Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Big Oil and biofuels: BP pays $98.3 million for Verenium's biofuels branch

July 15, 2010 |  5:36 pm

Big Oil: the patron saint of biofuels?

Petroleum companies -- and their pocketbooks -- have been working their way into the biofuels industry in recent years.

Wisconsin-based Virent Energy Systems Inc. said in June that it got $46.4 million in its third round of funding from investors such as Shell. Virent, which can convert plant sugars into clean transportation fuel, also partnered with Shell on a demonstration plant in Madison that can produce up to 10,000 gallons each year. The oil firm now has a seat on Virent’s board.

And on Thursday, BP Biofuels North America, a unit of oil giant BP, said it is shelling out $98.3 million for Massachusetts-based Verenium Corp.’s biofuels business.

Bpsign “The reality is that the big oil companies have invested trillions of dollars in their infrastructure over the past hundred years, and we’re going to need that infrastructure for biofuels,” said Joel Kurtzman, a senior fellow focusing on energy for the Milken Institute in Santa Monica.” And we will also need alternate sources of energy as supplies shrink and oil becomes more expensive.”

BP, though still dealing with the environmental and public relations fallout from April’s massive Gulf Coast oil spill, has also been active in biofuels research, development and operations. The company said it has invested more than $1.5 billion in the field since 2006.

In Thursday’s deal, Verenium will give up research and development facilities in San Diego and a pilot plant and demonstration-scale facility in Jennings, La. BP will become the sole investor in Vercipia Biofuels and Galaxy Biofuels – both joint ventures originally formed with Verenium.

“This acquisition demonstrates BP’s intent to be a leader in the cellulosic biofuels industry in the U.S. and positions us as one of the few global companies with an integrated end-to-end capability, from R&D through commercialization to distribution and blending,” said BP Biofuels Chief Executive Philip New.

The deal is expected to close in the third quarter. Verenium will also get $10.8 million in cash once it hands over the San Diego lease.

Some, however, called for more investment from companies where millions of dollars are just drops in the bucket.

“It should be pretty obvious that BP can’t afford to stay addicted to oil, but this small investment is not going to move them beyond petroleum,” said Jeremy Martin, a senior scientist with the Union of Concerned Scientists. “BP should be building new facilities and making investments measured in billions.”

But others said BP’s move is anything but a publicity stunt.

“Biofuels is a real sector, and Verenium is a real company with real technology,” Kurtzman said. “The issue in the gulf shows that in the future, oil is going to be coming from more and more dangerous places, whether in the Middle East or under 30,000 feet of water and rock. This is a recognition that we’re going to have to look for our energy elsewhere.”

-- Tiffany Hsu

Photo credit: Andy Rain / EPA