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BP scraps cellulosic ethanol plant plans

Posting in Energy

BP has cancelled plans to build a commercial-scale cellulosic ethanol plant in Florida, and will instead focus its U.S. strategy on research and development as well as licensing its technology.

The oil company plans to take the considerable capital required to build the facility and invest it into other "more attractive" projects, said Geoff Morrel, the company's vice president of communications.

BP hasn't escaped unscathed on the project, which began in 2008 as a joint venture with San Diego-based Verenium, a specialty enzymes developer.

Verenium's cellulosic biofuels business had struggled financially for years. The company warned in 2010 it wouldn't be able to make debt payments without an injection of capital.

As a result, BP was able to buy Verenium's cellulosic biofuels business--its biofuels and enzymes technology, a pilot plant in Louisiana, demonstration-scale facility as well as research and development centers in San Diego--for $98.3 million--a veritable bargain at the time.

Cheap deal or not, the cellulosic ethanol business is a risky one that requires considerable investment. Now, two years later, BP ended its pursuit of commercial-scale cellulosic ethanol production in the U.S.

BP is hardly alone in its failure. Dozens of companies and startups have tried without success to produce a single commercially viable drop of the stuff.

Cellulosic ethanol production was supposed to hit 500 million gallons in 2012. Instead, the EPA projected it would be 8.65 million gallons — or 0.006 percent — this year.

BP's Next Step

The oil company said it will continue to invest and operate its biofuels research facility in San Diego as well as a demonstration plant in Louisiana, to further develop next generation cellulosic biofuel technologies and license them for commercial use.

BP also completed construction on a joint venture ethanol plant in Hull, England and last year took ownership of three sugarcane ethanol mills in Brazil.

Photo: BP

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— By on October 26, 2012, 2:49 AM PST

Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure