Oil giant BP makes significant entry into sustainable aviation fuel production with investment in Fulcrum
Tue 8 Nov 2016 – Oil giant BP has announced a major move into sustainable aviation biofuels with a $30 million equity investment by its BP Ventures arm in US municipal solid waste (MSW) to jet fuel producer Fulcrum BioEnergy. Air BP has also agreed terms with Fulcrum on a 10-year offtake agreement in which the aviation division of BP will purchase 50 million gallons annually of low-carbon, drop-in jet fuel. One of the world’s largest suppliers of aviation fuel products and services, Air BP will also have the opportunity to provide fuel supply chain services for the blending, certification and delivery of Fulcrum’s jet fuel to commercial and military aviation customers. As a preferred supply chain partner, Air BP says it will distribute and supply the fuel into aircraft at key hubs across North America. With its first plant currently under construction in Nevada, Fulcrum has already signed similar equity investment and offtake agreements with Cathay Pacific Airways and United Airlines.
“Entering into this strategic relationship with a global oil and gas company enhances the value of Fulcrum’s waste to fuel platform,” said Fulcrum CEO James Macias. “This allows us to accelerate development of our second and third plants. With BP’s expertise in refining and fuel services, their partnership provides value beyond the investment, fuel offtake and logistic services.”
The Sierra BioFuels Plant 20 miles east of Reno, Nevada, has been designed to produce more than 10 million gallons of renewable Fischer-Tropsch syncrude from around 200,000 tons of prepared MSW feedstock that would otherwise be landfilled. The syncrude can then be upgraded and produced into a low-carbon jet fuel that Fulcrum claims will reduce greenhouse gas emissions by more than 80% on a lifecycle basis compared to fossil jet fuel. The California-based company says the fuel will also be cost competitive with conventional jet kerosene.
It has secured long-term access to large volumes of MSW feedstock having entered into 20-year agreements with waste service partners for the delivery of all the MSW required for Sierra. A feedstock processing facility has been constructed and is now in start-up operations. It deploys a waste processing system that has been designed to extract high-value recyclable products and inorganic matter not suitable for processing from the raw MSW prior to preparing it for processing. Fulcrum is expecting the plant to begin commercial operations in early 2019.
With the investment and offtake agreements of BP and its other partners, Fulcrum says it is now accelerating the development of additional, larger-scale projects across North America that will have the capacity to produce more than 300 million gallons annually of renewable transportation fuels, with growth potential around the world.
“BP is committed to supporting a transition to a lower carbon economy,” said Tufan Erginbilgic, CEO of BP’s downstream segment, which focuses on the refining and marketing of fuels. “With support from two of Air BP’s strategic customers, Cathay Pacific and United, Fulcrum is well advanced in its goal to produce and supply scalable biojet, and BP is excited by the opportunities that this partnership offers.”
Added Air BP CEO Jon Platt: “We have a deep understanding of our customers’ challenges to achieve their lower carbon goals. This agreement gives Air BP guaranteed access to product which will help meet these challenges. Securing this supply helps secure the future competitiveness of Air BP, and our place as leader in the industry.”
It is understood the early investors in Fulcrum will secure the initial production volumes of the renewable jet fuel. “However, given Fulcrum’s aggressive build-out plan, I’m confident that all investor volume demands will be met, with room for more,” said Jeff Ovens, Biofuel Manager at Cathay Pacific.
His airline was the first to see potential in Fulcrum’s ability and technology to produce cost-competitive, sustainable fuels. Cathay made an equity investment – the exact details were not revealed – in Fulcrum in August 2014 and entered into an offtake agreement to purchase 375 million gallons of biojet fuel over 10 years (see article). United Airlines followed a year later with an equity stake valued at $30 million and an offtake purchase of at least 90 million gallons a year for a minimum of 10 years. United and Fulcrum also agreed to jointly develop up to five projects located near the airline’s hubs that would be expected to produce up to 180 million gallons per year (see article).
“This investment and collaborative partnership with BP is a significant advancement for Fulcrum and a testament to the technology and project plans they have in place,” said Ovens. ”As an existing Fulcrum investor and future consumer of their waste derived fuel, Cathay Pacific is encouraged to see BP, a recognised company with the technical and logistical expertise to enhance success, being part of the team. We look forward to what lies ahead.”
Ovens notes an increasing interest from the oil majors in sustainable alternative aviation fuels. “I think the pull from leading airlines is too powerful to ignore so it was only a matter of time before they looked at biojet with greater interest, the recent global CORSIA carbon agreement at ICAO being a factor no doubt. Other majors have expressed interest in discussing bio initiatives so we are gaining momentum from all angles.”