013. The 36 MMgy Florida plant will convert perennial grasses, including energy cane, napier grass and high-biomass sorghum to ethanol, using biological fermentation technology.

Additionally, BP formed the Energy Biosciences Institute in San Francisco and provided a 10-year, $500 million grant for researchers there to study the various scientific aspects associated with producing advanced biofuels. The institute’s collaborators include the University of California-Berkeley, Lawrence Berkeley National Laboratory and the University of Illinois at Urbana-Champaign.

Ellerbusch stressed that while research and development of conversion technology is a crucial element of the production process, BP’s goal is not to create new methods, but to perfect what has already been developed. “The issue is not about invention of these new technologies,” she says. “The issue is about who can scale these technologies at the lowest cost.”

BP’s benchmark for cellulosic biofuels is $1 per gallon. It is at that price that they will be able to compete with $40-50 per barrel oil without subsidies, Ellerbusch says. To achieve this goal, BP has identified energy grasses as its ideal U.S. feedstock and believes sugar-based fuels will become the world’s third largest source of liquid hydrocarbons by 2030.