African Oil Trader Taleveras Takes First Step Into Biofuels

(Bloomberg) -- Taleveras Group, the African oil trading company, is making its first moves into renewable energy by setting up a joint venture to build a biorefinery in the U.S. with Global Green Development Group.

“The world is changing,'' said Chairman Igho Sanomi in an interview in London. “People are getting more aware on the climate, so cleaner fuels are the future. This should form a very significant part of how we look at things going forward.''

The plan is to set up farming collectives in Africa to grow jatropha, an inedible plant whose seeds can be turned into a fuel, and refine it in Mississippi to be sold in the U.S. market, according Sanomi. The first phase of the program is expected to cost $400 million to $600 million, with an annual production of 70 million gallons. It's expected to begin operating in two to three years.

Biofuels have run into controversy, particularly in poorer areas where food security is an issue. Food crops such as corn and sugarcane are made into ethanol to be burned in engines, with sizable markets in some parts of the U.S. and South America. Other oil companies have set up businesses in this industry, such as Royal Dutch Shell Plc and BP Plc, with large-scale operations in Brazil where the climate allows crops to grow quickly.

Alternative Fuel

Researchers are looking for alternatives made from inedible plants, known as second-generation or advanced biofuels. Jatropha may be a viable option since it can survive in lower-quality soil that ordinarily wouldn't be farmland. The crop was lauded as a “miracle feedstock” in the early 2010s, but other than small-scale projects, it hasn't taken off.

“So there's no technical challenge, jatropha works,'' said Bliss Baker, president of the Global Renewable Fuels Alliance. “The biggest challenge is building the infrastructure and raising capital in order to get sufficiently-large supplies. If you can overcome those, there's a huge opportunity.''

Taleveras is planning to set up farms in Nigeria and other African countries to cultivate the jatropha plant. It's looking for a minimum of 15,000 hectares of land. The company is in discussions with state governors in Nigeria, Ivory Coast, Ghana, South Africa and Ethiopia. It's expecting to create about 10,000 jobs.

Once the plant's seeds are refined into a biofuel, Sanomi and partners are seeking to supply the U.S. military with a product that can be blended with jet fuel.

“It's going to start with military aircraft as a test project. Eventually the goal is to get into commercial aviation, have people building engines around this,'' Sanomi said.

Airline Demand

The aviation industry signed a United Nations accord last October to reduce pollution, which requires airlines to counter emissions growth after 2020. Some companies such as Virgin Atlantic Ltd. are testing greener jet fuels, but strict regulations on safety have proven a roadblock to implementation.

A geologist turned oil trader, Sanomi was motivated to get into cleaner energy by friends working at oil majors.

“Sitting down and talking with people I admire in the industry, they told me that when we make decisions, we think about 15-year, 20-year view,'' he said. “We had it in mind to do that. Build the necessary balance sheet and then start looking at other things.''

The next phases of this project are expected to increase production and develop new technologies for cultivating and refining biofuels, depending on demand for the product and the success of the first phase.

Trump's Position

President Donald Trump's decision to pull the U.S. out of the Paris agreement and try to bolster fossil fuels such as coal in the U.S. has not deterred the partners' plan.

“With the sort of incentives we see for businesses coming into the U.S. under the current administration, we believe that it's still a viable project, so we're not worried about this kind of policies and how they affect us,'' Sanomi said. “What the fundamental thing here for us is that cleaner fuels are important. It will happen.''

Taleveras trades more than 100 million barrels of crude oil annually, as well as gasoline, jet fuel and liquefied petroleum gas. It is also developing and operating blocks off the coasts of Nigeria, Ivory Coast and Equatorial Guinea.

To contact the reporter on this story: Anna Hirtenstein in London at ahirtenstein@bloomberg.net.

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Jonathan Tirone