In good news for biofuel (and for Shell employees who want to get their caipirinha on while on a business trip), this month Shell and Cosan SA Industrio and Comerico, the world’s largest suger producer, signed a multi-billion dollar joint venture to produce biofuel (and sugar) in Brazil. Not as exciting as beef biofuel or butter biofuel, but more likely to make a global impact.
Shell will contribute a tad less than two billion dollars, around twenty-seven hundred service stations, its activities in jet fuel and its investments in biofuel companies Codexis and Logen Energy. Cosan will contribute twenty-three sugar mills and over seventeen hundred service stations. Oh, and Shell, always the big dog, has the right to buy Cosan’s half of the venture in ten years. What’s the estimated value of this little venture? No less than twelve BILLION dollars. But if that’s what it takes to get us into the biofuel age, so be it.
Why is this important? Well, aside from the environmental impact, there’s the business impact. Biofuel investments by venture capital firms in the last decade haven’t shown great returns, due in large part to the uptick in oil prices but also due to a lack of a market place because, according to Mohr Davidow’s Erik Straser and Josh Green, large oil companies haven’t been willing to commit to a biofuel infrastructure. At a minimum, the Shell deal says that Shell is serious about biofuels and willing to invest in building an infrastructure.
The move could go wrong. It could turn into an oil company accounting game. Or it could stay landlocked in Brazil, and while Brazilians drive a lot of cars and would create a lot of environmental good by using more biofuels, the market that needs the infrastructure is state side.
We’d like to point out that it could also devolve into a reason for Shell to spend company money on “team builder” retreats to Carnival. Or into the script for a bad dance movie (that joke is funny if you were one of the five people to see “Dirty Dancing Two.”). We’re going to remain positive and say that it’s an important firsts step in industrialized biofuel production.
Read the full article here.
For more information about Biofuel Investments, please visit our website at www.sceptreinternational.com.