Chevron's biodiesel boost

No Comments » November 11th, 2007 posted by // Categories: Energy Development Project

Friday, May 19, 2006

Chevron’s biodiesel boost

East Bay Business Times – by Mavis Scanlon


Chevron Corp. has invested in solar power, wind, geothermal energy and hydrogen fuel. Now, it is tiptoeing into biodiesel.

Chevron Technology Ventures LLC, a subsidiary, has taken a 22 percent stake in Galveston Bay Biodiesel LLC, a Texas-based company that is building what it claims will be the nation’s largest biodiesel plant, in Galveston, Texas. Chevron’s initial investment is $3.5 million.

Chevron will provide advice on fuel quality and clean, efficient distribution of the fuel, according to John Berger, vice chairman of Galveston Bay Biodiesel and founder and a managing partner of Contango Capital Management, another investor in the venture.

Two Chevron Technology Ventures executives, Alicia Boutan, vice president, strategy, planning and business development, and George Coyle, venture executive, will sit on the board.

“Just having (Chevron) around to help the management team with quality – that’s a big big deal,” Berger said. “Chevron knows how to do that better than anybody else.”

Construction of the plant will be completed by November, Berger said, but a small pilot plant will begin producing in the next few weeks.

“Diversification of energy and fuel supplies is important,” said Dana Flanders, president of Chevron Technology Ventures. “We see crude being at the core of world energy supply, but it’s diversifying as overall demand grows and as traditional (types of crude oil) become less available.”

The high prices of crude oil, which traded May 17 near $68 a barrel, the global issue of greenhouse gases, and a need for energy security are all drivers, he added. In January, Chevron Technology Ventures partnered with General Motors Corp. and Pacific Ethanol to provide an ethanol-blended fuel at certain California locations.

“If biofuels are going to be material, we definitely want to make sure that we keep pace, and, depending on our analysis (of the market), lead,” added Flanders, who became president of Chevron Technology Ventures on May 1. He replaced Greg Vesey, who was named president of the company’s global power generation group, which is part of Chevron’s global gas division.

The plant will have initial capacity to produce almost 55,000 gallons of biodiesel a day, or 20 million gallons a year. Ultimately the plant could produce 100 million gallons a year, the companies said. By comparison, Chevron processed up to 243,000 barrels of oil – more than 10 million gallons – each day at just one Chevron refinery, in Richmond.

Total biodiesel production in 2005 was about 75 million gallons, according to the National Biodiesel Board, a trade association.

Berger declined to detail a time frame for ramping up production to the 100 million gallon a year level, saying the company will respond as the market dictates.

“It remains to be seen how fast the biodiesel industry will grow,” Berger said, adding that major players such as Chevron and ExxonMobil Corp. have to become comfortable with it. “If we’re seeing quite a bit more demand than our plant can provide, then we will move forward with expansion plans both at this site and other sites,” he said, adding that the plant’s current investors are willing to continue to invest capital for expansion.

In general, biodiesel plant construction costs are about $1 for every gallon to be produced, but Berger said costs for the Galveston Bay Biodiesel are a bit below that. Investors in the plant include Contango Capital Biofuels Partners LP, Galveston Bay Biodiesel Management LLC, Sultex LLC, Mobius Risk Group LLC and Beaver Creek Fund Ltd.

Chevron is the second oil company within weeks to announce an investment in biodiesel, a clean-burning fuel that can be made from soybean or canola oil or animal fat. The fuel can be blended in any ratio with standard diesel fuel to create a biodiesel blend.

In April, Motiva Enterprises LLC, a refinery joint venture between Shell Oil Co. and Saudi Refining Inc., began blending soy-based biodiesel with diesel fuel.

“It is a very positive thing for biodiesel to have a major publicly traded company like Chevron invest,” said Joe Jobe, executive director of the National Biodiesel Board. “It demonstrates biodiesel’s long-term viability.”

Through its investment, Chevron will get an inside look at the entire biodiesel production process.

“We definitely want to build on our know-how. That’s the first step,” Flanders said. He’ll be watching supply and demand of the feedstock, in this case soy, as well as the quality of the end product itself.

Most of the plant’s production will go to bulk suppliers or wholesalers and will be used in the marine, commercial, trucking and industrial markets in and around Galveston and Houston.

Chevron has no plans at this point to sell the fuel at Chevron or Texaco stations.

As of April, there were about 50 U.S. biodiesel plants under construction, according to the National Biodiesel Board. Those plants include one in North Dakota being built by Archer-Daniels-Midland Co., the agribusiness giant based in Decatur, Ill., with a reported production capacity of 85 million gallons a year, and one in Kentucky being built by Owensboro, Ky.-based Owensboro Grain with a reported production capacity of 50 million gallons a year.

Former Chevron executive vice president Patricia Woertz was named president and CEO of ADM in April.

Bay Biodiesel LLC is building a 2.5 million-gallon plant in Martinez, according to the National Biodiesel Board, targeted for completion next month.


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