BA says the plant will reduce the amount of waste sent to landfill.

British Airways has struck a deal to build the first plant in Europe to produce jet fuel from waste matter.

Some 500,000 tonnes of waste will be used by the UK facility each year to produce 16 million gallons of fuel.

Construction of the plant in east London will start within two years. It is set to produce fuel from 2014, creating up to 1,200 jobs.

BA said the plant would produce twice the amount of fuel needed to power all its flights from London City Airport.

It would only account for about 2% of flights from Heathrow, however.

Greenhouse gas

BA argues the plant will cut the amount of waste that is sent to landfill, reducing the amount of methane that is produced.

Methane is thought to be a more potent greenhouse gas than carbon dioxide.

The plant will be built by a US company Solena Group, with BA committing to buy all of its output.

It will be another four years before it starts producing fuel, and it is unlikely to work at full capacity straight away.

The ideal source material for the plant is waste matter that has a high carbon content.

Biofuel creation

The waste is fed into a high temperature “gasifier” to produce BioSynGas.

A chemical process called Fischer Tropsch is then used to convert the gas into biofuel.

Waste products from the process can be used to power the plant as well as supply 20MW of electricity to the national grid.

A solid waste product can be used as an aggregate in construction.

The fuel produced by the plant is certified for use in other countries, but not currently in the UK.

BA says it is confident of getting the certification by the time the plant starts producing fuel, either for use in a blend with traditional kerosene or on its own.

By Richard Scott

Source: BBC

SAO PAULO (Reuters) – Royal Dutch Shell plans to form an ethanol and fuel distribution joint venture worth up to $12 billion with Brazilian sugar and biofuel giant Cosan, becoming the latest global energy company to buy into one of Brazil’s fastest-growing industries.

The deal, announced on Monday, marks Shell’s first foray into ethanol production and follows moves by British oil company BP, which in 2008 took a stake in a big Brazilian biofuel project and unveiled $1 billion in investments.

Cosan shares jumped 12 percent in Sao Paulo, compared with a 1.1 percent gain by the benchmark Bovespa index. Shell shares rose 1.1 percent in London, outperforming a 0.3 percent rise in the Dow Jones European oil and gas index.

“It’s a vote of confidence from an oil major for the Brazilian ethanol industry,” said Jonathan Kingsman, managing director of the Lausanne-based Kingsman SA ethanol and sugar consultancy. “I expect more interest from the oil companies in Brazilian ethanol, both in production and distribution.”

The 50-50 joint venture will be the third-largest fuel distributor in Latin America’s largest country, with almost 4,500 filling stations nationwide. By joining forces, Cosan and Shell will be better positioned to compete with the two top players in the market, state oil giant Petrobras and Ipiranga, a unit of Brazil’s Grupo Ultra.

Cosan first branched out into the fuel distribution business in 2008 when it acquired U.S.-based Exxon Mobil Corp’s Esso chain of service stations for nearly $1 billion. Cosan also agreed in December to buy a local chain of filling stations called Petrosul for an undisclosed sum.

While the deal will not immediately add to Cosan’s existing cane crushing capacity of about 60 million tonnes a year, it will give it a deep-pocketed partner at a time when some of its smaller rivals are vulnerable to takeovers.

The companies hope to more than double ethanol output to up to 5 billion liters a year from about 2 billion now, Shell’s downstream director, Mark Williams, said in London, without giving a time frame. The increase would come from takeovers and organic growth, he added.

The deal is another feather in the cap of Cosan Chairman Rubens Ometto, whose family has been in the sugar business since 1936. On Ometto’s watch, Cosan went on an acquisition spree and expanded into fuel distribution and port terminals.

Ometto hopes to capitalize on Shell’s global clout to make ethanol a widely traded commodity.

“Brazil’s aim is to become an ethanol exporter. Shell has distribution facilities throughout the world that we could use in a much more integrated way,” Ometto said in Sao Paulo.

“This step will be very important to consolidate ethanol as a clean and renewable fuel … and help it become a global commodity.”

Oil companies and major global investors have been searching for partnerships in Brazil’s promising ethanol sector, which is still largely dominated by family companies with complex ownership structures.

Shell has been looking for opportunities in Brazil’s ethanol industry for years. About 90 percent of all new cars in Brazil are flex-fuel, running on any mix of ethanol and gasoline, making the country a huge market for biofuels.

Other foreign companies have also been delving into Brazil. U.S. agribusiness giant Bunge Ltd struck a deal in December to buy sugar and ethanol producer Moema for $452 million, while French commodities company Louis Dreyfus said in October it would take over the Santelisa Vale mill for an undisclosed sum.

COSAN EYES OVERSEAS MARKETS, TECHNOLOGY

The combined entity will have about 40 billion reais ($21.4 billion) in annual sales, Cosan Chief Financial Officer Marcelo Martins said on a conference call with analysts and investors.

For Cosan, the world’s largest sugar and ethanol producer, teaming up with Shell could give it access to a vast overseas distribution network and new technologies in ethanol production, an area where Shell has been investing. Shell’s network may help Cosan export more ethanol as output grows.

