BP Makes Deal to Accelerate Its Natural Gas Business

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BP Makes Deal to Accelerate Its Natural Gas Business

03/20/2017

CHICAGO and NEWPORT BEACH, Calif. — BP plc will acquire the upstream portion of Clean Energy Fuels Corp.'s renewable natural gas business for $155 million and sign a long-term supply contract with Clean Energy to support the firm's continuing downstream renewable natural gas business.

This includes Clean Energy's existing biomethane production facilities in Canton, Mich., and North Shelby, Tenn.; its share of two new facilities under construction in Oklahoma City and Atlanta; and its existing third party supply contracts for renewable natural gas. Clean Energy will continue to have access to a secure and expanding supply to sell to the customer base of its Redeem-branded renewable natural gas fuel through a long-term supply contract with BP.

The deal will enable both BP and Clean Energy to accelerate the growth in renewable natural gas supply and meet the growing demand of the natural gas vehicle fuel markets, the companies said.

"Demand for renewable natural gas is growing quickly and BP is pleased to expand our supply capability in this area," said Alan Haywood, CEO of BP's supply and trading business. "BP is committed to supporting developments towards a lower carbon future and, working with Clean Energy, we believe we will be well-positioned to participate in the growth of this lower carbon fuel in the U.S."

Clean Energy will be able to expand its Redeem customer base at its North American network of natural gas fueling stations following the sale. It will buy renewable natural gas fuel from BP and collect royalties on gas purchased from BP and sold as Redeem at its stations. This royalty payment is in addition to any payment under BP's contractual obligation.

"We started our Redeem fueling business from scratch less than four years ago and have grown it into a significant enterprise," said Clean Energy president and CEO Andrew Littlefair. "This transaction will help to take it to the next level. BP's investment in and focus on renewable natural gas supply will ensure that Clean Energy can meet the growing demand of our customers for low carbon, renewable fuel."

Launched in its California stations in October 2013, Clean Energy sold 60 million gasoline gallon equivalents of Redeem in 2016 to customers across multiple states including UPS, Republic Services, Ryder, Kroger and the City of Santa Monica's transit agency, the company said.

The transaction's closing is subject to regulatory approval.

GLOBAL PROJECTS

BP CEO Bob Dudley also recently announced that the company will finish seven "massive" projects around the world in 2017, more than any in its history, reported FuelFix. This year, BP plans to log 88 million man-hours of work on projects under construction, a sharp increase from the eight million man-hours it logged in 2011.

Locations of the projects will range from Egypt to the Gulf of Mexico.

At the 2017 CERAWeek conference in Houston, Dudley discussed how BP has been retooling over the last few years, following the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

"We've had our own special problems over the last six or seven years," Dudley said. BP sold $55 billion in assets to cover settlements following the oil spill, and a two-year-old crash in crude oil prices then forced it to stop or slow big projects.

Over time, oil companies began to cut costs, squeeze contracts and find efficiencies, Dudley said. Some of these savings will go away as oil prices rise and contractors seek to regain profits, but others will likely remain. Cost estimates for BP's projects scheduled to come online in 2017 are coming in under budget.

"It feels like we're heading into a balance point here," Dudley said.

Cost estimates for BP's projects scheduled to come online in 2017 are coming in under budget. The new projects will add one million barrels of oil and gas per day to its production totals by 2021, according to BP.