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December 21, 2016

Volume 17 Issue 52

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Chevron Invests in Novvi

Chevron made an equity investment into Novvi LLC – a joint venture of Amyris Inc., Cosan S.A. and American Refining Group – to gain access to biobased base oils. Terms of the transaction were not disclosed.

The Novvi joint venture was formed in 2011 by Emeryville, California-based Amyris Inc., a U.S. developer of renewable chemicals technology, and Brazilian sugar company Cosan S.A. The purpose of the joint venture was to use Amyris technology to turn sugar provided by Cosan into high-performance renewable base stocks. In July American Refining Group announced a 33.3 percent equity investment that made it an equal partner with the other two companies.

In addition to the equity investment, Chevron and Novvi plan to work together to introduce new base oils and lubricants to certain parts of the industry.

Amyris produces a renewable hydrocarbon, made from sugarcane feedstock that can be finished to create base oil and lubricants. Brent Lok, Chevron’s base oil marketing and business development manager, said the primary driver of the investment was the performance of the base oil and its similarity to polyalphaolefins.

“In many ways they use very similar feed stocks to PAOs,” Lok said in a phone interview with Lube Report. “In return, the performance is much more comparable to PAO than conventional or even modern Group II and Group III base oils. So our interest in them is primarily because they’re manufacturing high-performance products that happen to also be renewable.”

He said the global market experienced a severe shortage in PAOs last year that lasted through early this year. “The PAO industry is now responding with a lot of new capacity,” Lok said. “The fact of the matter is that synthetic, high-performance base oils continue to be challenged in terms of supply-demand balances, and having more options for us is always a good thing.”

Lok added that the equity investment ticks two boxes for Chevron of San Ramon, California. “We’re looking for high-performance components to formulate our branded [finished lubricants], and we see a growing market need for renewable products,” he said. “I think we recognize that Novvi can play a role as a component supplier to our branded lubricants.”

The two companies are near each other in California, he said, and their relationship goes back almost a decade. “What resulted in this investment started a little over a year ago,” Lok said. “We recognized that Novvi had gotten to the point where it has a product that’s really quite promising and viable. So we made the decision.”

It’s very common for base oil suppliers and lubricant suppliers to work together where there’s mutual benefit, he observed. “We’ll work with Novvi to try to find areas that have mutual benefit to us as a lubricant supplier, and Novvi as a base oil supplier,” Lok said. “We have a lot of expertise and understanding of the base oil market because of our participation in that market, and we’ll probably help Novvi and give them guidance on those kinds of aspects too.”

Novvi CEO Jeff Brown said the company sought a strategic partner that can help it scale up the business from a base oil production and manufacturing standpoint, and operationally. He noted that having Chevron on board will help provide Novvi access to a variety of important resources. “From my point of view, this is about supplying our customer base better, cheaper, faster in the future, with a very reliable supply,” Brown told Lube Report. “We realize there is really a great fit between us from helping Chevron grow their business in synthetics and renewables and our strategic portfolio position at the same time.”

He said the relationship between the two companies isn’t stipulated specifically. “It’s really about how we grow together, and how we decide to move forward,” Brown said. “We’ll work together here over the initial year and figure out where the best fit is to help Novvi, but also to help Chevron to meet its core strategic reasons for the investment.”

Brown said in general growth in the lubricants industry is coming in the synthetic and high-performance products category. “I think that’s where our base oil plays very well, in those product areas,” he said. “Chevron’s core is they have a very strong position around the Group II base oil platform. We provide an extension of that in the synthetic market. Their core process technology underpins much of the leading premium base oil in the market today. They have tremendous expertise and capability in many of the areas we need.”

Amyris farnesene facility

Amyris’ first purpose-designed, industrial-scale Biofene plant began commercial production in early 2013 in Brotas, São Paulo, in southeastern Brazil. Biofene is Amyris’ renewable farnesene hydrocarbon, which can be finished to create base oils and lubes. Chevron has made an equity investment in the Novvi joint venture, which was founded by Amyris and Cosan S.A. in 2011 and now also includes American Refining Group.