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5 December 2019

BP completes on its Brazilian biofuels adventure

We cannot really blame BP for wanting to get into biofuels in a big way, but we can complain about the manner in which it does it. If a country has plenty of arable farming land then it can chase after both food security, food export and also biofuels. But Brazil is opening flaunting global public opinion, and burning down its forests in order to make space for all these activities.

This week BP completed the deal that it first highlighted in July in Brazil with Bunge Bioenergia. We said at the time, it was just providing Brazil with more reasons to burn down its forests, and we’re sure that BP would say to us “If we don’t do it, Bunge would do the deal with someone else,” and it might have a point.

This particular biofuel is from sugar cane, used to make ethanol, to mix with petrol (gasoline) to run cars on. It is only zero carbon in the sense that the ethanol part of the CO2 will be re-absorbed when the sugar cane grows again, but the process still gives off CO2.

Brazil is one of the world’s largest and fastest growing markets for biofuels and, through this transaction, BP Bunge Bioenergia is now the second largest operator when measured by effective crushing capacity in the Brazilian bioethanol market.

The new joint venture will have 11 biofuels sites in five Brazilian states, with more than 10,000 employees. It has total crushing capacity of 32 million metric tonnes of sugarcane per year, capable of producing more than 1.5 billion litres of ethanol, 1.1 million tons of sugar and exporting 1,200 gigawatt hours of electricity to the national grid in Brazil. The company will be owned 50:50 by BP and Bunge, and headquartered in Sao Paulo.

BP already had a strong biofuel business and in different parts of the world cars can use either 100% ethanol, or mix it with petroleum in concentrations as low as 10% and these percentages then usually slowly rise. In that sense BP knows these markets well and is really just buying upstream in its production cycle to make more profit – nothing more.

Ethanol is typified as “low carbon” fuel, but in Brazil, many cars are 100% ready to run on it, and it uses about 1.5 times the equivalent of petrol (to travel as far, you need more of it). It still gives off carbon, varying amounts less than petrol, depending upon which plant and which part of the plant is used. Sugar cane is supposed to be the most efficient, and in Brazil it is quite common to cut the cane to create ethanol, and to use the residues to burn to create electricity and for this process to be quite a saving in CO2.

Ethanol from sugarcane gives off 70% less CO2 when burned than conventional hydrocarbon transport fuels, claims BP.

The most worrying part of this process is that use of land for this means a food starved country like Brazil needs more land, some for meat farming, some for biofuels, and some for vegetable farming, and this leads to more trees being cut down by the current president of Brazil, Jair Bolsonaro. Just 8.4% of Brazil’s land area was arable farming in 2010, but today that has already moved up to 9.6% through fire for land clearance, and much of it is about making money from meat exports, and now there is another call on Brazilian land.

The truth is that hydrogen and other materials are also potential fuels for cars, but that the most likely one is pure electricity. Brazil seems to think that it’s fine to use whatever you’ve got, and it has decided to use its rainforest to burn, and replace with sugar cane and cows.

One of the biggest issues around Ethanol is how does it get distributed, since it needs a physical distribution business – which is currently carbon heavy. Distributing electricity is so much simpler, and more efficient.

We can see from the rise of EVs that petroleum has entered a slow death spiral as a business, clear that it is dying by 2035, and almost complete by 2050. Why get into a business that will be dead in 30 years? Clearly BP believes that this type of “almost CO2 free” businesses are fine.