BP and Bunge Merge Brazilian Operations and Create World-class Biofuel Player

RIO DE JANEIRO, BRAZIL – U.S. commodities trader Bunge, a leader in agriculture, food and ingredients, and British energy company BP have agreed to form a 50:50 joint venture that will create a leading bioenergy company in Brazil, one of the world’s largest fastgrowing markets for biofuels.

“Brazil is the Saudi Arabia of biofuel,” BP’s head of Alternative Energy, Dev Sanyal, told Reuters.

BP’s interest in the new venture will swell its existing biofuels business by more than 50 percent. The new company is expected to be headquartered in São Paulo.

Bunge will receive cash proceeds of US$775 million in the transaction, comprising US$700 million in respect of non-recourse Bunge debt to be assumed by the joint venture at closing, and $75 million from BP, subject to customary closing adjustments.

The joint venture is the largest deal in Brazil’s bioenergy sector since Royal Dutch Shell joined forces with Cosan to form industry leader Raízen in 2011, says Reuters.

Ethanol produced from sugarcane is one of the most carbon-efficient biofuels available globally, with lifecycle greenhouse gas emissions around 70 percent lower than conventional hydrocarbon transport fuels.

Brazil is the world’s second-largest and most integrated market for ethanol as a transportation fuel, with demand forecast to grow rapidly.

The majority of vehicles in the country are already able to run on ethanol, and the country’s demand for ethanol is estimated to increase by around 70 percent by 2030.

The new BP Bunge Bioenergia will have 11 biofuels sites in Brazil. With 32 million metric tons of combined milling capacity per year, the joint venture will have the flexibility to produce a mix of ethanol and sugar.

It will also generate renewable electricity — fuelled by waste biomass from the sugar cane — through its cogeneration facilities to power all its sites and sell surplus electricity to the Brazilian power grid.

BP and Bunge’s assets are largely complementary, with sites in five Brazilian states including three in the key region of São Paulo.

In 2018, the two businesses produced a total of around 2.2 billion liters of ethanol equivalent and, after powering the sites, exported 1,200-gigawatt-hours of low-carbon biopower to the national grid. Together, the two businesses currently employ over 10,000 people in Brazil.

The combined business will be ranked as the second-largest player in the sugarcane ethanol biofuel industry in Brazil by effective milling capacity.

In 2018 the Brazilian production of ethanol was some 26 billion liters, produced almost entirely from sugarcane grown in-country.

The Brazilian government is introducing a new low carbon transport policy, known as RenovaBio, to establish the first regulated carbon credits market in the country.

RenovaBio is expected to encourage continued growth in the market and support development of the sugarcane ethanol industry.