This European Oil Hub Is Investing Billions in Renewable Resources

People have lived in Rotterdam Harbor for over 10,000 years, but the latest city project is very 21st century. Image source: Moyan Brenn/Flickr.

Turns out that to go green, you could use a lot of help from black gold. That's the strategy being deployed by the Port of Rotterdam in The Netherlands, at least, as it creates the world's first bioport.

Home to one of the world's leading petrochemical clusters, the port and surrounding area boast 10 refineries sporting a combined annual capacity of 914 million barrels of oil that account for nearly one-quarter of the port's total cargo throughput. Six are at least partially owned by multinationals such as ExxonMobil (XOM -0.26%), BP, and Royal Dutch Shell, while Russian companies Lukoil and Rosneft have direct stakes in two. Everyone that is anyone in petroleum operates in or near Rotterdam, but that could soon be true for renewable energy and renewable chemical companies, too.

Petroleum will remain king for the port, but billions of dollars have been invested to build new renewable chemical, biofuel, and renewable diesel manufacturing sites -- literally in the shadows of oil refineries. The low-cost blueprint for renewable chemical production pioneered by Rotterdam could have big effects on the future of your investments in renewable industries.

How do you build a bioport?
Built in the 14th century, the Port of Rotterdam was the world's busiest and largest port between 1962 and 2002. Its four-decade reign was forfeited to rising economic powers in Asia -- and it has been sliding down the global rankings every year since. Rotterdam is still a massive port, however. In fact, it's the only of the 10 largest ports on planet Earth located outside of Asia. And the port's petrochemical cluster is rivaled only by those in the U.S. Gulf Coast, India, and South Korea.

But to future-proof and insulate growth from volatile fossil fuel markets, management has dedicated land to a new biochemical cluster and championed Rotterdam's value proposition to renewable chemical manufacturers. Here's what is envisioned for the dedicated bioport.

Sorry for the small text. See the full-size image in this PDF. Image source: Port of Rotterdam. 

I recently spoke with Stijn Effting, business manager of the Chemical & Bio Based Industry at the Port of Rotterdam, to uncover the efforts under way.

Step One: Biomass and storage
It's a simple rule: petrochemicals use petroleum as their starting input, or feedstock, while biochemicals use some form of biomass. (The broader category of renewable chemicals can use solid waste, purified carbon dioxide, or even recycled materials as feedstocks.) While you might be aware of the cheap sugarcane of Brazil -- the green chemical field's favorite feedstock -- you might not know that sugar beets in the Netherlands are actually the world's cheapest source of sugar. I sure didn't.

So it's no wonder global agricultural leaders have a major presence in the region. Archer Daniels Midland (ADM -0.96%) and Cargill might be more familiar to investors for their massive stakes in the American corn belt, but they're no stranger to Rotterdam. The former owns 2.4 million metric tons of unrefined oils capacity at the port, along with a major biomass terminal for soy and rapeseed shipments.

Despite being America's largest ethanol producer, Archer Daniels Midland does not currently operate any biofuel manufacturing capacity in the port. However, the company does own 16.4% of Wilmar International, which owns nearly 2 million metric tons of edible oils that are processed by the various renewable diesel and biodiesel facilities in the cluster. The two companies own a large chunk of Rotterdam's total capacity.

Source: Port of Rotterdam.

Biomass gets a green chemical company's attention, but there's plenty more to consider before spending tens or hundreds of millions of dollars on new manufacturing capacity.

Step Two: Logistics
Good news: Having five oil refineries in the heart of the port means little additional infrastructure is required at a new facility's expense. When companies such as ExxonMobil nestled into Rotterdam and gradually expanded operations, they funded large capital expenditure projects to build the utilities, roads, and storage terminals they needed. That gives the biochemical cluster instant access to international trade routes via railroads, highways, and seaways, in addition to plug-and-play potential for utilities. In fact, the Port of Rotterdam doesn't expect any new facilities to spend one penny on utilities infrastructure.

It might be easy to take utilities at new manufacturing plants for granted, but it's not always so easy. For instance, several companies that sprinted into Brazil to gain access to cheap and abundant sugarcane have had difficulty hooking up to the grid. During its third-quarter conference call, Solazyme announced that its 100,000-metric-ton per year renewable oils facility in rural Moema, Brazil, wasn't fully integrated with the grid; the company acknowledged it would take until the second half of 2015 to sync up. Companies at Rotterdam should have no such problem.

Step Three: Production
Bountiful, cheap biomass turned some heads and robust logistical planning landed some deals, but now companies must begin production. The Port of Rotterdam offers facilities for all stages of commercialization -- laboratory, pilot, demonstration, and commercial -- and plots ranging from 2 hectares to over 20 hectares. Progress in production has come swiftly.

Image source: Port of Rotterdam.

While only biodiesel and ethanol production is operational at the moment, Rotterdam is close to starting production at four biopolymer and biochemical facilities. And if that wasn't enough renewable tech for you, consider that the port is home to nearly 3 gigawatts of biomass co-firing (biomass and coal) and 150 megawatts of wind power generation capacity. Once all facets of the biobased value chain are running, it's possible that chemicals produced at the world's former busiest port will be the greenest in world -- never having been touched by a single fossil fuel feedstock or power source.

What does it mean for investors?
The Port of Rotterdam's push to become a global renewable chemical manufacturing powerhouse demonstrates that petrochemicals aren't the only game in town. Of course, petrochemicals remain the major source of consumable products in the global economy, but Rotterdam is providing a potentially game-changing blueprint for altering the economics of renewable chemicals. ExxonMobil, Archer Daniels Midland, and other major global companies have laid the foundation for success -- now all that is needed for success is investment from leading renewable chemical companies. So far so good.

Image source: Port of Rotterdam.

It's early, but you'll want to keep an eye on Rotterdam, as it's officials have presented their case for the biochemical cluster at several leading industrial biotech and renewable chemical conferences in the last year. Should your future investments set up shop at the port, you can look forward to low-cost construction, manufacturing, and overall operations -- perhaps boasting the lowest capital expenditure and highest margins of any global site in a company's portfolio.