Chevron says it may stop further investments in Galveston biodiesel plant

More evidence that Chevron is only paying lip service to biodiesel and not following through on real investments.

FO Licht’s World Ethanol & Biofuels ReportFriday December 07 2007
Chevron Corp. has signalled it may stop investing in a biodiesel fuel plant in Galveston, clouding the future of an operation that had been counting on the oil company’s backing to expand, according to people familiar with the situation.
The oil giant’s hesitation has created uncertainty for the plant’s Houston-based owner, Standard Renewable Energy, which runs the plant through an affiliate called BioSelect Fuels.
The companies are still negotiating, the sources said, and San-Ramon, California-based Chevron still may decide to increase its investment in the project, the Houston Chronicle reports.
Chevron would say only that it remains a partner in the venture, without speculating on its future role. Officials at Standard Renewable Energy declined comment.
With Chevron’s role in question, Standard Renewable Energy has begun rethinking initial expansion plans that would have made its Galveston Bay
Rather thancharging ahead with plans to increase the plant’s production capacity from about 20 mln gallons per year today to more than 100 mln gallons per year, the focus has turned to upgrading storage and transportation infrastructure at the site, sources said.
That more cautious approach, however, may be driven by factors beyond Chevron’s potentially reduced involvement.
Kent Robertson, a Chevron spokesman, stressed that Chevron, through its Chevron Technology Ventures subsidiary, remains a minority investor in the Galveston plant. The unit holds a 22% stake.
But he declined to say whether Chevron will inject more money into the project. “We haven’t announced plans for future investment,” he said.
Chevron is one of the only US oil companies to invest in the actual production of biofuels. Some competitors only blend biofuels with conventional petroleum fuels or invest in biofuels research.
Yet Chevron, the second-largest US oil company, remains focused on oil and natural gas exploration, as it made clear today with the release of its 2008 capital expenditure budget. Capital spending will increase 15% percent to $22.9 bln, with more than $17 bln going to oil and gas production. The balance will go to oil refinery upgrades and other activities that include research in renewable fuels, the company said.
Chevron has said it expects to spend more than $2.5 billion between 2007 and 2009 on alternative and renewable energy technologies, including biofuels.
In May, Chevron officials were in Galveston for the plant’s grand opening and held up the facility as an example of the company’s commitment to renewable energy technologies.
“Our involvement with BioSelect Galveston will allow us to apply our world-class capabilities in transportation fuel manufacturing and distribution while expanding our knowledge and experience in large-scale biofuels production,” said Donald Paul, Chevron’s vice president and chief technology officer.
At the same event, Standard Renewable Energy CEO John Berger said Chevron was “setting an example for the energy industry.”
But after investing money in the project five separate times over two years, Chevron balked at the latest request to invest more in the plant, sources said.
The Galveston Bay Biodiesel plant has been touted as one of the nation’s first large-scale production plants. The initial goal was to boost production to 60 mln gallons a year by fall 2007 and 110 mln gallons by 2008.
Beyond the Galveston facility, BioSelect had plans to open more US biofuel plants, hitting 470 mln gallons of capacity by 2010.
It’s not clear how those plans might change in a sluggish biodiesel market and without additional investment from Chevron in the Galveston Bay plant.
Eric Melvin, CEO of Mobius Risk Group, a Houston-based commodity risk advisory firm that owns asmall stake in the Galveston plant, said he hadn’t heard of plans by Chevron to stop investing in the facility. But he said he has his own doubts about the durability of the plant in the face of clear market challenges for biodiesel.