“We’ll have a partner with an absolutely huge international presence in fuels sales,” Martins said.

The so-called second-generation in ethanol production has yet to reach commercial scale, but some companies are betting on the use of cellulosic material such as bagasse or cane stalks and grasses to make biofuels, in part to move away from making fuel from foodstuffs.

Cosan, which recently obtained a court injunction to remove its name from a government black list of companies with workers in slave-like conditions, said it had 180 days to discuss the nonbinding memorandum of understanding exclusively with Shell International Petroleum Co Ltd.

As part of the transaction, Cosan will transfer its sugar, ethanol, fuel distribution and energy generation business to the merged entity, with assets valued at $4.93 billion and debt of $2.52 billion.

Shell will contribute its retail fuel and aviation distribution business, valued at up to $3 billion, and inject $1.63 billion into the merged company in up to two years.

Brazilian investment bank BTG Pactual advised Cosan on the transaction, while JPMorgan Chase advised Shell.

Cosan and Shell will have the option of buying each other’s stake in the venture after 10 years, with the price to be determined at the time of purchase.

Earlier on Monday, Cosan released its quarterly earnings for the three months ended December 31. It posted net income of 167.1 million reais, up sharply from 5.2 million reais a year earlier. ($1=1.87 reais)

Reporting by Elzio Barreto and Inae Riveras; additional reporting by Reese Ewing in Sao Paulo and David Brough, Nigel Hunt and Tom Bergin in London; editing by Todd Benson, Dave Zimmerman and John Wallace.

Source:  Reuters

State-run oil giant Petrobras (PETR4.SA)(PBR.N) and General Electric Co (GE.N), which helped design the plant, are betting that increased use of ethanol generation by green-conscious countries will boost demand for the product.

Brazil, the top global ethanol exporter, is already in talks with Japan to develop biofuels power generation there.

“We have great expectations to show the viability and economy of generating electricity from … an alternative feedstock to fossil fuels,” Maria das Gracas Foster, head of Petrobras’ natural gas division, said.

Petrobras with the help of GE upgraded the 87-megawatt power plant to switch between running on natural gas or ethanol instantaneously. Brazil primarily relies on hydroelectric power but needs backup thermoelectric generation during the dry season.

John Ingham, Latin America Products Director for GE, said tests showed switching the plant to ethanol reduced carbon dioxide emissions without lowering energy output.

GE has around 770 turbines like those used in the Juiz de Fora plant, including many in Japan, that could be converted to run on ethanol, he said.

“A plant like that consumes a lot of ethanol, so it has to be in a place that makes sense (such as) places that have no access to gas, like Japan, some islands, or places that depend heavily on diesel like the Amazon region,” he said.

Brazil is expected to produce a record 27.8 billion liters of ethanol in the 2009/2010 season. It began its biofuels program 30 years ago and now mandates a minimum 20 percent of ethanol in gasoline.

Petrobras itself is only starting to enter the ethanol market. Brazil’s ethanol production comes from sugar cane milled by companies such as Cosan (CZZ.N) or commodities giants including Cargill Inc [CARG.UL], Bunge (BG.N) and ADM Co (ADM.N).

Domestic demand for ethanol is being driven by the popularity of the flex-fuel car technology that was launched in 2003 and now makes up around 90 percent of new vehicle sales. (Writing by Brian Ellsworth; Editing by Marguerita Choy).

By Denise Luna

Source: Reuters

Moema Par is a holding company that owns one sugarcane mill and has ownership in five others. Together the six mills, known as the Moema Group, have the capacity to crush 15.4 metric tons. This agreement, which is structured as a share exchange worth approximately $896 million, gives Bunge 60 percent effective share of the total capacity.

“This transaction fulfills Bunge’s strategic goal of building a large-scale, fully integrated business in sugar and bioenergy,” stated Alberto Weisser, Chairman and CEO of Bunge Limited. “It adds significant scale to our current milling operations and enables us to vary production among multiple sugar and ethanol products, according to market conditions. The Moema Group cluster is also strategically located near large domestic markets in Brazil and has excellent access to export logistics systems. All of these strengths make it a perfect fit with our global trading and marketing operations.”

The Moema Group cluster is located on the border of São Paulo and Minas Gerais states, the two largest domestic ethanol markets in Brazil. According to Bunge, the mills benefit from cost savings due to their cluster configuration, and have favorable road and rail access to three of Brazil’s largest export ports (Santos, Paranagua and Vitoria). The mills can produce both raw and crystal sugar, as well as hydrous and anhydrous ethanol. In addition, the mills have co-generation facilities, are self-sustaining in terms of energy requirements and sell excess power to the grid. The majority of the cluster’s sugarcane is harvested mechanically, which is now law in São Paulo.

According to Bunge, they may enter into agreements to secure some of all of the remaining interests in the mills that comprise the Moema Group in the next few weeks.

Source: Domestic Fuel