Grain rejected for animal feed, which will be converted into biogas, being pushed into a grinder at Bio Energy Coevorden, which was acquired by Varo Energy, in Coevorden, Netherlands in April. — ©2023 The New York Times Company
EVERY day dozens of tanker trucks, many laden with animal manure and other kinds of agricultural waste, rumble through the gateway of an imposing steel-and-concrete plant in northeast Netherlands.
This pungent cargo will be mixed together into a slurry and pumped into massive tanks, where hungry bacteria will within weeks turn it into methane gas that will ultimately be sold to the energy grid to heat homes and generate electricity.
The gas is a biofuel – similar to the natural gas pumped out of offshore wells in the North Sea but, because of its biological origins, considered carbon neutral.
The recipe for success, said Fritz Ullrich, the plant manager, is keeping the microbes nourished with a steady stream of waste.
“We have to coddle them,” he said. “They are our factory.”
Ullrich, who came to this job after running oil depots, seems bemused at finding himself tending bacteria. But the energy industry is going through wrenching changes, especially in Europe.
For the plant’s main owner, Varo Energy, a privately held oil refiner in Switzerland that sells diesel and gasoline at service stations across northwest Europe, biogas facilities like this one represent the future – or at least a slice of it.
The European Union and national governments like Switzerland are forcing suppliers of oil products to increase the proportion of the fuel they sell that comes from renewable sources to mitigate climate change. Russia’s efforts to use natural gas as political leverage in the war in Ukraine have added to the urgency to end dependence on fossil fuels. As a result, companies that refine and sell oil are making significant investments that they would not have considered before.
Varo bought an 80% stake in this biofuel plant in the Dutch municipality of Coevorden this year to gain a foothold in a business that is expected to grow rapidly. Shell, Europe’s largest energy company, and BP recently spent billions to acquire similar biogas companies.
Pig manure is being pumped from a tanker truck at Bio Energy Coevorden, a biogas plant acquired by Varo Energy, in Coevorden, Netherlands in April. — ©2023 The New York Times Company
Looking ahead, Varo has a preliminary deal to supply the German airline Lufthansa with so-called sustainable aviation fuel, starting with a blend made from used cooking oil and later moving to hydrogen, considered by many to be the green fuel of the future.
The company’s future is still linked to oil – Varo owns and operates Switzerland’s only refinery, and a second one in Germany – but the company’s executives say they can profit from gradually becoming greener and helping customers achieve their clean energy goals. And under various national schemes intended to gradually reduce emissions or certify energy as green, Varo can also earn so-called biotickets that can be sold to polluting companies – providing another important source of revenue.
But this brave new world of energy has obstacles. For instance, there isn’t enough locally produced animal manure and other waste to keep the Coevorden plant going. That means Ullrich must scour the world for shiploads of spoiled corn and other agricultural detritus to fill its tanks. The plant even bought grain contaminated by an explosion that wrecked the port of Beirut in 2020.
And the waste is not free. While natural gas prices soared last year in Europe, so did costs for the stuff used in biofuel as demand surged, contributing to a financial loss at the plant last year.
The global hunger for biofuels has led to questionable practices like cutting down forests for wood debris and growing crops for fuel instead of food. The total amount of appropriate waste and other inputs available is “many times smaller than the global demand for aviation fuel or shipping fuels or industrial gas supply” said Mark Brownstein, the senior vice-president for energy transition at the US-based Environmental Defence Fund, a non-profit advocacy group.
Yet, Varo executives are confident that their foothold in European energy markets will help secure their future.
Now that Germany is cut off from Russian natural gas, they figure, it will be hungry for a green alternative to generate electricity and to power factories that need a lot of energy like steel mills or chemical plants. The German border runs through a roadway just outside the biogas plant’s gate.
“We are in the right ZIP code,” Varo CEO Dev Sanyal said in an interview.
Varo, which had about 2,100 employees and an annual revenue of US$26bil (RM118bil) in 2022, is an 11-year-old company that earns about US$500mil (RM2.28bil)) a year refining crude and distributing and trading oil products.
Yet the company’s owners – Carlyle, a private equity firm based in the United States, and Vitol, a commodities trading giant – realised that the business needed to prepare for changes ahead. Last year, they brought in Sanyal, who led the gas and renewable energy business at BP to shift direction.
Like other petroleum companies, Varo is trying to please several audiences: customers and regulators who demand clean energy, as well as the steady buyers of the gasoline, diesel and other products pumped out by its two refineries.
With environmental pressures growing, sticking to the status quo is not an option for oil companies.
“If all they do is transform crude oil into refined products, at some point that is not attractive to do in Europe,” said Alan Gelder, the vice-president for refining and chemicals at Wood Mackenzie, a consulting firm. — ©2023 The New York Times Company
