Dec. 4--The biofuels unit of global petroleum giant BP is steering clear of grain-based biofuels as it seeks to develop a diverse and sustainable mix of biofuels.

Sue Ellerbusch, president of BP Biofuels North America, wasn't touting any investments in Iowa's grain-based biofuels industry during a speech to the Iowa Farm Bureau Federation's annual meeting in Des Moines. That's because little of the $1.5 billion the company has spent on biofuels development has been in the Midwest.

"Today's a good start," Ellerbusch said in an interview, referring to the current biofuels production system. "We're focused on creating better biofuels faster." BP Biofuels is focused on three key areas of biofuels development: sugar-based ethanol, butanol and cellulosic ethanol.

The first commercial ethanol operation in which BP Biofuels has invested opened two months ago in Brazil. It is a 110 million-gallon-peryear sugar cane-based ethanol plant owned 50-50 by BP and Tropical Biofuels.

A second cane-based plant of the same scale is planned by the joint venture, in which BP Biofuels has invested $500 million.

Ellerbusch said BP Biofuels was attracted to the sustainability and economics of canebased biofuels. It can be viable in the market as a gasoline substitute at oil prices as low as about $40 per gallon without subsidies, she said.

"It has quite a good sustainability profile," Ellerbusch said. "It has a greenhouse gas reduction profile of 80 percentplus." Ellerbusch said cane-based ethanol does not compete for feedstocks with a food staple, and "fits our criteria of offering a sustainable biofuel." BP and DuPont are working with British Sugar to convert the United Kingdom's first ethanol plant to produce biobutanol. Ellerbusch said biobutanol doesn't have corrosive and water-attracting qualities that prevent shipping of ethanol through the current gas pipeline system.

Existing ethanol plans in the Midwest may one day be economically converted to biobutanol production, Ellerbusch said.

In August, BP Biofuels announced a partnership with Cambridge, Mass.-based Verenium Corp. to accelerate development of cellulosic ethanol from grass, cane and wood chips. BP is investing $90 million in the first phase.

Ellerbusch said BP considers Verenium to be at the forefront of cellulosic ethanol development.

"They completed a demon stration plant several months ago and are getting ready to go into production as we speak," she said. Commercial production is expected in late 2011 or early 2012.

BP Biofuels isn't interested in the path being pioneered by POET LLC. POET is developing what could be the first commercial scale crop wasteto-ethanol plant in Emmetsburg.

Because of the high requirements of the federal ethanol mandate, Ellerbusch said the industry should be looking at "more sustainable" feedstocks.

Some of the ethanol from the Brazilian cane plants BP Biofuels has invested in could make it to the United States, but it's unclear. BP Biofuels would like to see the U.S. government take a "more balanced" approach to tariffs and ethanol blending credits.

-- Contact the writer: (319) 398-8317 or david.dewitte@gazcomm.com

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