Shell is Taking Aim at U.S. Ethanol Market

Posted on February 2, 2010. Filed under: Advanced Biofuel, Blender's Tax Credit | Tags: , , |

By Steve Gelsi
MarketWatch
February 1, 2010

While a weak sugar harvest this year in Brazil may put a damper on ethanol exports, Royal Dutch Shell is taking aim both at the U.S. and European markets in its new joint venture with sugar giant Cosan.

Royal Dutch Shell executive Mike Williams said the oil major hopes to increase output from its Cosan joint venture to more than a billion gallons of ethanol a year, from about 500 million gallons now.

The sugar-based fuel could then be shipped to the U.S. or Europe, Williams said.

The new joint venture announced Monday would also target 792 million gallons of ethanol to the domestic Brazilian market.

“Our intention is to grow this business into a worldwide opportunity,” Williams said, according to a report by Dow Jones Newswires.

The prospects of more Brazilian ethanol in the U.S. hit a sore point with lobbying groups that support domestic supplies, already suffering from slack demand for car fuels.

Any imports into the U.S. would face an import tariff of 54 cents a gallon. Taking the sting out the cost, however, is a blenders tax credit of 45 cents a gallon offered to distributors who mix gasoline with ethanol.

Christopher Thorne, a spokesman with pro-U.S. ethanol group Growth Energy, said Brazil has been pushing to get the country’s sugar-based ethanol reclassified as an advanced biofuel to help circumvent the existing tariff.

Sugar futures touched a 29-year high of 30.4 cents a pound on Monday, before falling back, on expectations of a weak harvest after heavy rains.

Plinio Nastari, president of Brazilian consultancy Datagro, told Reuters that fungal disease is expected to hurt sugar output.

“This is the perfect illustration of why it makes no sense to become dependent on any foreign source of energy — whether it’s Middle East oil or Brazilian sugarcane ethanol,” the group said. “Between high sugar prices and a sugarcane crop shortage, Brazil can’t meet its own ethanol needs — let alone the ethanol needs of the United States.”

The U.S. imported about 12 million gallons of Brazilian ethanol in November, according to the Renewable Fuels Association,

“Brazil is having a supply issue themselves, and may be ready to import U.S. ethanol despite the 25% tariff Brazil puts on imports of ethanol,” said Matt Hartwig, a spokesman for the Renewable Fuels Association.

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Royal Dutch Shell and Cosan S.A. Sign US$12 billion Joint Venture in Brazil

Posted on February 2, 2010. Filed under: Advanced Biofuel | Tags: , , , |

RTTNews
February 1, 2010

Integrated petroleum company Royal Dutch Shell plc. (RDS-A: News ,RDS-B: News ,RDSA.L: News ,RDSB.L: News ) announced Monday that its unit, Shell International Petroleum Co. Ltd., has signed a non-binding memorandum of understanding or MoU with Brazilian sugar and ethanol company Cosan S.A. (CZZ: News ) in order to form an about US$12 billion joint venture in Brazil. The proposed joint venture will create one of the world’s largest ethanol producers, which will produce ethanol, sugar and power, as well as supply, distribute and retail transportation fuels.

The proposed biofuel joint venture would see both the companies consolidating certain of their existing assets in Brazil, which could dominate Brazil’s ethanol market. Brazil is a leader in biofuel production and consumption because of its abundant land and sugarcane production. The deal would enhance both companies’ growth prospects and market position in the retail and commercial fuels businesses in Brazil.

Both the companies will now engage in exclusive negotiations towards evolving a binding joint venture agreement. The transaction is subject to the creation of a final transactional documentation, due diligence, regulatory approvals and respective corporate approvals.

In a statement, Royal Dutch Shell’s downstream director, Mark Williams said, “Today’s announcement demonstrates the continued importance of Brazil to Shell. We’re looking forward to joining with a leading company in Brazil to meet the needs of retail and commercial fuels customers in that growing market.”

As part of the proposed 50:50 joint venture, Shell will contribute its 2,740 petrol stations and other fuel-distribution assets in Brazil as well as US$1.625 billion in cash, payable over two years, while Sao Paulo, Brazil-based Cosan will contribute 1,730 retail sites as well as supply and distribution assets.
 
Additionally, Cosan will contribute its sugar cane crushing capacity of about 60 million tonnes per year from 23 mills, as well as its ethanol production capacity of about 2 billion liters per year. Cosan will also bring in US$2.5 billion of net debt into the joint venture balance sheet. Further, Shell would contribute its 50% stake in Codexis and 14.7% stake in Iogen, two ventures exploring next-generation biofuels technologies.

With annual production capacity of about 2 billion liters, the joint venture would enhance both companies’ growth prospects and market position in the retail and commercial fuels businesses in Brazil. The joint venture would have a network of about 4,500 retail sites and a total annual throughput of about 17 billion liters, with further prospects of growth and synergies.

“Cosan’s vision is to become a global leader in clean and renewable energy. Our size, degree of sophistication and stage of development means we need a partner that not only shares our vision, but also has access to international markets to help us deliver our growth potential,” Cosan’s chairman, Rubens Ometto Silveira Mello added.

