SG Biofuels to Plant Jatropha in Brazil to Compete With Kerosene

SG Biofuels, the San Diego-based company backed by Airbus SAS, said it will plant 75,000 acres of jatropha in Brazil to power aircraft for about $50 a barrel less than traditional jet fuel.

Closely held SG Biofuels, also supported by the Inter- American Development Bank, will produce unrefined jatropha oil that will sell for $75 a barrel, President Kirk Haney said in an interview yesterday. Refined jet fuel cost about $126 a barrel in New York Harbor spot market on Sept. 12, according to data compiled by Bloomberg.

High petroleum prices and government pressure to lower greenhouse-gas emissions linked to climate change are prompting airlines to experiment with plant-derived fuels. Grupo Aeromexico SAB de CV flew the first commercial transcontinental flight with a plant oil-kerosene blend on Aug. 2. Test flights have shown that planes can fly on fuel made with weeds, wood chips and algae.

Jatropha “is the most practical way of blending with jet fuel today,” Haney said. The plant produces inedible oil and grows well in low-quality soils.

The development of higher-yielding seeds is expected to bring prices down to $38 a barrel in ten years, he said. Manufacturing so-called bio-kerosene from jatropha oil is already “cost-effective” with crude oil prices at $112 a barrel, he said.

SG Biofuels will develop its plantations with Bioventures Brasil in west-central Brazil, according to the statement. The seeds will be crushed into 45 million liters (11.9 million gallons) of oil once the plantations reach maturity in 2015 and then processed into fuel in the state of Sao Paulo, Haney said.

Other companies involved in SG Biofuels’ project include Brazilian airline Tam SA (TAMM4), which will buy some of the fuel, and U.K. oil company BP Plc (BP/), according to a company statement.

Similar-sized projects in different countries will be announced in the coming months, Haney said.

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Will Wade at wwade4@bloomberg.net