BP plc (ADR) (NYSE:BP) and Clean Energy Fuels Corp (NASDAQ:CLNE) have reached an agreement in which the former will acquire assets for biomethane production from the latter for approximately $155 million. This will allow BP to expand its portfolio of gas supply in the U.S and enter a space which is witnessing growing demand from vehicle fleets that use natural gas. It will also help BP to move to projects that leave a lower carbon footprint. The deal will, however, have to be approved by regulators first.
“Demand for renewable natural gas is growing quickly and BP is pleased to expand our supply capability in this area,” said the CEO of the trading and supply unit of BP, Alan Haywood.
Strategy update
BP further disclosed in an update on strategy that new investments were being explored in energy forms that were low in carbon since there lay great potential in these areas. Natural gas, for instance, produces greenhouse gas emissions that are 70% less than other energy forms such as diesel or gasoline.
Under the deal, two of Clean Energy’s biomethane production facilities will be taken over by BP besides supply deals from third parties. Some of the facilities are in North Shelby, Tennessee and in Canton, Michigan. The deal will also see Clean Energy buy BP’s biomethane for the long term.
Landfill waste gas
The U.S. renewable energy company collects biomethane gas that is produced in landfill waste locations which it then processes. After processing, the biomethane gas is purified before being pumped through pipelines. The biomethane gas is mainly utilized as a transportation fuel.
The deal will also see Clean Energy continue to get environmental credits for gas bought from BP for sale to consumers. Last year, Clean Energy’s sale of biomethane fuel was equivalent to about 60 million gallons of gasoline. Some of its customers include the transit agency of Santa Monica and UPS.
Clean Energy will retain the downstream business for green gas. It will also continue offering biomethane gas in its fuelling stations which number close to 600.
On Wednesday, shares of BP rose by 0.91% to close the day at $34.23.
