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BP: Biofuels Could Potentially Account for up to 30% of Global Transportation Fuel by 2030

October 23, 2008

Source: Green Car Congress

Based on announced targets and pending regulations, BP’s assessment is that biofuels could account for between 11 and 19% of the transport fuel market by 2030. The company also thinks there is a possibility, if the industry can address some of the land, feedstock and technology issues that exist today, for up to 30% biofuels penetration into transportation by 2030, according to Susan Ellerbusch, VP Global Biofuels for BP.

Delivering that aggressive quantity of more than 600 billion liters (158.5 billion gallons US) of biofuels by 2030 would require progress particularly in the area of cellulosic biofuels, Ellerbusch said in a talk at Platts 3rd Annual Cellulosic Ethanol and Biofuels conference in Chicago (9-10 October).

Other key factors would be an “unlock” that has to happen in terms of vehicles to allow for greater biofuels use in the market, as well as the development of the necessary infrastructure, she said.

When you talk about can it be 11, can it be 19, can it be 30 percent, a lot of it is going to depend on how we actually create sustainable biofuels. It’s not just about putting any biofuel out there, it’s about putting the right biofuel out there. Our view is that not all biofuels are created equal, so we believe it is a strong imperative to develop more advanced biofuels like cellulosic’s not just better biofuels, improved molecules or approaches. We’re looking for ways we can minimize the environmental impact, so we don’t get into the food vs. fuel debate.

—Susan Ellerbusch

BP formed its biofuels groups in 2006. Since then, the company has made more than $1 billion in investments, and the group has grown from an initial six to 70 people. BP is taking a three-legged approach to biofuels.

First is making first-generation ethanol “better”; to that end, BP is focusing on sugarcane ethanol. Earlier this year, BP announced a 50% stake in Tropical BioEnergia SA, a joint venture established by Brazilian companies Santelisa Vale and Maeda Group, which is constructing a 435 million liter (115 million gallons) a year ethanol refinery in Edéia, Goias State, Brazil. The joint venture, in which Santelisa Vale and Maeda Group would each hold 25%, also intends to build a second ethanol refinery, investing a total of approximately R$1.66 billion (US$1 billion) in the two refineries. The first ethanol came off the unit two weeks ago. (Earlier post.)

Sugarcane ethanol has a better greenhouse gas emissions balance, and has sidestreams coming off such as bagasse that can be used in boilers. BP is also looking at the possibility of that sugarcane ethanol becoming sugarcane butanol in the future.

The land being used by the JV in Brazil was degenerated pasture land, more than 1,000 kilometers from the Amazon. There is about 25-35 million hectares of such badly degraded land that could be a viable option for biofuels going forward, Ellerbusch said. Using that land for sugarcane production could yield an additional 40 billion gallons of biofuel—about 10% of gasoline demand today.

Second is a focus on more advanced technology molecules such as biobutanol. The BP-DuPont partnership on producing biobutanol is showing good results (earlier post), and the partners have demonstrated 16% blend rates with biobutanol versus a 10% blend rate with ethanol (Bu16 vs E10). The demo plant in the UK will begin producing 5 million gallons per year in 2009.

Ellerbusch said that BP is intent on bringing biobutanol into the US market in the next several years. It’s “not typical to introduce new molecules into the fuel chain”, she noted, and testing and approval will take some time.

Third is the focus on advanced lignocellulosic biofuels. Although there are a variety of conversion pathways under investigation, BP is focusing on biochemical fermentation as its cellulosic biofuel pathway of choice.

In August, BP made a $90 million investment in Verenium and formed a strategic partnership to accelerate the development and commercialization of cellulosic ethanol. (Earlier post.) BP is also collaborating with Mendel Biotechnology, a functional genomics company, on accelerating a breeding program for perennial grasses that can be used as feedstock for the production of cellulosic ethanol. (Earlier post.)

BP is also investing $500 million over ten years in the Energy Biosciences Institute with the University of California, Berkeley and its partners, the University of Illinois, Urbana-Champaign and the Lawrence Berkeley National Laboratory. EBI is initially focusing on renewable biofuels from existing and new crop plants for road transport. (Earlier post.)

Both Ellerbusch and John McKenna, Managing Director of energy investment bank Hamilton Clark & Co., who chaired her session, noted that the current environment, with the frozen debt market and plummeting equity market, is an excellent time to invest in companies in the advanced biofuels sector.

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