BP will join forces with Brazilian firms Maeda Group (MG), a major cotton producer, and sugarcane crusher Santelisa Vale (SV). The three will enter a joint venture as Tropical BioEnergia, with BP paying $60m for a 50% stake and MG and SV taking 25% stake.
Through Tropical BioEnergia, the firms will then invest over $1.1bn on two ethanol/sugarcane refineries. The first refinery, being built in Edéia in the Goias state, northwest of São Paolo, will open in the second half of 2008 and produce 435million litres of ethanol while a second factory, due to start producing in 2010, will raise capacity to 1billion litres a year.
Brazil is a world leader in Ethanol production, it harvests 528 million tonnes of sugarcane and refines 21billion litres of ethanol pa. The biofuel itself reduces greenhouse gas emissions by up to 80% and is used to power hybrid gas/ethanol vehicles in Brazil and other developing countires. Despite a price freeze on gas since 2005, effectively negating the high cost of oil, ethanol is still cheaper than gas for Brazillian drivers. Global demand is growing as countries seek cheaper, cleaner sources of fuel such as LNG.
Despite ethanol’s benefits, environmentalists who once hailed it as a panacea for energy demand are worried about food crops being used to produce biofuels. They point to the high cost of sugarcane and species wiped out as famers plant sugar fields. But ethanol supporters claim to use sustainable methods of production and Phil New, president of BP’s global biofuels division says “I struggle to see how this kind of project can be connected to the food and fuel debate. If it could be connected to it, we wouldn’t be investing in it.”
While the ethanol depate rages on and on, BP has made a prudent investment today. It currently accounts for 10% of the world’s ethanol output and this investment should substantially increase that figure. MG is an expert in agricultural production and its knowledge of plantations is directly applicable to sugarcane development, while SV is an experienced producer of ethanol along the entire value chain. It’s an encouraging sign to see a major oil producer invest heavily and work with regional experts to help produce a clean, sustainable fuel.
