Renewable fuel projects proving attractive to E&Ps

Renewable fuel projects are proving an attractive proposition for oil and gas operators seeking to diversify portfolios through equity stakes or outright purchases.

Deals in the sector represent a wide range of fuels and technologies, including biomethane, biodiesel, sustainable aviation fuel, and e-methanol, emphasizing the diversity of low-carbon solutions interesting large-scale E&Ps.

The past three years saw 44 renewable fuel deals involving E&Ps, based on Evaluate Energy data. This represents almost a quarter of the 191 worldwide renewable fuel deals spread fairly evenly between 2021 and 2023. Of these, 15 were located in Europe and 15 in North America.

Equity Deals

Around a third of the E&P deals involved an equity stake.

One of 2023’s largest saw TotalEnergies join forces with Belgian start-up Tree Energy Solutions (TES) on a US$2 billion US plant to produce e-natural gas, a synthetic gas produced from renewable hydrogen and CO2. Also last year, TotalEnergies acquired a 20% stake in Ductor, a Finnish biomethane producer. By 2030, TotalEnergies plans to produce 13 to 20 mmbtu of biomethane a year.

BP, meanwhile, acquired a stake in WasteFuel, a California biofuels company, and UK hydrogenated vegetable oil producer Green Biofuels. Bioenergy is one of five strategic transition growth engines that BP intends to grow through this decade, and the firm has a target to produce around 4.8 million tonnes per year of biofuels by 2030. Biofuels are the most common renewable fuels used in transport and can be blended with fossil-based raw materials in refineries.

ExxonMobil has a 49.9% stake in Biojet AS, a Norwegian biofuels company that plans to convert forestry and wood-based construction waste into biofuels. ExxonMobil plans to use the fuel as a replacement for diesel in road transport. ExxonMobil also invested US$125 million in biofuels producer Clean Energy Holdings. The firm has a target to produce 500,000 tonnes of biofuels by 2025.

Last year, Chevron formed a JV with Corteva and Bunge to produce vegetable oil feedstocks for the growing domestic renewable fuels market. Chevron has a goal to grow renewable fuels production capacity to 4.8 million tonnes per year by 2030.

Asset purchases

Six of the E&P deals involved outright asset purchases — two in Europe and three in North America.

TotalEnergies acquired Fonroche Biogaz in 2021, a company that designs, builds and operates anaerobic digestion units, and is the leading producer of renewable natural gas in France.

Also in Europe, Shell completed the acquisition of Nature Energy Biogas in 2023, the largest RNG producer in the region. The company established its first biogas plant in Denmark in 2015 and has 14 operating plants producing around 6.5 mmbtu of gas.

In the US, BP acquired renewable natural gas provider Archaea Energy in 2022, one of the largest renewable natural gas producers in the region, for US$3.3 billion in cash — one of the largest of the deals in the sector.

Also in 2022, Chevron acquired biodiesel producer Renewable Energy Group in a deal valued at US$3.15 billion. Renewable Energy Group was one of the early movers in the US biofuels sector, manufacturing renewable diesel at its biorefinery in Geismar, Louisiana.

US oil and gas firm Camber Energy also acquired a renewable diesel plant in the US. The facility in Reno, Nevada produces 180,000 tonnes per year of the fuel. Like ExxonMobil, Camber Energy plans to market renewable diesel to the road transport sector.

In the remaining asset deal, Canadian oil and gas firm Petrox announced its intention to buy Canadian biochar producer M&L. M&L plans to build a facility in Alberta to convert wood waste into biochar, with an adjacent 1.58 MW facility using heat produced by the biochar production process to generate power.

Evaluate Energy’s M&A database holds every upstream deal worldwide since 2008, allowing daily comparisons of key metrics, corporate valuations and changes in spending behavior over time. For more on our data, which also includes data on downstream, midstream, service sector and renewable energy M&A activity, click the button below.

 

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