In a move that will expand and accelerate the growth of its bioenergy business, bp has agreed to acquire Archaea Energy Inc., a producer of renewable natural gas (RNG) in the US. The acquisition, which is subject to regulatory and Archaea shareholder approval, will be for $3.3 billion in cash, as well as around $800 million of net debt.
Bioenergy is one of five strategic transition growth engines that bp intends to grow rapidly through this decade. bp expects investment into its transition growth businesses to reach more than 40 per cent of its total annual capital expenditure by 2025, aiming to grow this to around 50% by 2030.
Acquiring Archaea will expand bp’s presence in the US biogas industry, enhancing its ability to support customers’ decarbonisation goals and also progressing its aim to reduce the average carbon intensity of the energy products it sells. bp aims to reduce that carbon intensity to net zero by 2050 or sooner.
Bernard Looney, bp chief executive, said the acquisition will accelerate its key bioenergy growth engine, creating a real leader in the biogas sector, and support its net zero ambition.
“And, importantly, we’re doing this while remaining focused on the disciplined execution of our financial frame. Investing with discipline into the energy transition, creating further value through integration – this is exactly what bp’s transformation into an integrated energy company is all about.”
The acquisition of Archaea has a strong strategic fit with bp’s existing biogas business, enabling expansion of its position in the US and potentially also in key geographies globally, including the UK and Germany. Alongside growth in bp’s existing portfolio, the addition of Archaea’s production and pipeline has the potential to take bp’s biogas supply volumes to around 70,000 boe/d globally by 2030.
bp sees the opportunity to deliver additional distinctive value through the integration of the business with bp’s trading capabilities and broad customer base – bp is a leading marketer of natural gas in North America, with many customers looking to decarbonise. Demand for biogas is also diversifying with opportunities for growth into areas such as LNG, renewable hydrogen, and power for EV charging.
Dave Lawler, chairman and president of bp America, said: “Our biogas team is already one of the leading suppliers of renewable natural gas in North America. This deal accelerates our ability to deliver cleaner energy, generate significant earnings in a fast-growing sector and help reduce emissions. This could help bp take a significant stride toward our net zero ambition.”
Renewable natural gas
Global biogas demand is growing rapidly. In bp’s Energy Outlook 2022, biogas grows more than 25-fold from 2019 to 2050 in both the Accelerated and Net Zero scenarios.
Biogas is generated by the decomposition of organic material at landfill sites, anaerobic digesters and other waste facilities. Archaea’s operations process biogas – that would have been flared or vented if it were not captured – to produce pipeline-quality RNG or to generate power.
RNG can be used interchangeably with fossil fuel-based natural gas – including as transport fuel, in power generation and in heating – but, as it is derived from organic waste, its use results in lower lifecycle greenhouse gas emissions. Projects such as Archaea’s also have the potential to be integrated with technology such as carbon capture and storage to further reduce lifecycle greenhouse gas emissions.
Increasing sales of RNG will support bp’s net zero ambition, specifically its aim to reduce to net zero the carbon intensity of energy products it sells by 2050 or sooner. It has set an interim target to reduce this carbon intensity by 5 per cent by 2025 and aims to reduce it by 15 to 20 per cent by 2030, both against a 2019 baseline.
