BP buys Brazil biofuels producer for $680m

BP is to buy a Brazilian biofuels company for $680m (£424m) in a "watershed moment" in the oil major's plans to expand its sustainable fuel business.

The Companhia Nacional de Açúcar e Álcool (CNAA) deal includes 83 per cent of the Brazilian company's shares as well as an agreement to refinance its long term debt.

BP will gain 2,500 employees, two working ethanol mills and one more under construction, along with sufficient sugar cane to supply them. At full capacity, it will be able to process 15 million tonnes of sugar cane per year, producing 1.4 billion litres of ethanol.

BP has a presence in Brazil's biofuels sector through a 50 per cent stake in Tropical BioEnergia. But the CNAA deal is a different order of magnitude.

"This is a watershed moment," Philip New, the vice-president of BP Biofuels, said. "It is a foundation step for turning biofuels into a fully fledged business in BP."

The company is already betting big on green fuel. Since 2006, it has put more than $1.5bn into the business, and it is also investing $500m in the Energy Biosciences Institute in California.

"Biofuels are the only real alternative to crude oil if we are looking for decarbonised transport fuels and a broader set of supply options," Mr New said.

So far, Brazil is by far the largest market, with around half of all transport fuel made from ethanol from sugar cane. The other major growth area is the US, where ethanol from corn starch contributes around 10 per cent of fuel.

In the US, BP is focusing development efforts on cellulosic sugars, extracted from the cell walls of highly dense plants. Last year, the company bought a cellulosic biofuel business - including a demonstration plant in Louisiana – from Verenium for $98m. It is also building one of the world's first commercial-scale cellulosic facilities in Florida.

In the UK, the proportion of biofuel is currently less than 3 per cent. But BP and British Sugar have plans for a large-scale biofuel factory in Hull, to be up and running by early 2012. The facility will take the UK's surplus of high-starch, low-protein wheat – which is currently exported to Europe – and turn the starch into ethanol for biofuels and high-protein animal feed.

"The important thing about the CNAA deal is that it gives us a material business upon which to grow in Brazil, and also a base from which do something similar with cellulosic biofuels in the US and in other parts of the world in future," Mr New said yesterday.

The company roundly dismissed claims that biofuels add to pressure on food prices, stressing that the cane is grown on low-yield land with little capacity to support the human food chain.

"Biofuels can be done well, or done badly, just like anything," Mr New said. "It is massively simplistic to say that because people have found a way to turn some biomass into fuel it is contributing to increasing food prices."

Rosneft rejects TNK-BP

*State-owned Russian oil giant Rosneft yesterday dismissed rival TNK-BP's claims to a slice of its $10bn (£6.2bn) tie-up with BP.

TNK-BP – the 50/50 joint venture owned by BP and the Alfa-Access-Renova consortium of four Russian oligarchs – says the BP/Rosneft share-swap and Arctic exploration deal violates its shareholder agreement and that it is entitled to a piece of the action.

Rosneft thinks differently. "Rosneft once again underscores that it did not conduct and is not conducting any negotiations with the AAR group or TNK-BP," the company said in a statement yesterday. "TNK-BP has never been considered a potential participant in the alliance due to its lack of required competence."

Igor Sechin, the Rosneft chairman who is also a deputy prime minister of Russia, was similarly unmoved. "Russia has the right to choose its own partner," he told a news agency.

The BP/Rosneft deal is currently frozen, pending arbitration between BP and TNK-BP. Meanwhile, TNK-BP has put forward plans for it to act as an intermediary in the share swap arrangement.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions
Major medical journal Lancet under attack for 'extremist hate propaganda' over its coverage of the Israeli-Palestinian conflict

Lancet accused of 'anti-Israel hate propaganda' over coverage of Gaza conflict

Threat to free speech as publishers of renowned medical journal are accused of inciting hatred and violence
General Election 2015: Tories and Lib Dems throw their star names west to grab votes

All noisy on the Lib Dems' western front

The party has deployed its big guns in Cornwall to save its seats there. Simon Usborne heads to the heart of the battle
How Etsy became a crafty little earner: The online market has been floated for £1.2bn, but can craft and capitalism coexist?

How Etsy became a crafty little earner

The online market has been floated for £1.2bn, but can craft and capitalism coexist?
Guy Ritchie is the latest filmmaker to tackle King Arthur - one of our most versatile heroes

King Arthur is inspiring Guy Ritchie

Raluca Radulescu explains why his many permutations - from folk hero to chick-lit hunk - never cease to fascinate
Apple Watch: Will it live up to expectations for the man or woman on the street?

Apple Watch: Will it live up to expectations?

The Apple Watch has apparently sold millions even before its launch tomorrow
Don't fear the artichoke: it's a good cook's staple, with more choice than you'd think

Don't fear the artichoke

Artichokes are scary - they've got spikes and hairy bits, and British cooks tend to give them a wide berth. But they're an essential and delicious part of Italian cuisine
11 best men's socks

11 best men's socks

Make a statement with your accessories, starting from the bottom up
Paul Scholes column: Eden Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo

Paul Scholes column

Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo
Frank Warren: Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal

Frank Warren's Ringside

Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal
London Marathon 2015: Kenya's brothers in arms Wilson Kipsang and Dennis Kimetto ready to take on world

Kenya's brothers in arms take on world

Last year Wilson Kipsang had his marathon record taken off him by training partner and friend Dennis Kimetto. They talk about facing off in the London Marathon
Natalie Bennett interview: I've lost track of the last time I saw my Dad but it's not because I refuse to fly

Natalie Bennett interview: I've lost track of the last time I saw my Dad

Green leader prefers to stay clear of her 'painful' family memories but is more open about 'utterly unreasonable' personal attacks
Syria conflict: Khorasan return with a fresh influx of fighters awaiting the order to start 'shooting the birds'

Khorasan is back in Syria

America said these al-Qaeda militants were bombed out of the country last year - but Kim Sengupta hears a different story
General Election 2015: Is William Cash the man to woo Warwickshire North for Ukip?

On the campaign trail with Ukip

Is William Cash the man to woo Warwickshire North?
Four rival Robin Hood movies get Hollywood go-head - and Friar Tuck will become a superhero

Expect a rush on men's tights

Studios line up four Robin Hoods productions