March 20, 2012
Today’s biofuels industry accounts for nearly 30 billion gallons of production. Still in its infancy, advanced biofuels production represents just a trickle today, but biofuels are expected to play an increasingly important role over the next decade due in part to mandates imposed in at least 31 countries worldwide. Contrary to popular perception, the growth of the biofuels industry is not adverse to the interests of Big Oil. In fact, with “easy oil” increasingly difficult to source and with an obvious stake in the future of the $2 trillion transportation fuel market, the world’s largest oil companies have begun charting strategies to bring biofuels to market at scale. At the same time, with the cost of meeting emerging mandates over the next decade estimated at $336 billion, access to the oil industry’s capital and expertise will be critical to scaling up biofuels production. According to a new Pike Pulse report published by Pike Research, the oil majors best positioned to drive and profit from the growth of biofuels are Shell and BP.
“While Pike Research does not perceive any of the oil majors to be outright industry leaders at this stage, several companies have demonstrated a solid foundation for growth and long-term success,” says senior analyst Mackinnon Lawrence. “Shell and BP both have advantageous near-term positions for ethanol production from sugarcane and strong commitments to commercializing advanced biofuel pathways.”
Both Shell and BP are pursuing strategies based on rapid scale-up in Brazil, whose efficient sugarcane market represents one of the most attractive biofuels markets over the next decade, with potential to supply sugar for advanced conversion technologies producing “drop-in” fuels as well. Shell scored slightly higher than BP in the Pike Pulse assessment thanks largely to its $12 billion venture with Cosan, one of the world’s leading producers of ethanol from sugarcane. An early pioneer in the pursuit of advanced biofuels among oil majors, BP has made multiple investments across a number of potentially breakthrough feedstocks, participates actively in R&D efforts, and has built a strong portfolio of early-stage investments.
Third-ranked Total has charted out a similar strategy to Shell and BP, but its commitment to building out a delivery supply chain for biofuels, especially in Brazil, has to date been more conservative.
The “Pike Pulse Report: Biofuels Commercialization by Oil Majors” evaluates ten of the leading publicly-traded international oil majors and rates them on 12 criteria for strategy and execution, including production strategy and roadmap, partnerships, geographic reach, investment portfolio, distribution network, and market impact. Using Pike Research’s proprietary Pike Pulse methodology, the report profiles, rates, and ranks the companies with the goal of providing industry participants with an objective assessment of these majors’ relative strengths and weaknesses in the emerging biofuels marketplace. An Executive Summary of the report is available for free download on the firm’s website.
Contact: Richard Martin
+1 303 997 7609