BP has announced its largest ever low-carbon energy acquisition with the planned purchase of a US-listed biogas producer for $4.1bn as the UK oil major seeks to accelerate its push into greener fuels.
The proposed deal for Houston-based Archaea Energy would immediately increase BP’s biogas supply volumes by 50 per cent and provide a development pipeline of more than 80 projects that could see volumes quintuple by 2030, BP said in a statement on Monday.
Archaea, which describes itself as a leading producer of renewable natural gas in the US, produces the low-carbon fuel by processing organic waste from landfill sites and the farming industry. BP is paying $3.3bn in cash and Archaea has approximately $800mn of net debt.
Founded by the owners of a landfill in Pittsburgh, Archaea has 50 renewable natural gas and landfill gas-to-energy facilities across the US, producing about 6,000 barrels of oil equivalent a 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 deal is still subject to approval by regulators and Archaea shareholders.
Looney is spearheading one of the most ambitious corporate overhauls in the sector, having committed to cut BP’s oil and gas production by 40 per cent by 2030, while it invests in the provision of greener forms of energy.
BP has said investment into its five transition businesses — biofuels, convenience (forecourts and food), charging, renewables and hydrogen — will reach 40 per cent of total group expenditure by 2025 and 50 per cent by 2030.
Nick Stork, chief executive of Archaea Energy, said the sale to BP would enable the business to “realise its full potential”.
In June, Archaea signed a $1.1bn joint venture deal to produce biogas from 39 landfill sites across the US with Republic Services, a major US landfill operator, in one of the biggest such deals to date.
Renewable natural gas makes up a tiny share of the overall US gas market, currently delivering about 0.2 per cent of overall supply, according to a recent report from Goldman Sachs. But it is growing fast as companies look for ways to slash their emissions, and some states like California provide generous incentives for the projects.
Given Archaea’s existing project pipeline, the combined business could produce about 70,000 barrels of oil equivalent a day of biogas by 2030, BP said.