BP announces $4 billion acquisition of renewable natural gas producer
21 October 2022
In a move that will expand and accelerate the growth of its strategic bioenergy business, BP announced that it has agreed to acquire Archaea Energy Inc., a producer of renewable natural gas (RNG) in the US. The agreed acquisition, which is subject to regulatory and Archaea shareholder approval, will be for $3.3 billion (£2.9bn) in cash, as well as around $800 million (£717m) of net debt.
Bioenergy is one of five strategic transition growth engines that BP intends to grow rapidly through this decade, it said in a statement announcing the acquisition. The energy major expects investment into its transition growth businesses to reach more than 40% 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: “Archaea is a fantastic fast-growing business, and BP will add distinctive value through our trading business and customer reach. It will accelerate our key bioenergy growth engine, creating a real leader in the biogas sector, and support our 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.”
Based in Houston, Texas, Archaea Energy is an RNG producer, operating 50 RNG and landfill gas-to-energy facilities across the US, producing around 6,000 barrels of oil equivalent a day (boe/d) of RNG. At closing its production would be expected to provide an immediate 50% increase to BP’s biogas supply volumes.
Archaea has a development pipeline of more than 80 projects that underpin the potential for around five-fold growth in RNG production by 2030. Earlier this year, it announced a joint venture with Republic Services, Inc. to develop 40 RNG projects across the US, part of this pipeline. The joint venture will convert landfill gas into pipeline-quality RNG that can be used for a variety of applications to displace conventional natural gas.
BP said the acquisition of Archaea has a strong strategic fit with its 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.
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.
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