Marathon Oil Plans Ethanol Venture

Marathon Oil says it plans to team up with Andersons, an Ohio-based grain producer, to build and operate several large ethanol plants to help meet growing demand for the gasoline additive.

If the deal is approved by each company's board of directors, it would mark the first time in more than two decades that a major U.S. petroleum firm has invested in an ethanol plant.

Domestic refiners have already begun to move into other renewable fuels. Chevron, for example, owns a stake in a biodiesel plant that is under construction in Texas and has established a biofuels business (C&EN Online Latest News, June 2).

Marathon has been blending ethanol into gasoline for more than 15 years, according to Gary R. Heminger, the company's executive vice president. "We see the partnership with Andersons as an important step in maintaining the reliability of future ethanol supplies and in furthering our commitment to meet the needs of the motoring public," he says.

Demand for ethanol has increased dramatically this year as refiners phase out use of the rival fuel additive methyl tert-butyl ether (MTBE), which has been linked to groundwater contamination across the U.S.

Under the proposed 50-50 joint venture, Andersons would provide day-to-day management of the ethanol plants, as well as corn, dry distillers grain, and marketing services. Marathon would be in charge of distribution once the plants are completed.

The initial facility is expected to have an annual capacity of 110 million gal of ethanol. The companies say site selection is expected to be finalized soon. A target date for completion depends on regulatory requirements, permitting, and economic incentives.

Marathon blended 550 million gal of ethanol into gasoline in 2005 and expects its demand will increase to about 1 billion gal this year, says Linda Casey, a company spokeswoman.

The last ethanol investment by a major U.S. oil company was Texaco's joint venture in 1980 with CPC International. Texaco, now part of Chevron, dropped the project in 1995, when it sold the business to Williams Cos. of Tulsa, Okla.

Currently, 101 U.S. ethanol plants have the capacity to produce more than 4.8 billion gal annually. There are 34 ethanol refineries and seven expansions under construction with a combined annual capacity of more than 2.2 billion gal, according to the Renewable Fuels Association.