(Bloomberg) -- Total SE will halt oil refining in the Paris region and spend more than 500 million euros ($582 million) by 2024 replacing its facility with renewable-fuel and bioplastic plants.The decision reflects rising demand for greener energy and products, as well as a commitment by Total to reduce its exposure to hydrocarbons and curb carbon emissions. The French energy giant, like its European peers Royal Dutch Shell Plc and BP Plc, has come under increasing pressure from governments, consumers and investors to step up measures to tackle climate change.Crude oil refining at Grandpuits will stop in March and storage of hydrocarbons will end in late 2023, Total said in a statement. By 2024, the site will focus on production of renewable diesel mostly for aviation, plastic recycling and bioplastics, and the operation of two solar plants. Clients in the Paris region will instead be supplied by Total’s refineries in Normandy and Donges.“Total is demonstrating its commitment to the energy transition and reaffirming its ambition to achieve carbon neutrality in Europe by 2050,” Bernard Pinatel, president of Total Refining & Chemicals, said in the statement. Grandpuits accounts for 8% of France’s total refining capacity, he said at a later press briefing.Refining margins have been under pressure due to the coronavirus pandemic, which has cratered demand for oil products such as jet fuel. Conversely, Total’s biofuel plant in La Mede, in the south of France, has remained profitable during the crisis, Chief Executive Officer Patrick Pouyanne said in July.Energy ShiftGrandpuits has also been dogged in recent years by pipeline issues. Replacing the link to the refinery would cost almost 600 million euros, an investment unlikely to be worthwhile as the government pursues policies in favor of renewable fuels and cleaner vehicles, the company said.The new complex, to be commissioned in 2024, will be able to produce 400,000 tons of biofuels a year, including 170,000 tons of sustainable aviation fuel, in line with France’s target for 5% of jet fuel to be renewable by 2030.In terms of specification, the plant will produce so-called HEFA bio-jet, derived from hydroprocessing esters and fatty acids. The rest of the output will be renewable naphtha, used to produce bioplastics, and renewable diesel, or HVO.That reflects France’s shift in consumption habits, with demand for traditional diesel in the Greater Paris area dropping by 4% to 5% a year as engines become more efficient and people gradually shift to electric cars, Pinatel said.The new unit will process primarily animal fats from Europe and used cooking oil, supplemented with other vegetable oils like rapeseed. It won’t use palm oil, which is blamed by environmental groups for increasing deforestation.Total’s joint venture with Dutch chemical maker Corbion NV will also build a new plant at Grandpuits, which will use sugar instead of oil to produce plastic from 2024, following a similar endeavor launched in Thailand two years ago. The market for so-called PLA bioplastics, which can be used to make plastic films and rigid packaging, is growing as much as 15% annually, according to Total.On the same site, the French company will team up with Plastic Energy to recycle plastic waste into polymer feedstock that can be used to make food packaging. Two solar plants, with a total capacity of 52 megawatts, will be built at the Grandpuits and Gargenville sites.(Updates with detail on fuel specification from eighth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The La Nina weather system could roil global food production, sending prices higher, as potential droughts and floods bring upheaval to a suite of key agricultural commodities from Southeast Asia to South America.The highly anticipated phenomenon has officially formed, the U.S. Climate Prediction Center said Thursday, after the last significant La Nina event occurred in 2011.During that period, upheaval in commodity production led to steep increase in world food prices, with the United Nations’ Food & Agriculture World Food Price Index surging to a record in February 2011, up 37% from the end of 2009.La Nina typically affects a broad range of farm commodities, as it brings above-average winter-spring rainfall in Australia, particularly across eastern, central and northern regions, as well as in Southeast Asia, with the potential for flooding.It can also dry out the southern U.S. through winter, bringing cooler temperatures and storms across the north. In South America, croplands in Argentina can become more arid, with drought possible across parts of Brazil.“The weather phenomenon disrupts production of a broad range of agricultural produce, such as soybeans, corn, rapeseed, sugar, coffee and rubber,” said Bloomberg Intelligence’s Alvin Tai.WheatThe 2010-11 La Nina brought Australia’s wettest two-year period on record, according to the country’s Bureau of Meteorology, and with it a strong 2011-12 winter wheat crop. This season, the crop could climb 78% year-on-year to 27 million tons, the USDA FAS said in July.