BP p.l.c. (NYSE:BP) has announced entering into a joint venture agreement with Corteva, Inc. (NYSE:CTVA) to create a 50:50 partnership focused on expanding the production of crop-based oils specifically for sustainable aviation fuel (SAF) and renewable diesel (RD). This collaboration leverages the seed expertise of Corteva and BP’s refining and fuel marketing capabilities to target the commercial transportation fuel market.
The new joint venture, branded Etlas, is planned to annually produce 1 million metric tonnes of crop-based feedstock by the mid-2030s. This feedstock production is anticipated to result in more than 800,000 tonnes of biofuel output, contributing significantly to the global supply chain for SAF and renewable diesel.
Initial deliveries of the feedstock are scheduled for 2027, supporting two main biofuel production approaches: co-processing at refineries as well as dedicated biofuel plants. The initiative addresses growing global demand, with SAF expected to expand from approximately 1 million tonnes in 2024 to 10 million tonnes by 2030, while renewable diesel demand is forecasted to nearly double from around 17 million tonnes to 35 million tonnes in the same period.
The feedstock will be derived from crops such as canola, mustard, and sunflower cultivated on existing farmland, specifically grown between main food crops. This agricultural strategy aims to enhance soil health and offer farmers supplemental revenue streams without increasing total land usage.
Executives from both companies expressed optimism regarding the joint venture's potential. Judd O’Connor, executive vice president of Corteva’s seed business unit, stated, 2By helping found Etlas, Corteva continues to deliver on two critical parts of our mission: to help fuel the world and to support farmers. Agriculture is part of the solution, and we are excited to see Etlas come to life. 2
Philipp Schoelzel, senior vice president of biofuels growth at BP, commented on the benefits for BP's biofuels portfolio as well, saying, 2This capital light joint venture creates optionality in our biofuels value chain, strengthening our position and helping deliver attractive returns. 2
Separately, BP recently refined its business portfolio by divesting a 65% stake in its Castrol lubricants segment for about $10.1 billion, a transaction expected to yield around $6 billion in net proceeds for the company. This move could enable BP to channel resources more efficiently into renewable fuel projects like Etlas.
Market reaction to BP’s stock reflected a modest decline, with shares trading down 1.19% to $33.95 during premarket sessions on Wednesday. Shares of Corteva also saw slight upward movement, trading up 0.55% at $69.75.
Key Points
- BP and Corteva form a 50:50 joint venture named Etlas to produce crop-based oils for sustainable aviation fuel and renewable diesel.
- Etlas aims to generate 1 million metric tonnes of crop-based feedstock annually by the mid-2030s, translating into over 800,000 tonnes of biofuel output.
- Feedstock will be sourced from canola, mustard, and sunflower crops grown on existing agricultural land between primary food crops to support soil health and farmer income without expanding land use.
- Global SAF demand is expected to rise from about 1 million tonnes in 2024 to 10 million tonnes by 2030; renewable diesel demand is forecast to increase from roughly 17 million tonnes to 35 million tonnes within the same timeframe.
- BP recently sold a majority stake in Castrol lubricants for $10.1 billion, providing potential capital for strategic investments such as this joint venture.
Risks and Uncertainties
- The timeline for initial feedstock supply begins in 2027, which leaves a multi-year period where production scale-up and market demand alignment must be realized.
- The reliance on crops grown between main food crops introduces uncertainties related to agricultural yields, weather variability, and soil condition impacts.
- Market volatility is reflected in BP stock’s downward price movement amidst this announcement, suggesting investor caution or broader market factors affecting sentiment.
- Global demand projections for SAF and renewable diesel, while robust, can be influenced by regulatory, economic, and technological changes that may affect actual growth rates.