By Elizabeth Elkin and Kim Chipman
Booming demand for renewable diesel is prompting another agriculture-energy tie-up, with Chevron Corp. and Bunge Ltd. striking a pact to turn soybeans into less polluting fuel.
The proposed venture between the fossil-fuel giant and the world’s top oilseed processor marks the latest collaboration between oil and agriculture as traditional energy producers seek to secure raw materials needed to make more climate-friendly fuel. Renewable diesel is viewed as a growth area for both industries, with the future of liquid fuel facing pressure from a global push toward electric vehicles.
Chevron seeks to tap Bunge’s oilseed-processing expertise and farmer relationships to gain a steady source of soy oil that could be used to make cleaner diesel and jet fuel through a partnership announced Thursday. Bunge is expected to contribute soybean processing facilities in Louisiana and Illinois, and Chevron plans to put about $600 million into the venture.
“This relationship with Chevron would enable Bunge to better serve our farmer customers by accessing demand in the growing renewable fuels sector,” Bunge Chief Executive Officer Greg Heckman said in a joint statement with Chevron.
The two companies anticipate doubling the combined capacity of Bunge’s facilities from 7,000 tons per day by the end of 2024 through the partnership. The collaboration would also pursue new growth opportunities in lower carbon intensity feedstocks.
Shares of St. Louis-based Bunge soared as high as 3.9% in New York trading, its biggest jump since July 28, while Chevron’s stock rose as much as 2.7%.
The venture positions Chevron “to expand into the renewable fuel feedstock value chain, which will advance our higher returns, lower carbon strategy,” Mark Nelson, Chevron’s executive vice president of downstream and chemicals, said in the statement.
Refiners joining the renewable diesel race include Marathon Petroleum Corp. and HollyFrontier Corp. Agricultural firms including Andersons Inc., one of the five biggest U.S. grain handlers, have said they’re open deals to take advantage of the fossil-fuel industry’s rapidly growing interest in making less polluting fuels.
U.S. renewable diesel production capacity could surge to 4.9 billion gallons a year by the end of 2024, from about 827 million gallons now, JPMorgan Chase & Co. analyst Phil Gresh estimated earlier this year.
The booming interest has companies scrambling for the raw ingredients needed to make biofuels, including soybean oil, which is also used for cooking oil, mayonnaise and salad dressing. The most active futures contract for the commodity made by crushing soybeans has jumped 75% in the past 12 months.
“The market is clearly signaling a need for additional feedstock capacity for renewable fuels,” Truist Securities analyst Jordan Levy said in an email.