RDS-B closed Monday’s regular trading session at $54.53, up $1.15 or 2.15% on a volume of 0.67 million shares, higher than the three-month average volume of 0.63 million shares. CZZ closed at $8.60, up $0.80 or 10.26% on a volume of 2.11 million shares, higher than the three-month average volume of 1.80 million shares.

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Shell’s Cellulosic ‘First’ Is More of a Second

Posted on June 14, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | Tags: , , , |

Shell’s Cellulosic ‘First’ Is More of a Second

By Ian Austen

The New York Times

June 13, 2009

 

Much fanfare attended the arrival in Ottawa earlier this week of Luis Scoffone, Royal Dutch Shell’s vice president of biofuels. Mr. Scuffone flew in from England and descended, along with John Baird, Canada’s transport minister, on a large Shell station at Merivale Road — an undistinguished avenue of strip malls and big box stores.

It was here, at a single pump, Shell said in a news release, where customers could become “the first in the world to fill their tanks with gasoline containing advanced biofuel made from wheat straw.”

That was news to MacEwen Petroleum, however — a small regional service station chain based in Maxville, Ontario.

MacEwen apparently beat the multinational giant to the punch almost five years ago at a station in downtown Ottawa. And it did so, it seems, using ethanol from Iogen, a cellulosic ethanol maker also based in Ottawa, which recently became half-owned by Shell.

The attraction of cellulosic ethanol is that it’s made from agricultural and forestry waste materials rather than crops grown to produce fuel. That, its promoters hope, will allow it to escape the food-versus-fuel debate which has plagued ethanol made from corn and other crops.

Iogen, which also is supplying the ethanol for Shell’s month-long promotion, uses enzymes to break down wheat straw and make about 60,000 liters of ethanol a month at its demonstration plant in Ottawa.

In an interview following the Shell news conference, Brian Foody, Iogen’s president and chief executive, acknowledged that some of the production not needed by Iogen in the past for testing has gone into the pool of ethanol used for gasoline blending.

“There have been molecules from our plant that have made their way into cars,” Mr. Foody said.

 

Gas stationIan Austen/The New York Times MacEwen Petroleum, a small service station operator in Ottawa, said it was selling cellulosic ethanol five years ago. It also said it has been approached by Iogen about supplying ethanol for a MacEwen pump that sells an 85 percent ethanol blend, pictured above.

 

But executives at MacEwen, which was once a major Iogen customer, said they were a bit surprised, and somewhat amused, by the claims from Iogen and Shell.

When Ottawa hosted the 2004 Grey Cup, the Canadian Football League’s championship, MacEwen and Iogen offered a week long, cellulosic ethanol promotion at a busy station near an expressway in downtown Ottawa.

MacEwen was an early promoter in Canada of ethanol-blended gasoline. Marcel Labelle, the company’s vice president of sales and supply said “we were particularly careful about putting only their product in” the gasoline sold at that station’s ethanol blend pumps during the week preceding the football game.

The effort was publicized in a news release, and official Grey Cup vehicles, which were fueled at the MacEwen station, bore photos of wheat straw, the Iogen logo and the slogan: “Fueled with low CO2 cellulose ethanol.”

Outside of that promotion, Mr. Labelle said that MacEwen regularly purchased most of Iogen’s production during 2004 and 2005 and blended it, at varying levels, into gasoline.

“When we were doing this, the major oil companies wouldn’t touch ethanol,” Mr. Labelle said. “It was taking refined product out of their system. They’ve been caught out. And I’m sure Shell doesn’t want to be embarrassed.”

Kirsten Smart, a spokeswoman at Royal Dutch Shell in London, qualified the company’s earlier claim in an e-mail message on Friday:

“We believe this is the first customer offering where over a month long period consumers can knowingly purchase gasoline with a 10 percent blend of cellulosic ethanol, and the first time it has been actively marketed.”

Phil von Finckenstein, a spokesman for Iogen, said in telephone conversation and by e-mail that MacEwen only offered “a low-level blend” in 2004, not the 10 percent cellulosic mix now on sale at Shell. He added that the pumps were primarily for Grey Cup vehicles. “The public was happenstance if they got the fuel,” Mr. Finckenstein said.

Mr. Labelle, after consulting company records, agreed that early customers may have received slightly less than 10 percent cellulosic ethanol because there initially was some residual gasoline blended with corn ethanol in the station’s storage tanks.

But that gas station is replenished more than once a week, Mr. Labelle said. So many motorists received gasoline only blended with cellulosic ethanol.

Iogen, Mr. Labelle said, has approached MacEwen about supplying ethanol for a pump at the downtown station that sells an 85 percent ethanol blend, which is used mostly by federal government vehicles. If something comes of those talks, Mr. Labelle said he expected the cellulose marketing machinery to kick in again.

“Once they are done with us,” he said, “they’ll issue another press release.”

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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    About

    Renergie created “field-to-pump," a unique strategy to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies.

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