French bio-fuels maker Global Bioenergies stutters on low crude oil

Global Bioenergies, an unprofitable French maker of sugar-based petrol, said crude oil’s recent slump to $35 a barrel is testing the financial viability of its technology even as it plans expansion in the US.

“The economic case doesn’t stand with oil at $35, except when there’s a tax incentive” as in various European countries and the US, chief executive Marc Delcourt said.

Without tax breaks, the company would need Brent crude well above $100 a barrel, he said.

Shares of Global Bioenergies, listed in Paris since 2011, have dropped more than 50% from their peak in May as oil’s collapse raised investor concern that biofuel makers couldn’t compete.

Mr Delcourt is counting on the end of European sugar production quotas in 2017 and changes in US eating habits to keep the sweetener’s price low as it eyes more capacity.

Raw-sugar futures are trading at half their price five years ago.

“The target for 2016 is to sign a contract for a first plant in the US,” said the CEO, who co-founded the company in 2008 and led its development of a technology that transforms sugar into isobutene.

“We’re in advanced talks with several players, both from the upstream, like sugar producers which are looking for markets for their products, and from the downstream, which are using isobutene to make gasoline or materials.”

Isobutene, traditionally derived from oil, represents a $5bn (€4.59bn) market when used to make plastics, tyres and paints, according to Global Bioenergies.

It has a further $15bn market when converted into isooctane, a high-quality gasoline that can be used on its own but is generally added to other fuels to improve their quality.

The US and European countries including France and Germany have adopted tax and regulatory incentives for biofuels, helping producers withstand a slide in oil prices since mid-2014.

“Global biofuel use may continue to grow over the next couple of years after recent policy announcements in the US and Europe stabilised demand,” said James Evans, an analyst at Bloomberg Intelligence.

“This policy stimulus is tempered by a drop in crude oil prices which has led some biofuel producers to seek more value-added products.”