BP Could Mean "Biogas Promotion" for 2011
BP Could Mean "Biogas Promotion" for 2011
Just as the Chernobyl disaster in the Soviet Union in 1986 had a major impact on the
growth of the nuclear energy business, the BP oil spill in the Gulf of Mexico will mark a
significant turning point in the history of the fossil energy business.
Unlike the Exxon Waldez tanker shipwreck and oil spill in Alaska or onshore drilling leaks
during the Kuwait war, this catastrophe took place right in the backyard' of Western oil
companies. One can only imagine its lasting impact on industry safety requirements,
subsidies, taxation, technology development and renewable energy.
Deeper in risk
There are 70,000 oilfields in the world today, according to the International Energy
Agency (IEA). The top ten accounts for 20% of the production and four of these have
operations offshore. Between 1995 and 2007, the global production from deepwater
fields increased sharply. Deepwater rig suppliers have been struggling to meet the
demand from companies such as Petropras, StatoilHydro and BP.
With the disaster in the Gulf of Mexico however, the costs of new offshore projects are
projected to rise as standards become more demanding and increased financial risks are
allocated. The energy industry will have to urgently look for other solutions, particularly in
renewable energy. Oil companies such as Neste Oil from Finland and Preem from
Sweden and traditional production countries such as Abu Dhabi and even the US are
investing heavily in renewables and second generation biofuels.
From deep sea to gas
Of the options in renewable energy sources out there, biogas is the one to watch. The
chemical compounds of purified biogas have the same make-up as methane, thus
allowing its use in existing applications for natural gas without the need for any
modification, for example. Biogas is also touted as an alternative for coal, oil, biomass,
wind, solar and natural gas sources in heat and electricity generation. Wastewater plant
and landfill installations in developed markets are exploring ways to extract and use
biogas for their operations, while industry players in developing markets are exploring
even more advanced methods of waste utilization.
When compared to oil drilling for instance, biogas production poses virtually no major
environmental risks due to its distributed, small-scale nature. The raw material base is
also wider than with other biofuels, almost any organic matter is a potential source for
biogas. Indeed, after considering the actualized risks in deepwater drilling, the idea of
having thousands of anaerobic digesters scattered over the countryside and city outskirts
does not sound that bad an idea.
The barriers come down
Until recently, the biogas industry faced a range of challenges that had held back its
development.
Biogas development has not been spared some resistance and controversy, as green
activists warn of the risk of diverting focus away from reducing waste sources in the first
place. Other concerns include the potential utilization of edible plants and farmland as
energy resources and the domination of big players over what could be a local, labor-
intensive and sustainable energy resource.
In the world's leading biogas country, Germany for example, only seven percent of the
biogas is upgraded and fed into the natural gas network. The dominant biogas industry
players are still relatively low-tech and struggle when complexity and costs increase, as
quality becomes more important. Fortunately, new and improved technologies now exist
that improve the efficiency and yield of the anaerobic digestion process, help biogas fit
existing natural gas applications cost effectively, and that condense upgraded biogas into
liquid biogas.
Where the cost of upgrade technologies has been another key hindrance to improved
biogas utilization, government support for renewable energy in most countries and the
upgrade of old or the building of new sewage and waste management plants should help
in the development of biogas installations market.
The current market mainly consists of rather low-tech players who are likely to struggle
when complexity and costs increase, as quality becomes more important. Opportunities
therefore abound for new innovations and international businesses to enter the market.
In addition, there are at least 10 other factors that favour long-term biogas development.
1. Above all, the price volatility in the cost of fossil fuels makes the renewable energy
sources and second generation biofuels relatively more profitable. In the case of
biogas, the profitability improves also in absolute figures as the plants grow in size
and the technology becomes more economical
2. Leading countries are supporting biogas with subsidies such as feed-in-tariffs, cash
injections and tax reliefs. On the other hand, there is no relief in sight for the
production and purchase of fossil fuels.
3. The large scale plants and increasing utilization of technology are pushing down the
production costs.
4. The existing infrastructure and technology for natural gas is robust and provides a
low threshold for upgraded biogas to enter the market.
5. The energy out of biogas can be utilized flexibly either as electricity, heat or fuel.
6. The current use of natural gas within the transportation industry is driving the use of
biogas as well.
7. Biogas offers superior fuel yield per cultivated area compared to other biofuel
production processes, which makes it the most sustainable of biofuels.
8. The non-food sources of raw material such as landfills, dairy farms and wastewater
plants help reduce their methane emissions.
9. Biogas production provides "green jobs" and additional income in rural areas.
10. Countries dependent on foreign sources of natural gas may start producing a share
of the gas themselves.
As a result, more companies are entering the biogas market. These include chemical
companies such as Rhodia, equipment manufacturers such as General Electric,
distribution companies such as Gaz de France and gas companies like GASUM.
By entering such a nascent market however, these businesses face the challenge of
deciding on their operating models, market focus, technologies to use and their long term
plans, amongst other considerations.
The final implications of the Gulf of Mexico disaster for the energy sector are yet to be
seen but one thing is for sure: from now on BP will always remain as a strong argument
in any energy debate, particularly for biogas promotion.
This article and others from GIA's Consumer & Retail practice can be found at Global Intelligence Alliance industries.
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