ABF, BP and DuPont in joint venture to build $400 million bioethanol, biobutanol plants in the UK

As was recently outlined in its biomass strategy, the UK has a considerable potential to produce biofuels. A major step forward to tapping this potential was made today as BP, Associated British Foods (ABF) and DuPont announced major investment plans, totalling around £200 (€297/$400) million for the construction of a world scale bioethanol plant alongside a high technology demonstration plant to advance the development of biobutanol.

The European Investment Bank (EIB) will provide of £120 (€178/$240) million of project financing at interesting rates. This is the first direct involvement by the EIB in a biofuels project.

A joint venture will be formed, subject to regulatory approval, to build the plant and operate the business. ABF subsidiary British Sugar and BP will each hold 45% of the joint venture and DuPont will hold the remaining 10%.

The plant will produce bioethanol from wheat and will be built at a cost of £200m at BP’s chemicals site at Saltend, Hull. Its capacity will be 420 million litres (111 million gallons) of bioethanol per year and is planned to come on stream in late 2009. ABF expects a return on its investment ahead of its cost of capital in the first full year of operation.

Front end engineering and design work will commence immediately with Aker Kvaerner leading the project and their joint venture partner Praj providing the technology expertise (more info on Aker Kvaerner and Praj). Although the plant will be built from scratch, it will have access to the existing infrastructure at the BP site for essential supporting services. Once operational it will provide around 70 new full-time posts in addition to the employment opportunities generated by the construction phase.

Biobutanol
The plant will initially produce bioethanol, but the partners will look at the feasibility of converting it to biobutanol once the technology is available. BP and DuPont intend to build a jointly funded biobutanol demonstration plant, which will run in parallel with the main plant, thus making their agreement to cooperate on biobutanol concrete (earlier post). The plant, funded and owned equally by BP and DuPont, would produce around 20,000 litres of biobutanol a year from a wide variety of feedstocks:
biofuels :: energy :: sustainability :: wheat :: ethanol :: biobutanol :: UK ::

Over the last year, we have accelerated the commercial development of biobutanolThe demonstration facility, which will begin operation in early 2009, will develop the processing parameters and further advance the commercial deployment of our new technology. At the same time, the growing market demand for biofuels is significant. We are concurrently investing in the Hull bioethanol facility with the intention to increase that investment once biobutanol process technology development is completed and conversion feasibility is validated. - John Ranieri, head of DuPont Biofuels.

To begin market development of biobutanol, BP and DuPont are also establishing initial introduction plans for biobutanol in the UK. The companies will import small quantities of biobutanol, sourced from an existing first generation manufacturing facility in China. The first product is expected to arrive by the end of the year and will be used to carry out infrastructure and advanced vehicle testing.

This testing will build upon initial laboratory engine tests using conventional butanol which indicated that butanol has similar fuel performance properties to unleaded petrol. In addition, work will be undertaken to gather comprehensive data on the environmental footprint and sustainability of this next generation fuel.

Feedstock agreements
It is expected that formal agreements will be entered into by the bioethanol joint venture, after its formation, with other ABF businesses: Frontier Agriculture and AB Agri. The supply of locally grown wheat would be arranged by Frontier which is the UK’s leading grain marketer and supplier of agricultural inputs.

The major co-product of bioethanol production, distillers’ grain, would be sold to AB Agri. It will use its highly specialised sales and marketing business, which sources and develops co-products from the food, drink and energy industries, to market the distillers’ grain as an alternative feed for livestock.

This announcement follows the previously announced investment by British Sugar (an ABF subsidiary) to build the UK’s first bioethanol plant at Wissington, Norfolk. Its capacity will be 70 million litres (55,000 tonnes) of bioethanol a year, using sugar beet as a feedstock, and the plant will start production next month.

The European Investment Bank is finalising its approval for the provision of £120m of project financing for both of ABF's biofuel investments at attractive interest rates. This would be the first direct financing provided by the Bank for a biofuel project.

References:
Associated British Food: ABF in joint venture to build £200m UK biofuel plant - June 26, 2007.

BP: BP, ABF and DuPont Unveil $400 Million Investment in UK Biofuels - June 26, 2007.

BP - DuPont: Biobutanol factsheet [*.pdf].