BP to Invest $90 Million In U.S. Biofuels Producer

By GUY CHAZANAugust 6, 2008

LONDON -- U.K. major oil company BP PLC will invest $90 million in a U.S. producer of cellulosic ethanol, underscoring the growing interest in biofuels made from nonfood feedstocks such as plant waste.
So-called second-generation biofuels are garnering support amid concerns that corn-based ethanol is driving up global food prices and putting pressure on land resources. But even backers of second-generation biofuel say commercial production is a long way off.
BP's partner in the deal, Verenium Corp., produces cellulosic ethanol from bagasse, or sugarcane waste, and energy cane, an inedible cane-like grass.
Under an agreement to be announced Wednesday, BP will pay Verenium, of Cambridge, Mass., to access its technology platform and production facilities; BP also will co-fund Verenium's scientific initiatives. At a later stage, the two companies hope to jointly start commercial-scale production of cellulosic ethanol.
"This deal puts us at the front of the cellulosic biofuels game," said Sue Ellerbusch, president of BP Biofuels North America, in a statement.
The investment marks BP's first venture into cellulosic ethanol. Its rival, Anglo-Dutch major Royal Dutch Shell PLC, has built a visible presence in the sector, investing in a Canadian biotech company that makes the fuel from wheat straw and in a German firm that creates diesel fuel from wood chips. Shell is also attempting to extract biodiesel from algae.
BP previously was more focused on ethanol production. In April, it took at 50% stake in Tropical BioEnergia SA, which is building an ethanol refinery in Brazil.
Some countries have already moved to back the development of second-generation biofuels with legislation: the Energy Independence and Security Act of 2008 requires the U.S. to produce 21 billion gallons of advanced biofuels such as cellulosic ethanol by 2022.
Write to Guy Chazan at guy.chazan@wsj.com