CBH Group explores foray into biofuel production as part of possible BP deal

CBH Group has not ruled out speculation it is laying the groundwork for a possible partnership with BP that could see Australia’s biggest grain handler build its own oilseed crushing plant in Perth. A move by CBH to diversify into biofuel production would shake up the biofuel sector, with the co-operative traditionally focussed on grain storage, handling and marketing. It would be CBH’s first investment outside its core business since it opened the Blue Lake Milling oat processing facility in 2016 after launching CBH fertiliser in 2015. It would also hinder GrainCorp’s ambitious growth strategy, after the ASX-listed group revealed plans to spend what analysts have estimated would cost at least $350 million on its first oilseed crushing plant in WA. GrainCorp — already Australia’s biggest oilseed crusher with extensive operations along the east coast— has been in talks with BP and other industry players to secure partnerships, a site and canola supply. This week, the Australian Financial Review reported CBH was “closing in on a partnership with BP” that would derail GrainCorp’s ambitions. When questioned, CBH — which has made previous investments in flour mills and a malting plant in Asia — did not confirm whether a deal was imminent but provided a statement saying it was “open to considering opportunities”. “Recent global and local investments in the expanding biofuel industry — in response to government and corporate sustainability mandates — has increased the global demand for vegetable oils as a critical feedstock for biofuels like sustainable aviation fuel and renewable diesel,” a CBH spokesman said. “As a reliable and substantial provider of canola, WA growers are well-placed to serve this growing market either internationally or domestically if there is local investment in biofuel processing. “WA grain growers are already a large provider of canola into international export markets where a significant portion of the canola is crushed for oil and meal. “In line with our purpose to create sustainable value for WA growers, CBH is open to considering opportunities that provide growers with market optionality that utilises our supply chain.” CBH has historically strongly safeguarded its operations from outsiders, making a partnership with GrainCorp unlikely. BP has been considering investing more than $1 billion to convert an oil import terminal at Kwinana into a renewable fuel production hub. But the global energy giant would require a large-scale oilseed crushing plant to supply feedstock. A BP spokesman said the company was in talks with “multiple parties” about a WA crushing facility, but declined to comment further. With its fleet of locomotives and spare land at its Kwinana grain export terminal, CBH is well-positioned to deliver canola to a crushing plant. WA grain growers produced more than 2.5 million tonnes of canola during last year’s relatively mediocre harvest, most of which will be exported to international crushing plants. This was down from about 4.3Mt in 2022, when the State’s growers yielded a record crop totalling more than 26Mt. CBH exported 21Mt of grain from its four WA terminals last financial year and reported its second-biggest net profit on record at $353.3 million. This was down from $497.7m for 2021-22 when overseas buyers clamoured for grain after Russia’s invasion of Ukraine disrupted supplies.