BP Plans To Purchase Biogas Manufacturer, Archea

Summary:

• BP’s largest-ever low-carbon energy acquisition.
• Archaea Energy would boost BP's biogas supply volumes by 50%.

BP to benefit almost immediately from the purchase

A US-listed biogas manufacturer will be purchased by BP for $4.1 billion, marking its largest-ever low-carbon energy acquisition as the UK oil company looks to hasten its transition to cleaner fuels.

According to a statement released by BP on Monday, the planned acquisition of Houston-based Archaea Energy would boost BP's biogas supply volumes by 50% right away and offer a development pipeline of more than 80 projects with the potential to quadruple volumes by 2030.

In order to create low-carbon fuel, Archaea processes organic waste from landfills and the agricultural sector. The company advertises itself as a top producer of renewable natural gas in the US. BP is paying $3.3 billion in cash, while Archaea has a net debt of about $800 million.

Archaea, a company founded by the proprietors of a landfill in Pittsburgh, operates 50 landfill gas-to-energy and renewable natural gas facilities around the US, producing 6,000 barrels of oil equivalent each day.

“Archaea is a fantastic fast-growing business, and BP will add distinctive value through our trading business and customer reach,” BP chief executive Bernard Looney said.

The transaction is currently awaiting regulatory and shareholder clearance from Archaea.

With a commitment to reduce BP's oil and gas production by 40% by 2030 while increasing investments in the development of more environmentally friendly energy sources, Looney is leading one of the most ambitious corporate transformations in the industry.

According to BP, by 2025 and 2030, investments in its five transitional businesses—biofuels, convenience (forecourts and food), charging, renewables, and hydrogen—will account for 40% of all company spending.

According to a recent estimate from Goldman Sachs, renewable natural gas now provides around 0.2% of the total supply, constituting a negligibly small portion of the US gas market as a whole. However, as businesses explore for ways to reduce their emissions, it is expanding quickly, and some governments, like California, offer large incentives for the projects.

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Sources: finance.yahoo.com, ft.com