Outlook 2012: Big First Step

Sue Ellerbusch, president, BP Biofuels North America
By Kris Bevill | November 15, 2011

Few companies have expanded their biofuels interests as rapidly as oil major BP has over the past five years. BP Biofuels was strategically formed in response to the 2007 renewable fuel standard, commonly referred to as RFS2, with the intent of identifying which technologies and regions would be best suited to comply with the mandate. “We saw the opportunity for change in how liquid transport fuel would be delivered in the future,” says President of BP Biofuels North America Sue Ellerbusch. “We thought biofuels was going to be the most near-term, scalable solution for liquid transport going forward. Thus BP formed a business to try to pursue that opportunity.” Now five years into the process, BP’s biofuels arm has more than 4,000 employees in locations around the globe and has invested hundreds of millions of dollars in the Brazilian and U.S. industries. And it’s just getting started.

To date, most of BP’s high-profile biofuels activities have taken place in Brazil. The company was the first oil major to enter Brazil’s biofuels space, forming a joint venture known as Tropical BioEnergia in 2008. According to Ellerbusch, Brazil offers three significant benefits to ethanol that attracted BP to invest in the space: it’s an existing industry with existing assets that can be purchased and used to scale up the company’s presence rapidly and the industry is strongly supported by the government. “It’s a very attractive place to enter into because we know the industry exists, we know how the players exist, the model is there, and if you look at things like sugarcane, we understand the economics of that,” she says. “It’s attractive from an economic aspect and also from a greenhouse gas standpoint. It fits a lot of the opportunities for us to have low-cost, low-carbon, scalable technologies.”

In September, BP paid $100 million to gain operational control of three ethanol mills in southern Brazil that it had already invested hundreds of millions of dollars in, including the mill it operated as part of the joint venture. In the coming year, Ellerbusch says BP will work to increase the three mills’ combined crushing capacity to 15 million tons. “Of course that won’t all happen in a year, but there will be work going on to expand in Brazil,” she says.
Expanding production capacity is also a near-term focus in the U.S., although at a smaller scale. Currently, BP controls

just 1.4 MMgy of ethanol production in the U.S., in the form of a demonstration-scale facility in Jennings, La., but its main priority for 2012 will be to advance its $400 million, 36 MMgy cellulosic facility project in Highlands County, Fla., Ellerbusch says. This year BP began building out what will eventually become a 20,000-acre farm growing energy cane to supply the facility. “That is a primary goal— to continue to advance the construction of the farm,” Ellerbusch says. “We look to break ground on the industrial facility late next year as well.” Working in conjunction with Lykes Bros. Inc., one of Florida’s largest landowners, BP expects to have about 1,500 acres of energy cane planted in areas surrounding the production facility site by the end of this year. Energy cane has a 10-1 planting ratio, Ellerbusch says, so while the company hasn’t settled on its exact planting plan for 2012 yet, it will have the potential to plant up to 15,000 acres of feedstock. The ethanol plant is expected to begin production in 2013.

As with everything BP does, the decision to focus on energy cane and other tall grasses was a strategic one. Research funded by BP has shown that energy grasses can yield four times as much ethanol per gallon as corn, up to 2,000 gallons of ethanol per acre of feedstock. Also, energy grasses are particularly well-suited for growing in southern regions, which matches well with BP’s targeted area for biofuel production along the Gulf Coast. The citrus, cotton and rice producers along the lower Gulf Coast have struggled in recent years and Ellerbusch says the chance to partner with BP to grow energy grasses will offer a way to revitalize those communities. The company is currently scouting plant sites in Texas, Louisiana and Florida, knowing that it will take several years to establish the feedstock. “We’re going to start initially in the Gulf Coast—it has the right weather and climate—and look to move a bit further to the north, but still in the South, as we expand our portfolio of grasses,” she says.

Another priority of BP Biofuels officials in the coming year will be to maintain a clear path on the regulatory front, Ellerbusch says. The RFS2 has been a vital element to every player in the biofuels industry, she says, and without it she questions whether BP would have accelerated its pace in the arena as much as it has. “This is a technology that is not competitive with fossil fuel today. Therefore, we need to have some form of a market targeted by the government in order to incent those to produce,” she says. There is no doubt that it will be challenging for cellulosic biofuel producers to meet the 2022 RFS2 goal of supplying 16 billion gallons of fuel to the market, but if efforts to revoke the policy are successful, it will likely deliver a crushing blow to an industry that is just now beginning to gain ground. “I think I can point to [BP] and several other players—Poet, DuPont, Abengoa, Ineos—that have recently started to get government funding or their own funding to move their projects forward,” she says. “This is the first step in establishing the industry.” 

Author: Kris Bevill
Associate Editor, Ethanol Producer Magazine
(701) 540-6846
kbevill@bbiinternational.com