BP’s exit from cellulosic ethanol: the assets, the auction, the process, the timing, the skinny

The complete details on BP’s exit and the considerable physical and intellectual assets available for acquisition, in part or in whole.

As BP continues to reel from its oil leak capital calls and the impact of crashing oil prices, they dropped a bombshell in recent weeks:

“The current challenging external business environment is resulting in tough strategic choices having to be made by businesses across BP.  In Biofuels, the decision has been taken to cease further development of BP’s proprietary ligno-cellulosic technology. 

“While we believe there is value in the LC technology, we have chosen to focus our biofuels investment on building the profitability and scale of our sugarcane biofuels business in Brazil.  

“This decision will affect ligno-cellulosic activities including a demonstration plant in Jennings, Louisiana, technology center in San Diego, the Highlands feedstock farm in Florida, as well as some activities in Brazil and centrally. We will now explore options to sell these assets and facilities. 

“This decision does not affect our Vivergo bioethanol joint venture in the UK or our bio-butanol joint ventures Butamax and KRL.”

Re: the exit from lignocellulosic ethanol, The Digest here below has obtained the details. We’d add that the assets might be sold in toto, or broken into parts.

The Assets

Since 2008, BP has invested over $750m and created a distinctive capability set with roughly 300 staff to develop and license a leading cellulosic ethanol technology.

BP developed a set of integrated capabilities including: Gene Discovery, Strain Engineering, Enzyme Evolution, Strain Evaluation, Process Development, and Scale-Up. The key assets include: A 76,000 square foot biofuels technology center in San Diego, CA; 3,500 acres of energy grass farms, trial sites and capability in Florida, Louisiana and Texas; a 1.4 mgy demonstration plant in Jennings, LA; and a Cellulosic licensing business in Houston, TX.

Proprietary technology material and data includes: Cellulosic ethanol engineering and process design packages for bagasse, energy cane / napier grass, and fully integrated sugarcane ethanol and lignocellulosic ethanol conversion processes; lignocellulosic enzymes tailored for use with acidic pre-treatment; industrial C5/C6 yeast strains with world-class conversion rates and fermentation yields; biodiversity collection and gene and protein libraries; energy cane feedstock production know-how and research / demonstration package; more than 500 patents and patent applications owned or licensed world-wide covering lignocellulosic process technology, enzymes, yeast, metagenomic libraries and directed evolution technology; and a comprehensive patent landscape analysis; In addition there are developed commercial relationships globally, including MoUs, for cellulosic licensing.

Three Sites

The Technology Center

76,000 sq ft biotechnology R&D facility located in San Diego, California ~150 staff focused on development of proprietary enzymes, yeasts, and process technology Core to BP’s large portfolio of intellectual property rights in cellulosic ethanol.

For a virtual tour of the Global Technology Center in San Diego, visit here: 

Infrastructure available: Analytical Lab; Small-scale Fermentation Labs and Bioprocess Optimization Area; Pilot Lab (up to 500L); Robotics Automation Lab (HTP); Biodiversity Library; Bioinformatics and LIMS.

Includes  Bioprocess Optimization – (Up to 500 L scale; small scale pretreatment and feedstock characterization); Process Development / Engineering Scale-Up (Process Simulation and Modeling: Integrated flowsheet modeling — both Dynamic and Steady State, CFD, thermal chemical and biological kinetics modeling)

The Cellulosic Ethanol Demonstration Plant (Jennings, Louisiana)
A 1.4 million gallon per year (40 ton/day) demonstration facility with feedstock flexibility

Energy Grass Farms, Trial Sites and Capability in Florida, Louisiana & Texas
Development and demonstration of on-purpose energy grass feedstocks

Five Packages

The Biodiversity Library

• Thousands of unique libraries from samples harvested around the world, in total containing potentially billions of unique genes High Throughput Screening; Ability to rapidly screen billions of samples per day to find the ideal enzyme or microorganism
• Systems Biology and Metabolic Engineering: Characterization and manipulation of microbial cell function (full suite of systems “omics” biology capability)
• DirectEvolution Technology: Patented genetic manipulation for optimization of enzymes and proteins
• Cost Estimation / Economic Evaluation

The Proprietary Enzyme Package

BP developed cost-competitive, proprietary, genetically modified (and non-GMO) fungal strains producing enzymes that convert biomass to fermentable sugars, including: High saccharification conversion yields, high productivity and high enzyme efficiency optimized respectively for Simultaneous Saccharification and Fermentation (SSF), Hybrid Hydrolysis and Fermentation (HHF) and Separate Hydrolysis and Fermentation (SHF) process schemes

The Proprietary C5/C6 Yeast Package

BP developed proprietary genetically modified industrial yeast strains that co-ferment both C6 and C5 sugars, including genes stably integrated into an industrial yeast strain, mined using BP’s in-house biodiversity collection, with what BP describes as “Best in class conversion yield and rates on C6 and C5 sugars, robust under industrial conditions.”

The Cellulosic Ethanol Engineering and Process Package

The assets include improved biology through process and bio-system design optimization, which allows effective balance of capex, opex and yield and offers lowest cost and most optimized design for selected feedstock, including: Front End Engineering Design (FEED) for a commercial 18 mgy bagasse bolt-on process, and a 36 mgy greenfield energy cane/napier grass process; technology Design Packages (TDP) for a fully integrated sugarcane and lignocellulosic ethanol facility; TDP includes Basis of Design, Heat and Mass Balance, Process Flow Diagrams, Equipment List and Data Sheets, Technology Readiness Level and Risk Analysis; plus, an In-house integrated process development team

BP Biofuels Product Package Portfolio

On-purpose energy cane feedstock production, including know-how and research/demonstration package. (Energy cane is an advantaged feedstock approved by EPA as a cellulosic RIN pathway). Economies of scale for conversion facilities are enabled by the high yield and year-round supply potential for energy cane compared to agricultural residues. Including results and interpretation from variety and agronomy replicated trials in FL, LA & TX, and roughly 20 feedstock research staff focused on commercialization of energy crops at scale

The Process and Timeline

The Virtual Data Room will be made available January 26, 2015. The effective date of the sale is June 30, 2015. The indicative non-binding bid deadline is 5pm CST on February 27, 2015. Parties interested to be considered for Round 2 will be required to submit an indicative non-binding bid. At the end of Round 1, BP may, in its sole discretion, select parties to participate in Round 2 of the bidding process. Detailed information surrounding the individual assets, management presentations and site visits will be made available in Round 2. Interested parties are strongly encouraged to submit their final binding bids as soon as they are ready to do so.

Next steps

Here’s the complete overview for download. And here’s a copy of the confidentiality agreement.

BP advises:

“Upon execution and return of a Confidentiality Agreement, interested parties will receive access to the following evaluation materials via the VDR (“Due Diligence Materials”): including Executive Summary Overview of Assets, Financials, List of Material Contracts, Health and Safety Documentation, Operations and Assurance Documentation, Organizational Charts and Description of Capabilities, and Published Intellectual Property Assets.”

All communications to:

Malcolm Coleman
Project Manager – M&A, BP America, Inc.
+1 (281) 366-3952 malcolm.coleman@bp.com

Patrick Vagner
Commercial Manager, BP America, Inc.
+1 (510) 809-7654 patrick.vagner@bp.com