BP buys rights to ethanol facilities

• By TED GRIGGS
• Advocate business writer
• Published: Aug 7, 2008 - Page: 1A - UPDATED: 12:05 a.m.

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Energy giant BP has formed a partnership with biofuel pioneer Verenium Corp. to speed the development and commercialization of cellulosic ethanol made from agricultural waste such as sugar-cane bagasse.

Verenium owns a demonstration-scale cellulosic plant in Jennings, located between Lafayette and Lake Charles. It can produce 1.4 million gallons of ethanol a year, without having to use food-based materials such as corn.

Under a partnership arrangement, BP will pay $90 million to Verenium over the next 18 months. In exchange, BP gets the rights to current and future technology held within the partnership, including access to Verenium’s cellulosic ethanol technology, production facilities and expertise.

Benjamin Legendre, interim director of the Audubon Sugar Institute and a sugar-cane specialist with the LSU AgCenter, said the deal makes sense for both sides.

“BP is saying, ‘This is the way for us to go because Verenium has a pilot plant producing ethanol. If we can work with them on reducing the cost of production, we’ll have a leg up on the other companies that don’t have a plant,’ ” Legendre said.

Verenium gets the backing of a major oil company, which can help it find ways to reduce production costs, Legendre said. Those costs are a major barrier to commercializing the process.

Although corn prices have doubled, and with them the production costs for corn-based ethanol, the production costs for cellulosic ethanol remain higher, Legendre said. Corn-based ethanol costs about $4 per gallon to produce, while cellulosic ethanol is about $6 per gallon with the current technology, he said, quoting figures he heard at a conference held by the American Society of Sugarcane Technologists.

However, Verenium spokeswoman Kelly Lindenboom disputed those figures.

The Jennings plant can produce ethanol for less than $3 a gallon, she said, while corn-based fuel production costs are well above that level.

Verenium’s goal, and that of the partnership, is to reduce production costs to $2 a gallon or less, she said.

Verenium previously announced plans to build three commercial cellulosic ethanol refineries — one in Louisiana, Texas and Florida.

A commercial refinery could produce 30 million gallons of ethanol a year and would cost about $200 million to build, Lindenboom said.

Cellulosic ethanol is made using products such as sugar cane bagasse, switchgrass, rice straw and wood chips.