Brazil Is Planning to Become the World’s Third-Largest Bioenergy Operation from Sugarcane

Bunge Limited is an American agribusiness and food company, and BP Plc, a British multinational oil and gas company headquartered in London, United Kingdom, teamed up to merge Brazilian sugar and ethanol business, to create the world’s third-largest sugarcane operation. It is said that this joint venture is the largest deal in Brazil’s bioenergy sector.

According to Mario Lindenhayn, head of biofuels at BP, talked with Bunge’s CEO, Geovane Consul in Sao Paulo, Brazil on July 22, 2019. The main point was this joint venture was the largest deal in Brazil’s bioenergy sector since Royal Dutch Shell joined forces with Cosan to form industry leader Raízen in 2011.

It is known that ethanol produced from sugarcane is one of the most carbon-efficient biofuels available globally, with lifecycle greenhouse gas emissions around 70% 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 – around 70% – are already able to run on ethanol and the country’s demand for ethanol is estimated to increase by around 70% by 2030.

Formerly, Bunge sold its sugar trading business to Wilmar International Ltd last year. Its bioenergy unit posted losses in five of the past six quarters and the company forecast results for the unit would be roughly break-even in 2019. The company revealed that will receive cash proceeds of US$775 million as part of the agreement, which it expects to use to cut debt.

The joint venture, named BP Bunge Bioenergia, will operate on a standalone basis. Besides sugar and ethanol, the company has capacity to produce electricity fueled by waste biomass from sugarcane.

Gregory A. Heckman, Bunge’s Chief Executive Officer, said “This joint venture with BP, one of the world’s leading energy companies, represents a major portfolio optimization milestone for Bunge. We are proud of what our team has done to evolve our sugar and bioenergy business as an industry leader. I am confident that this team, and the strong commitment from a global leader such as BP, will create even greater shareholder value.”

According to BP Bunge Bioenergia, will have 11 biofuels sites in Brazil. With 32 million metric tonnes of combined crushing 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.

In addition, the new business is expected to be headquartered in São Paulo. Mario Lindenhayn from BP will be executive chairman, Geovane Consul from Bunge, chief executive, and Marcus Schlosser from BP, chief financial officer. BP and Bunge will have equal representation on the board of directors.