The U.S. government has reserved over $100 million in loan guarantees for a commercial-scale Biosynthetic Technologies facility that would use fatty acids from high-oleic vegetable oils to produce synthetic base oil.
In its new release Monday, the Irvine, California-based company disclosed the plant will produce 20 million gallons (67,000 metric tons) of the high-performance base oil per year, for use in automotive and industrial lubricants.
Our total project cost will be approximately $150 million, Biosynthetic Technologies CEO Allen Barbieri told Lube Report yesterday. We are allowed to fund 70 percent of that with a loan, so the loan portion would be about $115 million. The remainder has to come from our shareholders.
The company announced Monday it received USDA approval on its phase one application for a loan guarantee under the agencys Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Program – known as the 9003 Program. The company said its co-applicant on the loan application is one of the three largest U.S. banks. Advancing the application to phase two means the USDA reserved funds that will be used to guarantee 80 percent of a loan to be issued by the bank to Biosynthetic Technologies to build the commercial-scale plant. The company, bank and USDA will work together to finalize loan terms acceptable to the three parties.
Barbieri noted the USDAs program was set up to help new technologies that are otherwise challenged in getting traditional bank financing. Its really designed for first plants for new technologies in the fuels and chemicals sector, he said.
The company has worked with Jacobs Engineering for about two years on the plant design. We have generally selected a location in the Gulf Coast area, he said. Well be moving forward. Under this loan structure, the plant has to be built in the U.S. to qualify for the USDA financing. He added that most of the companys customer relationships are in the United States and Europe, which makes the Gulf Coast location appealing.
We fully anticipate funding the loan and starting construction this year, Barbieri said. The partners we have both funding the plant and building the plant have that timeline. The construction process will take a typical 18 to 20 months for construction and three or four months for commissioning.
He explained the company primarily is looking to co-locate the manufacturing plant inside an existing chemical plant and contract with the owner of that plant to run and operate the facility for Biosynthetic Technologies. The Gulf Coast has no shortage of big chemical plants that have access, room and utilities and infrastructure, Barbier said. So we are deep in discussions and should have that finalized within the next 30 days.
He emphasized that the companys technology process is a fairly simple, petrochemical-type catalyst reaction process. So the equipment we use is common petrochemical equipment, he said. Theres nothing tricky or complicated about either purchasing the equipment or scaling up the process.
Biosynthetic Technologies demonstration plant was built and is operated by Albemarle at its Baton Rouge, Louisiana, chemicals complex. He noted that plant has used soybean oil, canola oil and algae oil – all from the U.S. – as feedstock. It has also used palm oil from Asia.
Mostly thats to validate that we do have the flexibility of changing feedstocks and getting a consistent finished product from our process, which helps if theres shortages of one type of feedstock, hurricanes or other issues that would affect one of those oils, Barbieri explained. We can always switch to a different one and get the same end product. Thats the process the company is scaling up for the commercial-scale plant in the Gulf Coast, he added. We have dozens of field trials under way with dozens of companies, so the demonstration plant both validates manufacturing and helps customers to prepare to scale up and launch their own products around this base oil.
Biosynthetic Technologies said it has certified SAE 5W-20 and 5W-30 motor oil formulations with the American Petroleum Institute and the U.S. governments BioPreferred program.
While the company does not disclose its customers names, he said, We are working with almost every single major lubricant manufacturer in the U.S. and Europe, and when we say we have over 100 big chemical companies testing and evaluating our product, its in their formulations. We are simply a base oil company – thats our business model – to do the base oil and let others determine how this would be used and incorporated into products they sell.
He said the company does focus on providing support to customers. We do understand the best way to formulate with this product, he said. It is a little different than a typical Group IV/V-type product, which is the area where most people are using this.
Congress established the Biorefinery Assistance Program in 2008, and in 2014 the Farm Bill extended and expanded it to include renewable chemicals and biobased product manufacturing. The program provides guarantees for loans made by commercial lenders to fund the development of biorefineries for the production of advanced biofuels and renewable chemicals as well as biobased product manufacturing facilities.