Shell has agreed to buy Europe’s largest biogas producer for €1.9 billion in the UK oil major’s latest effort to diversify its energy portfolio and reduce its dependence on fossil fuels.
The deal for Denmark’s Nature Energy is a sign of the industry’s growing interest in so-called renewable natural gas after rival BP last month announced the planned $4.1 billion acquisition of Archaea Energy, a US-listed biogas producer.
Biomethane is chemically identical to natural gas but produced by processing agricultural, industrial and household waste.
Nature Energy, founded in 1979 as a natural gas distributor, established its first biogas plant in Denmark in 2015. It now has 14 plants and produces about 3,000 barrels of oil equivalent a day of biomethane.
Huibert Vigeveno, Shell’s downstream director, said energy transition policies and customer preferences signalled “strong growth in demand [for biogas] in the years ahead”, adding that Shell would use the acquisition to build out a global business for the fuel.
“Acquiring Nature Energy will add a European production platform and growth pipeline to Shell’s existing RNG projects in the United States. We will use this acquisition to build an integrated RNG value chain at global scale.”
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Biogas is produced primarily using waste from crops, animal manure and industrial activity through “anaerobic digestion”, a process by which bacteria break down organic matter in an oxygen-free environment. This is then purified into biomethane by extracting carbon dioxide and can then be treated identically to natural gas in the pipeline network.
The sector is attempting a transition from a fragmented, cottage industry to industrial-scale operations. Shell started its first biomethane facility in the US last September and has three more under construction in north America.
In Europe, TotalEnergies has partnered with Veolia to produce biomethane from wastewater, while Engie and container shipping giant CMA CGM in June agreed to co-invest in a biomethane plant in the French port city of Le Havre.
The EU is pushing for a rapid increase in biogas production as the bloc seeks to reduce its reliance on natural gas from Russia. It has doubled its biomethane production target to 35 bcm by 2030.
Nature Energy chief executive Ole Hvelplund said the company was excited about its potential “to help address both the current energy insecurity, as well as the longer-term potential for biomethane capacity set out in the REPowerEU plan”.
However, in July he told the Financial Times it would take at least two years to significantly ramp up supply given the time required to secure permits and construct plants.
The company and its 420 employees in Europe and north America will initially operate as a Shell subsidiary under its existing Nature Energy brand, Shell said.
The acquisition from current shareholders Davidson Kempner Capital Management, Pioneer Point Partners and Sampension is expected to close in the first quarter of 2023, subject to regulatory approvals. — Copyright The Financial Times Limited 2022