“A wet spring will support pasture development and grain fill for the winter crop,” Rabobank said in its September agribusiness report. “However, if wet conditions continue into harvest, it can reduce crop quality.”For more on how La Nina weather conditions roil markets, click hereA late-season La Nina is unlikely to have any impact on the current winter crop in Australia, forecaster Abares said in its June outlook. The country’s harvest of grains including wheat and barley is due to start within weeks.La Nina may also exacerbate a bout of dryness in Argentina, jeopardizing what was supposed to be a record wheat crop in one of the world’s top exporters.SoybeansSoy growers in the U.S. might escape damage, with harvests typically complete by November. Brazilian soy may be more at risk “if drought and high temperatures weaken conditions for planting, which stretches from mid-August to mid-December,” said Tai.The U.S., Brazil and Argentina account for about 80% of soybean production and smaller harvests can raise prices, according to Tai. In the 2011-2012 season, Brazil’s soy production declined 12%.PalmAdditional rains in Southeast Asia could boost palm oil production, while the industry could also benefit from lower output of rival soy oil, Tai said.There has already been more rain in Southeast Asia, particularly in Sabah and Kalimantan, since June, said Ling Ah Hong, director of plantation consultant Ganling Sdn. La Nina’s impact on the palm crop would depend on how strong it is, Ling said.“A weak to moderate La Nina is usually beneficial to palm production in the following year,” he said. “However, the heavy rains, if any, may cause immediate short-term disruption to harvesting and crop quality.”Palm oil production usually declines in December and January, after rising in August and September, said Derom Bangun, chairman of the Indonesian Palm Oil Board. More rain in those typically drier months could be positive for monthly output, providing conditions aren’t extreme, he said.CoffeeLa Nina and El Nino events can lead to steep differences in coffee prices. During the last big La Nina, arabica prices surged as much as 127% between 2010 and 2012, while robusta gained as much as 105%.Arabica is mostly grown in Brazil, which can be hit with drought during La Nina, while the premium narrows during El Nino years, as robusta crops in Vietnam and Indonesia are hit by drought, said Tai.The coffee output from Brazil, Colombia and Indonesia fell 5-10% during the same period, while Vietnam’s output climbed as more areas were planted with beans, Tai said.La Nina tends to bring adverse above-average rains to many parts of Colombia, and its effect may start to show up from October to December, said Roberto Velez, chief executive office of Colombia’s National Federation of Coffee Growers.While that may benefit areas that traditionally get less rain, the darker days caused by excess clouds reduce the luminosity necessary for flowering to occur, eroding overall yield potential.Higher humidity can also trigger outbreaks of coffee-leaf rust, which happened between 2010-12, curbing output. However, about 80% of the plants in the second-largest arabica producer are now resistant to rust, compared with a very low percentage during the last La Nina, he said.Still, Indonesia’s coffee production may decline, as the rain causes coffee cherries to fall or rot, especially if rain occurs more than 10 days straight, said Moelyono Soesilo, head of specialty coffee and processing at the Association of Indonesian Coffee Exporters and Industries.SugarSugar output from Australia, Brazil and Thailand could be affected, Tai said. Drought could cut production in Brazil, with yields down 12% during the last big La Nina. In Australia, it’s heavy rain in the country’s north that could create harvest delays.The crush is almost half way done in Australia’s growing regions and “La Nina years can bring an unwanted wet end to the domestic crushing season,” said Charles Clack, a Rabobank commodities analyst, in the September report.CottonFor cotton, drier-than-normal conditions in southern and western Brazil and northern Argentina could have a negative impact on crops there, while more rain could benefit Australian fiber, according to Donald Keeney, senior meteorologist with Maxar in Gaithersburg, Maryland.(Updates with IPOB comment in 16th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Raizen Energia SA is in talks to buy a unit of Louis Dreyfus Holding BV as Brazil’s biggest sugar processor eyes mills that would help it boost efficiencies and defend margins.The deal would see Louis Dreyfus swap its Biosev SA sugar subsidiary in return for a minority stake in Raizen, a joint venture between Royal Dutch Shell Plc and Cosan SA, according to people familiar with the matter. Biosev shares rose as much as 25% in Sao Paulo on the news.Also on the table is a possible extension to payments on Biosev’s 7.3 billion reais ($1.4 billion) in debt in exchange for Dreyfus paying part of it upfront, the people said, asking not to be identified because talks are private.In a filing released after the close of trading Wednesday, Biosev confirmed preliminary talks with Raizen that may result in a merger as well as debt discussions with banks. Raizen also confirmed it has held early talks with Biosev. Louis Dreyfus declined to comment.The deal would be Raizen’s biggest and may give it more power to negotiate cane prices with suppliers. For Biosev, the arrangement would help resolve a years-long battle with debt, which has in the past forced Dreyfus to inject about $1 billion into the unit. Dreyfus is trying to raise cash as its owner seeks funds to pay down loans and is in talks to sell a minority stake to Abu Dhabi sovereign wealth fund ADQ.EARLIER: Dreyfus Sugar Unit Faces Asset Sales Amid Credit CrunchBiosev’s woes began with a period of sugar surpluses and gasoline price caps that reduced demand for ethanol made from cane. Global sugar prices are down about 50% from a 2016 peak.In the year ended March, Biosev had a record net loss of 1.55 billion reais, its ninth straight negative result. The company’s debt was up 22% from a year ago amid Brazilian currency devaluation, triggering covenant breaches.(Updates with Raizen comments in fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.