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BP plans to invest $560m in biofuels

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Financial Times: BP plans to invest $560m in biofuels

By Jonathan Wheatley in São Paulo and Ed Crooks in London
Published: April 24 2008 19:09 | Last updated: April 24 2008 19:09

BP announced plans to invest $560m in biofuels on Thursday and argued that its proposals to develop ethanol production from sugar cane in Brazil would not affect food supplies.

The oil group plans to spend $60m buying a 50 per cent stake in a Brazilian joint venture and invest a further $500m in two ethanol refineries.

Environmental groups, some of which supported the push towards biofuels a few years ago, have become increasingly critical of the effects of ethanol and biodiesel production on food supplies and the environment.

However, BP argued that Brazilian ethanol fitted with its strategy of investing in “sustainable feedstocks that do not impact on food supplies”.

BP is providing half the total $1bn investment in two ethanol plants being prepared by Tropical BioEnergia, the joint venture it is entering with Grupo Maeda, a Brazilian agribusiness group, and Santelisa Vale, a Brazilian sugar and ethanol producer.

The Brazilian partners are at an advanced stage in preparing the venture’s first plant, which is due to enter production in July in the inland state of Goiás, an area that has experienced rapid expansion of agribusiness in recent years.

A location has yet to be chosen for the second plant.

Phil New, president of BP’s global biofuels division, who was in São Paulo on Thursday to announce the investment, said the British company had entered the joint venture at a time when the oil industry faced two big challenges: energy security and concerns over greenhouse gas emissions.

“Brazil is the most pragmatic and sensible place to respond to these concerns,” he said.

“Sugar cane has the best greenhouse gas profile of any biofuel feedstock and the way it is produced in Brazil is a remarkable story of a closed and sustainable process.”

Brazil is the second-biggest producer of fuel ethanol after the United States and its sugar cane-based industry is by far the world’s most efficient. However, it has come under attack recently as concerns spread that crops planted for ethanol are displacing food crops and contributing to the rapid rise in food prices around the world.

Mr New said such charges had to be taken seriously, but that there was no shortage of arable land in Brazil and most of the land being planted with sugar cane had previously been used for pasture.

“I struggle to see how this kind of project can be connected to the food and fuel debate,” he said. “If it could be connected to it, we wouldn’t be investing in it.”

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